Holding Precious Metals in your Individual Retirement Account (IRA)
Individual Retirement Accounts (IRAs)
Under US tax law, an Individual Retirement Account (IRA) is an account structure designed to save for retirement. IRAs can be opened by any US resident with taxable income. The main attractions of an IRA is that it is tax-incentivized, and contributions can be funded from pre-tax income.
A self-directed IRA is a version of an IRA that facilitates investment into a wide variety of assets such as real estate, precious metals, mutual funds, hedge funds, REITs, bonds etc. While IRAs can hold this range of assets, an IRA established to specifically invest into precious metals is commonly known as a precious metals IRA.
It is a common misconception that IRAs are limited to holding a narrow range of precious metals such as US Mint Eagles. Under IRS rules, a wide range of investment grade precious metals can actually be held within these IRAs. This includes investment grade gold, silver, platinum and palladium bullion coins, and investment grade gold, silver, platinum and palladium bullion bars. An IRA also does not have to store its precious metals holdings in a depository in the US. The IRA can easily and legally hold its precious metals abroad in a safe and secure jurisdiction such as Singapore.
There are a number of different types of IRA such as ‘Traditional’ IRAs, ROTH IRAs, SIMPLE IRAs and SEP IRAs. A Traditional IRA is opened by an individual. Growth of investments held in this account is tax free, and tax-deductible contributions within various IRS parameters are allowed. Withdrawals from a traditional IRA are not tax-deductible.
A Roth IRA can also be set up by an individual. Growth of investments is tax free, and distributions from the ROTH IRA are tax free, but contributions into the ROTH IRA are not tax-deductible and have to be made from after-tax income.
SIMPLE IRAs are IRAs set up by an employer, hence the name SIMPLE = Savings Incentive Match Plan for Employees. Contributions are tax deductible in a similar way to a Traditional IRA. Both employee and employer can contribute into this type of IRA.
A SEP IRA, meaning Simplified Employee Pension (SEP), is set up by an employer and only the employer can contribute to the IRA. Like a Traditional IRA, employer contributions are tax-deductible.
All of these IRA types can be opened as self-directed IRAs, therefore US residents can open a Traditional self-directed IRA, or a ROTH self-directed IRA, and if self-employed can open a SIMPLE self-directed IRA or a SEP self-directed IRA.
BullionStar is at any time able to work with any and all IRA custodians that offer precious metals IRAs. BullionStar’s preferred partner is an IRA custodian called IRA Club. With IRA Club, you can set up a self-directed custodial IRA and invest the funds held in the IRA into purchasing and storing bullion with BullionStar. IRA Club offers traditional, ROTH, SIMPLE and SEP versions of self-directed IRAs within its self-directed custodial IRA suite.
While an IRA custodian/trustee has to be based in the US, the secure storage vaults which guard the precious metals held within an IRA can be based outside the US, As one of the safest and most secure jurisdictions in the world, it is practical as well as simple for IRAs to hold precious metals offshore in Singapore.
Precious Metals Eligible for IRAs
Under IRS rules, a wide range of investment grade precious metals can be held within IRAs, under parameters specified in US Tax code, section 408, title 26. The legislation allows for gold, silver, platinum and palladium bullion coins, and gold, silver, platinum and palladium bullion bars as eligible investments in the IRA structure.
Precious metals first became eligible for IRAs in 1986 when American Eagle gold and silver coins were launched by the US Mint and simultaneously added to the IRS rules. Then in 1997, platinum American Eagles were also made IRA eligible after the US Mint launched the platinum eagle. At the same time in 1997, the IRA exemptions were significantly expanded to include a wide variety of other precious metals coins and bars precious metals bars. This followed successful lobbying of Congress by the Industry Council for Tangible Assets (ICTA) to extend eligibility criteria to this wider range of bullion coins and bullion bars. The actual parameters added to the Tax Code in 1997 were as follows:
“a coin issued under the laws of any State, or
any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 7 of the Commodity Exchange Act 7, USC 7), requires for metals that may be delivered in satisfaction of a regulated futures contract,
Under the IRS wording, ‘Any State’ refers to any nation state. Therefore, precious metal coins issued by international (non-US) mints are eligible for holding within IRAs.
