An Individual Retirement Account (IRA) is a tax-advantaged investment account that is designed to help you save for retirement. There are several types of IRAs, including Traditional IRAs, Roth IRAs, and SEP IRAs.
Gold has long been considered a valuable asset, with its value increasing over time. One way to invest in gold is through a precious metal IRA, also known as a gold IRA.
In this article, we will discuss gold IRAs, how to get them set up, and why home storage needs to be avoided at all costs.
What is a Precious Metal/Gold IRA?
A precious metal IRA, also known as a gold IRA, is a type of retirement account that allows investors to hold physical gold, silver, platinum, and palladium as an investment. These assets are held in storage by a custodian, which can be a bank or other financial institution.
Investors can choose to hold a variety of precious metals in their IRA, including gold coins, gold bars, and gold bullion. The value of the precious metals in the IRA is based on their market value at the time of purchase.
One key difference between a traditional IRA and a precious metal IRA is that the latter allows for a wider range of investment options. While traditional IRAs are typically limited to stocks, bonds, and mutual funds, precious metal IRAs allow investors to diversify their portfolio with tangible assets.
Why Invest in Gold?
There are several reasons why a Gold IRA may be the right choice for you.
- Gold has a long history of being a stable and reliable investment, and it can potentially provide a hedge against inflation and market volatility.
- Gold is a tangible asset that you can hold in your hand, which can be appealing to some investors who prefer to have physical ownership of their investments.
- Investing in a Gold IRA can add diversification to your retirement portfolio, which can help to reduce your overall risk.
Can You Setup a Home Storage Gold IRA?
You may be wondering if it is possible to store precious metals in your own home. While this may seem like a good idea, it is actually not recommended for one reason:
It’s not allowed.
Technically, there is one way to get around this, but it is extremely complicated, and chances are, you won’t qualify. But assuming you meet all the requirements and want to risk heavy fines from the IRS, here are some benefits to home storage:
Benefits Home Storage Gold IRAs
Why would you want to store your gold at home?
Flexibility: With a home storage gold IRA, investors have the option to store their precious metals at home or at a third-party storage facility. This allows investors to have greater control over their assets and the ability to access them more easily.
Cost Savings: Home storage gold IRAs typically have lower fees compared to traditional gold IRAs, which often charge storage and maintenance fees. By storing the precious metals at home, investors can save on these costs and potentially increase their overall return on investment.
Privacy: Some investors may prefer the added privacy and security of storing their precious metals at home. A home storage gold IRA allows investors to keep their assets out of the public eye and in a location, they feel is more secure.
On the surface, storing your gold at home may appear to be a feasible choice; however, there are many rigid IRS regulations that must be strictly adhered to if this type of account is chosen.
How to Store Your Gold at Home
The Internal Revenue Service (IRS) does not allow for the physical possession of IRA-owned assets by the IRA owner or any disqualified person. This means that the IRA owner cannot personally hold or store the assets in a home storage IRA.
However, the IRS does allow for the use of a “checkbook IRA,” which allows the IRA owner to have greater control over the investments in their IRA. With this type of IRA, the IRA owner can use a limited liability company (LLC) to make investment decisions and hold assets on behalf of the IRA. The LLC is owned by the IRA and is managed by the IRA owner or a third party.
In this case, the assets in the IRA, including precious metals, can be stored at a location chosen by the LLC. This could include a third-party storage facility or the home of the IRA owner, as long as the assets are stored in a secure location and are insured to protect against loss or damage.
It is important to note that the IRS has strict rules and regulations regarding the use of a checkbook IRA and the storage of IRA-owned assets.
A few other requirements to qualify for home storage gold IRAs are:
- Minimum net worth of $250,000
- All personnel of the organization, including employees and trustees, must provide a corporate insurance bond worth $250,000
- For a trustee corporation to be valid, ownership must be shared among multiple individuals
- In order for your IRA trustee corporation to be eligible, it must maintain a physical presence that is accessible and open to the public
- Must have a corporate legal counsel
- Must provide detailed audits
- And more
In the unlikely chance that you meet all these requirements, it is still recommended to work with a financial professional and a reputable custodian when setting up this type of IRA to ensure compliance with IRS guidelines.
Why You Should Not Store Your Gold at Home
Most “home storage delivery” options are outright scams. Since most people do not qualify for the IRS workarounds required to legally store precious metals at home, the only way to do so is through a third-party custodian. This can get expensive, leading many uninformed investors to seek out deceptive home storage options, not realizing that they do not qualify and that the promoters are likely taking advantage of them.
Huge Penalties. Assuming that the “home storage gold delivery” business you gave money to didn’t turn out to be a scam, you can face stiff penalties for violating the IRS rules. In addition to owing back taxes, you could be subject to a 10% early withdrawal penalty or even a 50% excise tax.
Lack of Security. Your home could be an easy target for burglars and other criminals, as it’s not as secure as a professional storage facility. Additionally, insurance and liability coverage may be limited or nonexistent when you store your gold at home.
It’s Not Legal. Despite there being loopholes, in reality, most people will not be able to legally store their gold IRA assets at home. Don’t try it.
How to Set Up a Traditional Gold IRA
Instead of risking it all with a home storage IRA, it’s in your best interest to set up a traditional gold IRA. Setting up a traditional gold IRA is a relatively simple process.
Choose a custodian. The first step in setting up a home storage gold IRA is to choose a custodian. A custodian is a financial institution that holds and manages the assets in the IRA. It is important to research and compare custodians to find one that is reputable and meets your needs.
Open an account. Once you have chosen a custodian, you will need to open an account with them. This typically involves filling out an application and providing personal and financial information.
Fund the account. After the account is opened, you will need to fund it in order to make purchases. This can be done through a rollover from an existing IRA or by making a contribution.
Choose your investments. Once the account is funded, you can start choosing your investments. This involves purchasing precious metals, such as gold coins or bars, through the custodian.
Store the investments. After you have purchased your precious metals, you will need to decide where to store them. You will need to store the metals at a third-party storage facility.
Don’t try to store your gold at home. It’s an impossible task for most people and can lead to hefty penalties. Instead, set up a traditional gold IRA with the help of a qualified custodian. It is important to do thorough research and consider all your options before deciding on a gold IRA to ensure it meets your investment goals and needs.