With gold at record levels, many investors (and some collectors) have been inquiring about including precious metals in their self-directed retirement plans such as Individual Retirement Accounts (IRAs). Approaching the time of year when many investors are especially concerned with investments, this is a good time to informally recap how investors (and collectors) can take advantage of the precious metals option. In 1981, Congress arbitrarily deemed “collectibles” to be unacceptable for inclusion in IRAs and other self-directed retirement plans. In addition to fine art, gems, stamps, antiques, rugs, wine, and other items, the definition of collectibles was changed and included coins and precious metals. ICTA did not exist at the time (ICTA was formed in 1983), and the coin and precious metals industry had no real voice in Washington to either prevent this action or give Congress the facts. In 1986, the American Eagle Gold and Silver coin program began, and the legislation that created the Eagle included language that stated that for the purposes of Section 408(m) of the Internal Revenue Code (the section that deals with self-directed IRA plans), the term “collectible” did not include Gold, Silver or (later) Platinum Eagle coins. Therefore, Eagles are allowed in self-directed IRAs. There is no differentiation between Proof and Uncirculated, and bother versions are allowed.
As part of the Taxpayer Relief Act of 1997, ICTA was successful in having Congress approve legislation that expanded IRA-acceptable precious metals to include additional bullion Gold, Silver, Platinum and Palladium products. While the definitions of these other eligible precious metals items were not specific other than by fineness, it is generally accepted that many “mainstream” (most popular and frequently traded) precious metals bullion coin and bar products are acceptable if they meet the specified criteria. The IRA companies that handle such retirement accounts can provide you with a list of those items they will or will not accept for IRA purpose. (They may vary by company.)
How to Include Precious Metals in Your IRA
Especially in this record—setting precious metals market, there is a much greater interest in including precious metals in IRAs. Both investors and dealers who don’t have experience with these accounts have many questions. The following includes some of the basic elements of these accounts. You’ll find some of the information highly dependent on the policies and procedures of the company handling your IRA, and now is the time to compare companies for the one that best fits your needs. (Please note that ICTA provides this information with the intent to assist you, but the ICTA’s staff cannot provide advice on the subject. For more specific information, we strongly recommend that you consult with your own legal counsel or professional tax advisor.)
A. The first step to including precious metals in your IRA is to set up an IRA account with a company that handles IRA accounts for precious metals (“the IRA Company”). If you don’t do that properly, you lose the tax benefits associated with an IRA. You must have the account set up and funded (with rollover or “new” IRA money) before you purchase any metals. It is important to note that you may not personally take physical delivery of precious metals products held in your IRA without incurring a substantial penalty. The IRA Company should arrange for the safekeeping of the metals to your satisfaction. There are two ICTA=member companies we are aware of that serve as precious metals IRA custodians: Sterling Trust Company of Waco, Texas and GoldStar Trust Company of Canyon, Texas. Sterling Trust’s website contains a list of items of Gold, Silver, Platinum and Palladium products that it will accept for IRA accounts in addition to other helpful information. We recommend you contact whatever IRA company you choose for the specific procedures you will need to follow in order to establish an IRA account containing precious metals.
B. While there are the usual benefits to including any acceptable asset in a qualified IRA ( or other self-directed retirement program), there are certain costs associated with such IRAs. There may be a flat annual fee (sometimes called an administration fee) as well as the annual storage charges. Another company’s fee structure may be different and might include a per trans action fee. You should evaluate all applicable charges to determine which company may better serve your needs.
C. Generally, in non-IRA transactions, you lock-in the purchase of metals for the benefit of your account. You do the same thing when you buy precious metals in coin or bullion form for your IRA. There are transactional differences. Ask whether the IRA Company or your dealer has any minimum dollar amount for an IRA trade. You will want to research in advance to see if your favorite dealer is willing to conduct bullion IRA transactions and whether there is any service charge for this type of trade. If you need assistance in determining a dealer, some IRA companies will offer a list of suggested firms; other will not make any such recommendation. Regardless, you have to follow the rules on acquiring precious metals coins or bullion as well as the rules on disposition.
Unlike a normal cash bullion purchase where you pay for and receive your merchandise immediately, IRA transactions must be handled according to IRS regulations and the IRA Company’s procedures, and often there is a delay in payment to the dealer. Since this may mean that the dealer has to have his money tied up for some period of time prior to the IRA Company releasing the funds from your account, there may be a nominal IRA transaction fee levied by the dealer to help offset this extra cost. Be sure to ask.
Sometimes IRA companies may release payment for the precious metals before the dealer ships to the designated safekeeping facility. It is likely they limit this pre-funding accommodation to the dealers with which the IRA Company has an existing relationship. However. ICTA recommends that dealer sellers contact the IRA companies in advance of doing any IRA trades to determine if this policy can apply to them. But normally, payment is only authorized once receipt of the metals has been logged in at the facility.