The reference to bullion which meeting a specific fineness or purity in terms of the Commodity Exchange Act also allows any bullion bar to be IRA eligible once it passes the fineness criteria for precious metals that underlie exchange traded futures contracts in the US. This would be a ‘fineness’ equal to or greater than 0.995 fine for gold, 0.999 fine for silver, and 0.9995 fine for platinum and palladium.
Therefore since 1997, gold, silver, and platinum coins issued by the US Mint, as well as precious metals coins issued by other countries, as well as gold, silver, platinum and palladium bullion bars of investment grade quality, have all been eligible to be held as qualifying investments within IRAs. Based on the IRS definition of bullion, precious metals rounds meeting the minimum fineness can also be held within IRAs.
The 1997 IRS amendment also added that precious metals held by an IRA have to be in the physical possession of a trustee, which according to the IRS, is a supervised US incorporated bank or credit union or a person who demonstrates to the IRS that they have the expertise to administer a trust in compliance with IRS legislation.
The following precious metals coins and bars are eligible investments to be held within IRAs:
US Mint American Gold Eagle coins and US Mint Gold Buffalos. Any other gold bullion coin with a fineness greater than or equal to .995, such as US Mint Gold Buffalos, Canadian Gold Maple Leafs, Austrian Gold Philharmonics, Australian Kangaroos.
Gold bars with a fineness greater than or equal to .995. This would include gold bars produced by LBMA approved mints and refineries such as Argor-Heraeus, PAMP, Metalor, the Royal Canadian Mint and the Perth Mint.
Any silver bullion coins with a fineness greater than or equal to .999. This includes US Mint Silver American Eagles. , Canadian Silver Maple Leafs, Australian Silver Kangaroos, Kookaburras and Koalas, Austrian Silver Philharmonics, Royal Mint Silver Britannias, and Mexican Silver Libertads, Chinese Silver Pandas.
Silver bullion bars of fineness greater than or equal to .999 silver.
Platinum American Platinum Eagles (bullion and proof coins, since the IRS legislation allows platinum proof coins). Any other platinum bullion coins with purity greater than or equal to 99.95%, such as Canadian Platinum Maple Leafs, Austrian Austrian Silver Philharmonics, and Perth Mint platinum Platypus coins.
Platinum bullion bars with purity greater than or equal to 99.95% such as platinum bars from Heraeus, Balcambi, and Argor Heraeus.
Palladium bullion coins with purity greater than or equal to 99.95%, such as palladium Canadian Maple Leafs. Palladium bullion bars with purity greater than or equal to 99.95% such as palladium bars from the refineries Heraeus, Valcambi, and Argor Heraeus.
Precious metals rounds, such as the Singapore Silver Merlion round, are also eligible for inclusion in IRAs. However, note that numismatic and collector coins are not eligible investments for IRAs.
Steps to buying investment precious metals for your IRA
To purchase precious metals for IRA and have these precious metals stored, your will need to open an IRA, fund it, and then buy precious metals for the IRA using the IRA’s funds. These simple steps are as follows:
1. The IRA holder must have or open a custodian account for the IRA before buying precious metals. BullionStar is able to work with any and all IRA custodians that offer a precious metals IRAs. Our preferred partner is IRA Club.
2. With IRA Club, you can set up a simple self-directed custodial IRA structure, where you can invest your IRA capital into purchasing and storing bullion with BullionStar.
3. Once you have opened your custodial account, you can fund the account by a rollover from a 401k, a transfer from another IRA, and/or a contribution.
4. To purchase and store precious metals you will need to open an account with BullionStar. Go to Sign Up where you select “Trust / Foundation /IRA" in the dropdown for Account Type. Input the IRA name or LLC name (if the IRA owns an LLC which in turn owns the bullion) in the field for “Account Name". Select “IRA" in the dropdown for Entity.
5. Place a bullion purchase order with BullionStar and send the order confirmation to the IRA custodian to settle the order with your IRA funds.
6. BullionStar will process your metals into Vault Storage and will update you accordingly via an order status e-mail. The IRA can then sell, audit or physically withdraw/ship the metals to another depository at anytime.
See more information about opening an IRA and purchasing precious metals, see BullionStar’s dedicated IRA page here. For information about BullionStar’s secure vault storage services, see here.
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