Prior to the Taxpayer Relief Act of 1997, Congress forbid the use of almost all types of precious metals in IRAs. The only precious metals Americans were allowed to own directly within IRA accounts were U.S.-minted American Eagle gold and silver coins.
Since the passage of the TRA, however, Congress relaxed the rules a great deal, allowing Americans to hold a much broader array of precious metals. But there are still important limitations. It’s critical to know what those are, before making a transaction. Precious metals can be an important part of a diversified a retirement portfolio. But make a mistake, and you could find your entire IRA account disallowed by IRS officials, and be facing steep tax fines and penalties.
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IRA rules strictly prohibit holding ‘collectable’ items within an IRA or other tax-advantaged retirement account. These include any kind of wearable jewelry or gemstones, or any form of precious metal that isn’t of a sufficient and standardized weight and purity.
Similar rules also prohibit IRA accountholders from holding art and antiques, musical instruments, and alcoholic beverages. Life insurance is also prohibited within IRAs.
IRA Precious Metal Assets Must Be in Bullion
The term “bullion” indicates precious metals that are minted and manufactured primarily for their metal content. Collector value is a distant secondary consideration. Bullion products come in three forms: Coins, bars, and “rounds.”
In each case, their value to IRA investors is in their “melt value” as stores of precious metal, and not in their physical beauty or rarity.
Coins, by definition, are minted by sovereign governments in national mints. They are generally designed to be legal currency, and tend to be well standardized. However, not every national coin is allowable within IRAs, since some national coins are not minted with sufficient purity. They may have higher quantities of alloys for durability, for example, or simply may contain more impurities than allowable under American law.
“Rounds” are coin-shaped precious metal products that are not manufactured by a sovereign government in a national mint. They can be highly-refined, high-grade products of exceptional beauty themselves. Or they can be very simple products with no markings but a manufacturer’s stamp and weight. But rounds are minted by private organizations, not governments.
Bars can be government-cast or minted or cast or minted by private manufacturers. They can vary in weight from 1/10th of an ounce to hundreds of pounds. Central banks tend to hold a standard “good delivery” gold bar as their primary gold reserve asset. These bars are 438.9 ounces (12.4 kilograms) in weight. The largest gold bar currently in existence is a 551-pound bar manufactured by the Mitsubishi Materials Corporation.
Gold coins must have a minimum fineness level of 99.5% to be allowable within IRA accounts, except for American Eagle coins. American Eagles are allowed within IRA accounts, even though the don’t have the same purity level normally required.
Silver must be 99.9% pure for inclusion in IRAs. Platinum and palladium products must have a minimum purity level of 99.95%.
All coins held in IRA accounts must be bullion products, rather than collectibles. Additionally, smaller bullion products must be minted or stamped to exact weight parameters. However, exceptions are made for 400-ounce gold, 100-ounce gold, 1000-ounce silver, 50-ounce platinum, and 100-ounce palladium bars.
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All precious metal products held in IRAs must also come from a sovereign national mint or a refinery approved by NYMEX, COMEX, NYSE/Liffe, LBMA, LPPM, LME, ISO 9000, or TOCOM.
Some coins, called “proofs,” are manufactured to exceptionally high standards, and may include a protective coating or special processes to enhance the finish. If the underlying coin is allowable as an IRA asset, the proof version of the coin is generally allowable, as well, But to be included in an IRA, the coin must be fully encapsulated in original mint packaging, and be stored with its mint-issued certificate of authenticity, if applicable.
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Numismatics vs. Bullion
Numismatic coins are coins that are no longer produced, and are traded primarily for their value as collectables. Many of them are worth much more than the spot price of their metal content alone. They may meet the legal purity requirements generally applicable to IRAs, and they may even be manufactured in government or certified mints. But they are not generally allowable in IRA accounts.
These coins are often well-loved by collectors, who bid them well above the market price of the underlying metal. If you want your investment to reflect the long-term properties of gold and precious metals, numismatics are not designed to do that. Their value is not always connected with the spot price.
With gold, silver, platinum, or palladium bullion, you can always quickly find a ready buyer for your metal at or near the spot price of the metal, minus appropriate discounts for the cost of shipping, handling, brokerage fees, etc.
With a numismatic coin, you may not get back anywhere near what you paid for it, even if the metal spot prices are soaring. That’s because the value of these coins determined largely by the sentiment of a few private collectors, rather than by the gold markets at large.
They are also impossible for IRS agents to place a reasonable valuation on, other than the spot price of the metal. Which would make owning them in IRAs a very expensive mistake, even if it were allowed!
If you must own numismatics and collectable coins, you must do it outside of your IRA accounts.
Common IRA-Approved Coins and Types
These coins have been officially approved for IRA accounts, as they either meet the required standards for purity and manufacture established by law, or, in the case of American Eagle coins, they fall under an exception.