D. In addition to setting up an IRA account with “new” IRA money, investors may rollover existing monies from other IRA accounts they have. Usually the procedure will be to issue an order to liquidate certain other assets held in an existing IRA. If you are using rollover money, you need to make sure you understand exactly what you need to do. It should be very simple – you will authorize the sale of the original IRA asset and direct that the proceeds of that sale be sent to the company handling your precious metals IRA account. You may do this yourself (giving instructions where to send the proceeds) or the company handling your precious metals account, up your signed order, may place that order for you. Be sure you understand the procedures fro setting up the new account in order to have a smoother transition. If the funds from the liquidation are sent to you directly, this can affect the tax-advantaged status of the rollover money if it is not re-invested within the allowed time frame. Plus this will delay setting up your account and, with the current daily fluctuation of precious metals prices, can affect the price you pay for your IRA metals. Once your IRA account is funded, then you will be able to purchase the precious metals you want to include in your precious metal IRA account.
Dealers interested in conducting precious metals IRA transactions should contact at least one or two IRA companies for more information on policies and procedures. There is a lot of interest in these IRAs right now, and you want to be sure you can accommodate your customers’ business quickly and easily. Likely your customers will have many questions, and it’s just smart business to be ready to assist your clients.
Q. Can slabbed coins go into an IRA?
A. This depends on the IRA Company because there are no government regulations concerning it. The Sterling Trust website says that they will not accept coins that have been slabbed, i.e. authenticated, graded and encapsulated. You may wish to ask whether a bullion coin that has been authenticated but not graded is acceptable if that is important to you. Raw bullion coins have been successfully placed in IRAs for years, so this may not be a concern for you.
Q. Are US Mint issued sets that include Eagles allowed?
A. The law is very specific: Eagles 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 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract. Check with the IRA Company you choose. You may find that a depository will reject coins that do not meet its criteria. We are aware of errors that have occurred in the past where the transaction proceeded all the way to the metals arriving at the depository only to be rejected.
Q. As this is an especially volatile precious metals market, how fast can I lock in a liquidation of precious metals in my IRA?
A. There are several elements to liquidating some or all of the assets. ICTA recommends you ask your IRA company at the time you set up your account to outline its liquidation procedures.
In general, you would contact your coin dealer to lock0in a price on the metals. You, of course, will tell the dealer this is an IRA transaction. The dealer will prepare a purchase invoice which the IRA company will need in order to find out from the custodial facility how much additional funds will need to be paid for shipping charges. The metals and shipping charges have to be paid in advance of the release of any metals. The dealer sends payment (bank wire preferred) to the IRA Company, for your account. The IRA Company will then direct its custodial facility to release the metals for shipment to the dealer. Dealers don’t usually pay shipping charges for delivery of metals they purchase from a customer, so you may have to inquire how you and the dealer will handle this aspect. Or, you may ask your IRA Company if they can just deduct the shipping charges from your IRA account. We strongly suggest having these procedures understood and ready to be implemented so any liquidation of your metals will not be delayed and the price possibly affected. A problem-free transaction is everyone’s goal. Again, ask whether the dealer has any other special fees for conducting the liquidation since he/she will be fronting money for product likely not received for at least a week or two. Again, your dealers may or may not add fees – we just suggest you ask so there are no surprises.
Q. How fast does my dealer get delivery of metals liquidated from an IRA?
A. The faster the transaction is paid for, the sooner the depository will be notified to release the metals for shipping to the dealer. You may wish to ask what the normal turnaround time is from when the payment is made to the actual shipment of the metals to the dealer by the depository. It should be reasonably quick. If the dealer has his own account with that particular depository, it may be possible merely to transfer from your IRA account to the dealer’s. thereby avoiding shipping charges. There might be a small transfer fee from the depository; however, it would be less than insured shipping charges.
Q. What about dates on coins going into my IRA? If I specify in my order a certain date of, let’s say, American Eagles, will these be segregated for my account?
A. You should ask your IRA Company whether your specific coins are segregated from other IRA accounts. One suggestion might be to have the dealer specify any dates of coins in your IRA order on all invoices and other documents. Even if the coins are the current year’s coins, this could be of importance in the future, especially for Proof Eagles. Such specificity can only work to your advantage. Some advisors recommend that investors only deal in segregated assets; consult with them if you have questions.
For investors who want to own precious metals but do not have adequate funds outside of an IRA or other self-directed retirement plan, IRAs provide an excellent way to fulfill your personal investing strategy. Whether a dealer or investor, doing your homework on the details of IRAs ensures your transaction are easy and hassle-free.
ICTA is a non-profit national association representing the rare coins, currency and precious metals industry. CITA is supported solely by membership dues and donations. For more information, go to the ICTA website at www.ictaonline.org.
Source: The Coin Dealer, Diane Piret, ICTA Industry Affairs Director
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