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While self-directed individual retirement accounts have some limitations — you can’t hold fine art or collectible items like stamps in them, for example — generally, they offer more asset-related options than conventional IRAs, according to Lear Capital founder and Chairman Kevin DeMeritt.
Physical precious metals are one item you can potentially include in a self-directed IRA.
The details on how — and why — investors incorporate gold, silver, and other metals into an IRA are below.
What Is a Self-Directed IRA?
You can include the stocks and bonds that can be held in a conventional IRA in a self-directed IRA, along with other alternative assets, such as real estate or promissory notes; you can also add certain precious metals.
As with a conventional IRA, with a self-directed IRA, contributions are made on a pretax basis, and taxes are deferred until distributions are taken.
A self-directed IRA that contains gold, silver, or platinum items is sometimes referred to as a precious metals-backed IRA.
Why Do People Hold Precious Metals in an IRA?
With only a finite quantity of metals like gold and silver available in the world, they’ve historically shown continued demand and value over time.
Gold, for instance, has performed well during past economic booms and busts, with prices for the precious metal either remaining fairly steady or rising throughout the past 200 years, according to the National Mining Association data.
In just the past two decades, gold’s value has risen tremendously. In 2000, the average annual price for the precious metal was $279.11 per troy ounce. By 2003, it had risen to more than $363 — and it continued to climb, surpassing the $1,000-per-ounce mark in 2010.
In early December 2023, gold reached a new milestone level of more than $2,100 per ounce, which is 478% higher than its average price in 2003.
What Metals Can I Include in a Self-Directed IRA?
The government allows numerous physical gold, silver, and platinum assets to be held in an IRA. Per IRS requirements, the items must possess a certain purity level. Gold assets, for instance, need to have a precious metal content of at least 0.995. The threshold for silver is 0.999 or higher.
Coins — including some that serve as legal tender — are a popular self-directed IRA inclusion choice. There is one coin-related caveat, though, regarding the accounts’ precious metal purity prerequisite, according to Kevin DeMeritt.
“The government has made these rules that it has to have a fineness to it,” the Lear Capital founder says. “If it has that quality, then you can add it to an IRA; if it does not, then you cannot — [however, for] an American Eagle, which does not have that fineness, the government made an exception.”
American Gold and Silver Eagle coins have been produced by the U.S. Mint for more than three decades. Versions are available that feature different designs and other qualities. The coins’ purity level is backed by a U.S. government guarantee.
Some IRA-eligible coins may be of particular interest to investors because they derive value from both their precious metal content and limited production.
Investors also can purchase rectangular-shaped bars made of precious metals such as gold and silver.
Available in various sizes, the bars can offer some notable benefits, according to Lear Capital; 100-ounce silver bars, for example, which are often produced by trusted private mints, can easily be stacked, taking up less storage space than round items.
How Do I Get a Precious Metals-Backed IRA?
Several steps are involved in setting up a self-directed IRA. Once you’ve established and funded your account, you can then add physical precious metal assets to it.
The process typically begins with filling out paperwork to create the account. The next step is to put money in your IRA — by either adding it from a checking or savings account, or rolling over funds from another qualified retirement savings account. Roth, SEP or SIMPLE IRA, 401(k), 403(b), 457(b), Thrift Savings, and pension plans all qualify.
“If you have a 401(k) or an IRA, and you’d like to take a portion and move it over to a self-directed gold-backed IRA, you can do that,” Kevin DeMeritt explains. “You don’t have to [roll over] your whole IRA; you transfer any portion that you feel comfortable with.”
There are two rollover methods you can use. In a direct trustee-to-trustee transfer, money is moved from your current IRA provider to your new self-directed IRA provider. The other approach, known as a 60-day rollover, involves having your current IRA account custodian mail a check directly to you. You will then need to deposit the check into your new IRA account within 60 days to avoid invoking any tax implications or fines.
After that process is complete, you can select which precious metal assets you would like to include in your IRA, based on factors such as your overall savings goals.
When you purchase precious metals from Lear Capital, the items will be shipped directly to an approved depository to fulfill another IRS requirement. The company arranges for IRA-related precious metal purchases to be securely sent to the Delaware Depository, which insures the assets for their full value in the event of incidents such as fire or flooding that could result in physical loss or damage.
“To continue to get the tax benefit of that retirement account, you cannot hold those metals yourself,” Kevin DeMeritt says. “The government needs to confirm that you actually have [them].”
You retain full ownership of the assets — and you can also adjust the allocation in your IRA by adding or selling some of the metals whenever you would like to.
Lear Capital account executives can help you start to set up and fund a precious metals-backed IRA today.
“Simply give us a phone call [to] establish an account,” Kevin DeMeritt says. “We use one of the largest self-directed IRA custodians in the country. One of our representatives will get you the paperwork to transfer whatever portion of that IRA, 401(k), or 403(b) you would like to roll over to a physical precious metals IRA — it’s a pretty easy process.”