IRA-Authorized Gold Products
- American Gold Eagles, in 1/10th oz, 1/4th oz, ½ oz, or 1-ounce formats.
- American Gold Buffalos
- Australian Gold Kangaroos
- Australian Gold Nuggets
- Australian Lunar Series coins
- Austrian Gold Philharmonics
- Canadian Maple Leafs
- Royal Canadian Mint gold bars
- Chinese Panda coins
- 1-ounce UBS gold bars
- 50-gram Valcambi Gold Combi Bars
- 1-ounce Valcambi Gold Bars
- 1-ounce Credit Suisse Gold Bars
- Credit Suisse PAMP Suisse bars
IRA-Authorized Silver Products
- American Eagle Bullion and Proof silver coins
- America the Beautiful coins
- Australian Kookaburras
- Australian Koalas
- British Britannia silver coins (made in 2013 and later)
- Canadian Maple Leaf silver coins
- Chinese Panda silver coins
- Mexican Libertad bullion coins
IRA-Authorized Platinum Products
- American Eagle platinum bullion coins
- Isle of Man Platinum Noble coins
- Australian Koala platinum bullion coins
- Canadian Male Leaf platinum coins
IRA-Authorized Palladium Products
- Canadian Maple Leaf palladium coins
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Precious Metals Not Authorized for IRA Accounts
While popular among collectors for their beauty, rarity, historical interest or other factors unrelated to the precious metal content of the coin, these products are examples of coins that are not allowable within IRA accounts:
- U.S. Buffalo Proof coins
- U.S. Liberty coins
- Austrian Coronas and Ducats
- Belgian Francs
- British Britannia coins manufactured prior to 2013
- British Sovereigns
- Chilean Pesos
- Columbian Pesos
- Dutch Guilders
- French Francs
- German Marks
- Hungarian Koronas
- Italian Liras
- Mexican Pesos
- Mexican Onzas
- South African Krugerrands
- Swiss Francs
These and any other coin, round, or bar that fails to meet purity requirements or come from an approved refinery/assayer may not be held within IRA accounts, or any other retirement account in the U.S.
Numismatic coins that have been “certified” are also not allowable within IRAs accounts.
IRA Precious Metal Storage and Transaction Requirements
While gold collectors love the look and feel of gold and silver and get a great deal of personal satisfaction out of handling and viewing these beautiful items, this is irrelevant to gold and silver held within an IRA. This is because IRA prohibited transaction rules prohibit IRA investors from holding IRA-owned gold personally.
Many people have seen ads on television depicting people counting out their gold coins on a dining room table, or showing off their private vaults. But only private collectors can do this, using assets held outside of retirement accounts.
Instead, all metals held within an IRA account must be physically held by an approved IRA trustee or custodian – often a private vault service.
The vault service costs a little bit of money, so there is a carrying cost associated with holding gold and precious metals within IRA accounts. Different vault companies and other vendors have different fee structures, based on the convenience, security and other services and amenities they provide.
Precious Metal IRA Prohibited Transactions
In addition to the restrictions specifically applicable to precious metals, there are also more general rules against making IRA transactions with certain parties. These rules are designed to prohibit conflicts of interest, and maintain the integrity of IRA accounts.
As an IRA owner, you must title all IRA assets in the name of the IRA itself, not your own name, personally. Otherwise your account won’t be an IRA at all, and it won’t qualify for favorable tax treatment.
Similarly, you cannot use your IRA account to purchase conduct transactions directly with yourself, nor your spouse, ascendants, descendants, anyone who advises you as a fiduciary concerning your retirement accounts, and any entities you or they control.
You cannot take physical possession of precious metals held within your IRA account at any time. This means you can’t store these assets in your own home safe or vault. Instead, your IRA custodian or third-party administrator must handle all your gold and precious metal transactions on your behalf.
IRA Alternatives to Direct Ownership of Gold and Precious Metals
While many gold investors prefer to own actual physical gold directly, there are alternatives that allow you to benefit from increases in the value of gold and other precious metals without taking direct possession of gold, silver, platinum or palladium.
One popular alternative is exchange-traded funds, or ETFs. These are essentially large mutual funds indexed to gold, silver or any other identifiable commodity.
You can also own mining stocks, which also tend to move up and down in concert with minerals as their underlying asset class. However, mining stocks and limited partnerships have all the normal business risks associated with the ownership of any business enterprise: Businesses, including mining companies, can experience cash crunches, poor development decisions, industrial accidents, lawsuits, labor strikes, and all manner of other misfortune. A mining company can even go bankrupt, potentially wiping out stockholders.
Actual physical ownership of gold itself, inside or outside of an IRA, is not subject to these misfortunes.
For the full details of the legal requirements, definitions and restrictions on precious metals in retirement accounts, see 26 U.S. Code § 408, paragraph (3)(A). Also, see IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRA)s.