Case Study: Precious Metals IRA

Rob is like any other honest hardworking middle-class American. Growing up in Santa Ana, CA, he started working for the County of Orange in 1976, the year he turned 21. Having been taught the basics of good financial planning by his father, Rob started saving regularly, along with the savings in the IRA account his employer had set up.

The “Black Monday” stock market crash on October 19, 1987, was an important event that exposed the frailties of a traditional IRA that usually invests in stocks, bonds, and mutual funds. Rob wanted more power to make his own investment decisions. That is when he rolled over his traditional IRA into a self-directed IRA where he would be in control of his investments.

Apart from stocks, he was also able to diversify his investments to include assets like real estate and precious metals, especially gold. Over the years, these alternative assets in his retirement portfolio appreciated in value substantially and independently of the volatility and uncertainty of the stock market.

The global pandemic also shocked the economy and Rob was thankful for his decision to save part of his assets in precious metals. When Rob retired in January 2022, he decided to receive his IRA contribution. And because he now had a gold IRA, his returns were more than most traditional IRAs. He gratefully accepted an in-kind distribution of his precious metals, while keeping the other assets to grow some more.

However, now he faced another challenge – to find a buyer for his precious metals who’d offer him a good deal. He was looking for a reputable buyer who could handle all of his goods, offer him a good price for all of his goods.

He approached a few places but while some of them said they weren’t buying at the moment since they did not have the cash flow to float the deal immediately, or he wasn’t happy with the deal they were offering.

Finally, on the advice of one of his friends, he approached Vasco Assets in Newport Beach. With the help of our precious metal experts, we were able to valuate Rob’s goods in no time and were able to close the deal with him at a price above what other competitors offered. By the end of the working day, Rob was able to walk away from our office with one check for everything.  

How to Hold Physical Gold in an IRA?

As Rob’s case highlights, you can hold physical gold and other precious metals like platinum, silver, and palladium in your self-directed individual retirement account. A self-directed precious metals IRA is governed by the same laws as a traditional IRA, but it gives you more control over your investments as you can decide which assets to diversify your investments in.  

Many people look at investing in precious metals as a hedge against stock market volatility and economic instability.  

The IRS rules have clear guidelines on what kind of precious metals you can hold in your IRA. Gold must be 99.5% pure and silver must be 99.9% pure. Platinum and palladium must be 99.95% pure. Some products that meet these purity criteria are Canadian Maple Leaf gold coins, PAMP Suisse bars, and Australian Koala bullion coins. An exception to these is American Eagle coins that the IRS allows to be held in an IRA, although they do not meet the 99.5% purity standard for gold.

Can I Take Physical Possession of Gold in My IRA?

This question may have two meanings with regards to a precious metals IRA. Let’s tackle them both.

The first scenario would be when you are thinking of physically possessing your precious metals when your IRA account is in force. When you open a precious metals IRA, you can possess precious metals. However, even though you are the “owner” of the precious metals, they are not in your “physical possession,” meaning you cannot keep them at home.

According to Section 408(m) of the IRS code, the precious metals you buy in your IRA must be held with the “trustee.” The trustee means an IRS–approved depository. The section also provides guidelines on the type of precious metals you can buy for your precious metals IRA.

The second scenario would be when you wish to withdraw from your precious metals IRA. Here, you have two options – a) get the precious metals shipped to your home (as Rob did), and b) sell the precious metals to the depository and withdraw in dollars. If you choose the first option, your precious metals will come into your physical possession and you can choose to do with it as you please.

How Can I Open a Precious Metals IRA?

Opening a self-directed IRA is slightly more complicated than opening a regular IRA. But because you are able to take control over your assets, the initial work is worth it.

• Choose a Self-directed IRA Company

You will have to select an IRA custodian to hold your IRA account. These are usually banks, trust companies, or financial institutions that are approved by the IRS.

• Fund Your IRA Account

You can either send a cheque to your custodian to fund your newly formed IRA account, or you can rollover funds from a retirement scheme to the IRA. You can also transfer part of your funds in an existing retirement plan into your IRA. If you are below 50 years of age, you can contribute a maximum of $6000 per year into your self-directed gold IRA. For individuals above 50 years, the maximum amount is $7000.  

• Select a Gold Dealer

In most cases, your custodian can direct you to a precious metals dealer in their network. However, you can do your own research and select a dealer if you so wish.

• Select a Depository

The IRS mandates that you hold your precious metal products with an approved depository. You can either do your own research or your custodian may suggest a depository partner.

• You Are Ready to Complete the Transaction

Once you choose the custodian, the dealer, and the depository, you can ask your custodian to send money to the dealer to purchase gold products you wish to include in your IRA. These gold products will then be sent to the custodian for safekeeping.

You can cash out your IRA gold when you reach 59.5 years of age. If you withdraw it earlier, you will be liable to pay a penalty of 10%. While your investments can grow tax-free in your IRA account, you’ll have to pay income tax when you withdraw your retirement savings.

Is a precious metals IRA Right for Me?

The current market conditions and record inflation may seem like the perfect recipe for setting up a precious metals IRA. However, you should understand that it is expensive (you’ll likely pay for storage and insurance of your precious metals) than other investment options and carries more risk than a regular IRA.

While thinking about a precious metals IRA, you should have a well-diversified portfolio and only put around 5% to 10% of your funds in precious metals. One of the major issues most people with a precious metals IRA face is when they opt for in-kind distributions. When the precious metals arrive at their addresses, they find it difficult to sell them within a reasonable timeframe. However, the IRS expects you to pay for taxes as soon as you withdraw from your IRA, leaving you to figure out how to raise funds to pay the taxes.

In such times, you can rely on someone like Vasco Assets. As a multinational luxury asset conglomerate, we can offer you a safe, secure and seamless experience of selling your precious metals to us. We have a huge global network of industrial and accredited buyers and so we can help you get money for your precious metals in just a few days. Because your precious metals have already been bought from accredited dealers, appraisal hardly takes much time and under the best circumstances, you can walk away with money within 24 hours. We also guarantee the best deals in town for your precious metals.  

To know more about our services, visit us at www.vascoassets.com. To get a free valuation of your IRA gold, visit our office at 2024 Quail Street, Newport Beach, CA 92660, call us at 949.679.2300/800.688.2994 or write to us at info@vascoassets.com..