Yes, You Can Hold Gold in Your IRA. Learn How.
As the coronavirus pandemic exacts a devastating toll on global economies, gold and other precious metals are getting a second look from investors.
Investors tend to gravitate toward gold during times of economic stress, seeking precious metals to help diversify their holdings and prop up portfolios in the face of market volatility. This trend was on display during the Financial Crisis. With investors on the hunt for portfolio protection, the value of gold increased dramatically from 2008 to 2012. According to the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for gold surged 101.1%.
With no clear idea of just how deeply the coronavirus pandemic will upend financial markets and economies, investors are yet again seeking gold exposure.
According to State Street Global Advisors, gold funds attracted $2.8 billion of inflows in March. That pushed their first-quarter inflows to $6 billion—the fourth-highest level ever. Gold inflows over the rolling 12-month period, at $15.4 billion, stand at the second-highest level ever—narrowly outpacing Brexit-related inflows.
While investors may be familiar with investing in gold with their taxable accounts, many do not realize they can also invest in gold using a tax-advantaged IRA. That’s because most custodians don’t allow account owners to hold gold and other precious metals in their IRA. But it's possible to do so in a self-directed IRA, and you’ve probably seen these IRAs advertised as "gold IRAs" or "precious metals IRAs."
As a self-directed IRA custodian, PENSCO makes it possible for our clients to hold gold in their retirement accounts. We have knowledge of and experience in IRS rules and regulations to help clients efficiently handle these transactions.
Here are some of the top questions we receive about investing in gold and other precious metals with a self-directed IRA:
How does investing in a “gold IRA” or “precious metal IRA” work?
By law, self-directed IRA custodians like PENSCO cannot find, recommend, or endorse any investment that will be held in your retirement account. As a result, IRA custodians cannot tell you whether investing in gold makes financial sense, and custodians cannot source a gold or precious metals investment. You must work directly with a metals dealer who can source your precious metals. It is your responsibility to select which pieces and amounts of precious metals you want to buy with your IRA funds.
When selecting a dealer, conduct due diligence to ensure you’re working with a reputable one. Ask your financial professional for a recommendation or talk to fellow investors who have purchased precious metals to help protect yourself against fraudulent activity.
Once you’ve decided which metals to buy, the next step is opening a PENSCO self-directed IRA if you do not have one already. This process can be completed online. After you open and fund your self-directed IRA account, we’ll open an account on your behalf with our precious metals custodian, Delaware Depository, which is qualified to hold precious metals for IRAs.
When your Delaware Depository account is established, we will send your IRA funds to your precious metals dealer. Delaware Depository will then work with that dealer to arrange shipment of your precious metals from the dealer to their storage facility for placement in your IRA account.
This process may seem confusing, but it is required by law. The IRS prohibits investors from personally taking possession of precious metals when they are owned in an IRA. That’s why a third party, like Delaware Depository, must hold the metal on behalf of an IRA.
What types of precious metals can be held in an IRA?
Investors can diversify their IRA portfolios with gold, silver, platinum, or palladium. But the metal must meet specific IRS requirements. For instance, it must be “highly refined,” according to the IRS. IRAs are only allowed to own gold coins or bars that are 99.5% pure or better; silver coins and bars that are at least 99.9% pure; and platinum and palladium coins and bars that are at least 99.95% pure.
Owning rare or collectible coins—such as Belgian 20 Franc gold coins or Italian 20 Lira gold coins—is off limits in your IRA.
Before finalizing your precious metal purchase, consult with your financial professional to ensure the transaction doesn’t run afoul of any securities rules.
How do required minimum distributions (RMDs) work with a hard asset like gold?
Given the coronavirus outbreak, the government has relaxed RMD rules for 2020. The CARES Act provides a one-year suspension of RMDs, and it waves the penalty for not taking that distribution. Typically, investors who skip an RMD are subject to a penalty equal to 50% of the required withdrawal amount.
In a normal year, investors with traditional IRAs must start taking RMDs once they turn 72. Account holders are required to remove a portion of assets from their IRAs each year as a distribution so the government can begin collecting taxes on your savings.
The most common distribution method is cash, which means the IRA must either have cash available or sell securities to fulfill the distribution. A gold investor can sell a portion of their gold holdings to cover their RMD if needed, or they can take a "distribution in-kind." With a distribution-in-kind, an investor receives the physical gold owned by their IRA.
Keep in mind that if you have more than one traditional IRA, you have the option of taking your RMD from just one account or a combination of them. This allows you to sell your more liquid securities—like mutual funds or stocks—to cover your RMD and leave your precious metal holdings untouched.
Using precious metals in your IRA
At PENSCO, we’ve assisted clients with all different sizes and weights of gold, silver, platinum, and palladium in their IRAs. As a self-directed IRA custodian, it is our job to make the process of holding alternative assets—including precious metals and gold—as smooth as possible.
To learn more about holding gold, silver, platinum, or palladium in your IRA, please contact us at 866.818.4472.
Editor's Note: This is an updated version of a blog that was originally published in 2019. To learn how the CARES Act affects IRA owners, please read our blog on the topic.
 Price movements reflect annual average comparisons for 2008 through 2012.
PENSCO is not a precious metals dealer. All precious metal holdings are held at Delaware Depository Service Company, and PENSCO forwards the funds to complete transactions.
This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.
Pacific Premier Trust (formerly PENSCO Trust Company) performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Pacific Premier Trust is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.