The idea of a home storage gold IRA can entice many people. This type of IRA is appealing because it is tax-deferred and allows investors to store their gold and other precious metals holdings at home rather than shipping them offsite through an online account or a broker.
The concept seems simple enough. If you have gold in an IRA, you can store it in your home. However, there are several legal and practical concerns that need to be taken into consideration before investing in such an IRA. We shall weigh the pros and cons of home storage gold IRAs and how much gold you can store at home, among other things.
What Are Home Storage Gold IRAs and How Do They Work?
A home storage gold IRA is an individual retirement account that allows investors to hold gold and other precious metals at home. They are self-directed IRAs that can only be used to acquire IRS-approved gold bullion and valuable metals. They are also used to buy property, enterprises, and other valuable assets.
A gold IRA is similar to a traditional IRA in that it allows you to invest some of your retirement funds in gold while also deferring a portion of the taxes due on this investment through a tax-deferred environment.
Pros & Cons
Pros of the Home Storage Gold IRA Strategy
Cons of the Home Storage Gold IRA Strategy
Gold in IRA vs. Gold in a home safe: hands-on OR hands-off
The gold in your IRA is entirely different from that in your home. The gold you hold in an IRA can be sold outright to another person only if it has been properly melted down and refined. It cannot be used as a gift or an inheritance. If you want to leave your gold legacy to your heirs, the IRS would require you to convert the gold to cash and hold it in a permanent depository.
Gold held in an IRA can often be more valuable than physical gold held in a particular home safe because of the potential tax benefits associated with IRAs. If you own gold in an IRA, it is not subject to capital gains taxes when you decide to sell your precious metals or bullion. However, if you have physical gold at home, it is subject to capital gains taxes on any sale or inheritance.
Additionally, gold held in a home safe is not insured. If your home safe is burglarized or otherwise compromised, you will likely be responsible for the loss. On the other hand, an IRA offers insurance to protect against losing your gold in various circumstances.
Overall, gold set up in a formal IRA is preferable because it offers more protection and a greater chance of securing your gold through the various stages of ownership and appreciation. Moreover, it isn't easy to set up a home storage gold IRA. This is primarily due to several legal concerns surrounding section 401(k) regulations.
Setting Up a Home Storage Gold IRA
As mentioned earlier, setting up a home storage gold IRA account can be difficult. However, several companies can do it for you. The most reliable and trusted companies, such as Nobel Gold Investments, have their in-house gold reserves.
However, you should check with your accountant or a tax expert to confirm the current rules and regulations surrounding home storage gold IRAs and determine how they will affect your situation.
Is a Home Storage Gold IRA Legal?
The IRS does not officially endorse the home storage gold IRA approach. The IRS does not allow precious metals to be bought, sold, or held directly. Instead, they must be kept in an approved depository with a trustee in charge. This is a safer and more practical method of storing physical bullion.
A trustee is the rightful owner of the gold (or other valuable assets) and protects it through insurance policies and security procedures that help protect against theft or damage.
How does the IRS view home storage gold IRAs?
Although investors can buy and store real gold in a home safe, the IRS bans doing so with IRA-purchased gold (and other precious metals) because it sees this as self-dealing. If a person uses their IRA funds to buy gold, then the money no longer qualifies for the tax benefits afforded by IRAs
Opening a Home Storage Gold IRA Incorrectly: Any Taxes or Penalties?
Yes. If you have purchased gold in your personal IRA, then the IRS would require that you remove the gold. Failure to do so will lead to penalties and taxation of any gains you have made on the gold.
Additionally, the IRS would consider the gold a prohibited transaction, meaning that it would fall under the category of an illegal transfer. This means that IRS will assess a penalty on the entire amount of gold plus additional taxes.
In such a case, IRS regulations state that any gains must be recognized when you take possession of the gold you have purchased. If you have sold the gold and done so at a profit, then this profit would be treated as ordinary income and taxed at the regular income tax rate.
Can Your Gold Be Stored at a Bank?
Yes. Some banks offer storage for precious metals. However, if your gold is kept at a bank, you cannot use it as part of an IRA plan. Additionally, the bank is not compelled to pay you if your gold or silver is stolen or destroyed while in a bank's safe deposit box.
How Much Gold Can You Store at Home?
Most importantly, your gold storage at home is determined by how much you can store and how much is necessary to store it. You will want to determine what you need to protect your assets and how much you can afford. If you are comfortable with the amount of gold bullion you have, and it has been appropriately secured inside your in-home storage safe, then you can store your gold at home.
How to Open a Gold IRA the Right Way
Depending on your goal in opening a gold IRA, you can use a self-directed retirement account or an exchange-traded fund. A self-directed retirement account allows you to buy gold bullion yourself. However, with an exchange-traded fund, you will be able to invest indirectly in gold through stocks and mutual funds (which may contain an element of gold).
Formal gold IRA companies such as Noble Gold Investments are better preferred than home storage gold IRAs. This is because golf IRA companies can provide numerous benefits in terms of asset protection and a secure environment for gold.
Final Thoughts: Is Gold Right for You?
Gold is a sound investment in terms of preservation and economic stability. Gold has always been compared to money, wealth, and investment, as diamonds are to jewelry. If you are interested in investing in gold for any reason, you should ensure a formal gold IRA company secures your gold.