Can You Take Physical Possession of Gold in Your IRA?

If you have a gold IRA, you may wonder if and when you can physically possess your gold. While the IRS does have strict rules about how precious metals are to be stored in a retirement account, there are times when you can hold the gold yourself.

In this guide, we will review IRS rules about gold IRAs and help you answer the question: Can I take physical possession of gold in my IRA?

Can I take physical possession of gold in my IRA?

You can withdraw physical gold from your IRA whenever you’d like, but your timing will determine what taxes and penalties you may pay.

Here are three things to keep in mind:

• Taking physical possession of gold is considered an IRA distribution: The IRS requires gold in an IRA to be kept with an approved trustee or depository. Once you take physical possession of the gold, that is considered a distribution from your retirement account.
• IRA distributions can be taxable: Once you withdraw an asset from an IRA, it becomes taxable. If you have a traditional IRA—one for which you deduct contributions on your federal tax return—then the value of the gold you withdraw is subject to regular income tax. If you have a Roth IRA, meaning you do not get a contribution deduction, gold is not subject to income tax.
• Early IRA distributions can be penalized: If you are younger than 59½, taking physical possession of gold from an IRA will trigger a 10% penalty in addition to income tax. This penalty applies to both traditional and Roth IRA accounts. There are some exceptions, though, such as if you make the withdrawal to pay medical insurance premiums while unemployed or if you become totally and permanently disabled.  

Approved storage options for physical gold 

The government does not allow home storage of gold kept in an IRA. Instead, precious metals in a retirement account must be in the possession of a trustee, according to IRS rules. That trustee is a custodian that manages and oversees the IRA, and you need to keep your gold where a custodian can monitor it.

Some have argued that you can get around this rule by creating a LLC—limited liability company—to serve as the trustee and then keep the gold at your home under the management of the LLC. However, the court ruled against this method in the case Andrew McNulty et al. v. Commissioner of Internal Revenue.

That means you’ll need to store your gold in one of the following IRS-approved locations:

Depository

A depository is the most common place to store gold and precious metals in an IRA. These specialized businesses have highly protected and insured vaults, providing a safe place to keep your investment.

Other financial entity

Banks, credit unions, trust companies, and other IRS-approved financial institutions can also be used to hold gold in an IRA. However, that doesn’t mean you can place your gold in a safe-deposit box. Doing so would be essentially the same as storing the gold at home since you’d have the gold in your direct control.

Not all financial institutions are equipped to store and maintain gold IRA assets. As a result, depositories are the more popular option for many investors.

What options do I have if I want to hold physical gold? 

While depositories have vaults that securely store gold and precious metals, some people prefer the peace of mind that comes with having physical gold in their possession. In that case, there are two options to use:

• Withdraw gold from an IRA: When you take a distribution from an IRA, you can either liquidate that gold for cash or physically possess the metal. While you may have to pay some taxes and possibly a penalty, depending on your age, withdrawing gold from an IRA is one option to hold physical gold at home.
• Purchase gold outside an IRA: The other option is to leave your gold in the IRA and purchase additional gold or precious metals outside your retirement account. This option also allows you to purchase gold items that may not be eligible for a gold IRA, such as collectible coins or jewelry.

Gold IRA vs. purchasing physical gold

No one type of gold investment will be right for everyone. Consider the pros and cons of each before deciding how to purchase and hold physical gold.

Gold IRAs

Pros

• Comes with tax advantages

• Diversifies retirement portfolio

• Gold must meet high purity standards

Cons

• Fees for IRA custodian and storage

• Physical possession of gold at home is not allowed

• Penalty for withdrawals before age 59½

Purchasing gold outside an IRA

Pros

• Ability to store gold at home

• More purchase options

• Can liquidate gold at any age

Cons

• Might require purchase of additional insurance

• Could be at risk for theft

• No tax advantages

Your decision may come down to the purpose of your investment and when you expect to use the gold. A gold IRA can make the most sense if you want to use gold as a long-term investment to cash in during retirement. If you want physical gold in the event of an economic crisis, purchasing gold to keep at home might fit your needs.

Either way, you get access to an investment historically used as a hedge against inflation and provides a tangible asset with a value not tied to any nation’s currency.   

How to open a gold IRA

If you decide a gold IRA is right, opening one is relatively simple. Just follow these steps:

1. Select a gold IRA company: Working with a gold IRA company is not required, but it can save you time. These companies have experienced staff who can walk you through all the following steps.
2. Open a self-directed IRA: You can’t hold physical gold in a regular IRA so you’ll need to open a self-directed IRA through a custodian.
3. Fund your gold IRA: Next, you’ll need to fund your gold IRA with a direct contribution or a transfer of money from an existing retirement account.
4. Buy gold and ship it to a depository: Once you have money in your gold IRA, you can purchase gold and other precious metals that meet IRS requirements. Remember, you cannot store your gold at home, and it must be sent directly from a gold dealer to a depository or other approved institution.

If you are ready to start, check out the best gold IRA companies today.

The post Can You Take Physical Possession of Gold in Your IRA? appeared first on LendEDU.