By These days, some IRA owners and investors may be worried about being overexposed to equities. That could be you.
But the safest fixed income investments (CDs, Treasuries, and money-market funds) are still paying microscopic interest rates.
For example, when this was written, the 10-year Treasury was yielding about 1.92 percent. Ugh!
Meanwhile, the pandemic might or might not be coming to an end, the economy might or might not be okay, and inflation might or might not be controlled. Who knows?
In this uncertain environment, investing some of your IRA money in gold or other precious metals such as silver and platinum may be worth considering. Ditto for holding some precious metal assets in taxable form.
Precious Metal Assets in Your IRA
At first blush, our beloved Internal Revenue Code appears to throw cold water on the idea of holding physical precious metal assets in an IRA.
As a general rule, a physical IRA investment in any metal or coin is treated as the acquisition of a collectible for federal income tax purposes. As such, the transaction is characterized by the tax code as a taxable distribution from your IRA to you (the IRA owner), followed by a purchase of the metal or coin by you.
In effect, this general rule appears to prohibit you from using an IRA to invest in precious metals or coins made from precious metals.
But there’s a great big exception to the preceding general rule. Under the exception:
- You can use your IRA to invest in certain gold, silver, and platinum coins and in gold, silver, platinum, and palladium bars (bullion) that meet the purity standards.
- Your IRA trustee or custodian, rather than you, must hold the coins or bullion.
These rules apply equally to traditional IRAs, Roth IRAs, SEP accounts, and SIMPLE-IRAs.
Your IRA Can Buy Precious Metal Coins and Bullion
Thanks to the exception, IRAs can own certain precious metal coins and bullion. Examples include
- American Gold Eagle coins;
- Canadian Gold Maple Leaf coins;
- American Silver Eagle coins;
- American Platinum Eagle coins; and
- gold, silver, platinum, and palladium bullion that meets the purity standards.
For example, gold bars must be 99.5 percent pure or better, and silver bars must be 99.9 percent pure or better.
If you would like to discuss precious metal investments, please call me on my direct line at 408-778-9651.