Last year, a number of companies in the precious metals and retirement industry began advertising gold for “home delivery.”
These ads were accompanied by the ill-considered claim that the coins would make for a “safe addition” to one’s existing IRA.
There are a couple of problems with these advertisements; problems whose consequences may prove devastating to the customer.
- First, most of the companies advertising home delivery gold did not provide the necessary legal disclaimers warning about IRS requirements for home storage; the violation of which would have resulted in punitive action.
- Second, in an over-reaching move that potentially contradicts the Taxpayer Bill of Rights--the right to for every citizen to pay no more than the “correct” amount of tax--the Internal Revenue Service (IRS) has found a way to make illegal most home-stored precious metals IRA assets; all of which are subject to tax penalization.
Let’s take a closer look at the latter point. According to IRS Publication 590-A, “your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins” including some silver and platinum coins and bars.
However, the IRS’s stringent restrictions on home stored precious metals IRA assets can easily render such storage illegal. This is conversion (from legal to illegal) is based on a technicality, one that treats gold stored in a home as a transfer instead of a normal asset.
Ultimately, the rules are so tight, that if you don’t follow them with exacting precision, you will have committed an illegal act.
And if your “violation” is discovered during the course of an audit (the IRS has a seven-year window to do initiate such an audit), you can lose as much as 35% of your retirement fund in tax penalties!
Sadly, it has been estimated that only 1% of home stored IRA assets have successfully met the IRS’s stringent requirements. Most investors—many of whom have failed to abide by the rules--have lost a significant portion of their hard-earned savings.
Despite the regulatory burdens of home-stored IRA gold, many investors who view the asset as a safe haven “hedge” against inflation, market downturns, and economic instability prefer the option of storing their gold assets in their own homes. The IRS, unfortunately, requires third-party storage for precious metals under the supervision of a trustee (a financial agent or institution).
Following the IRS’s preferred means of storage, you will not be able to see or touch your assets; your access limited to numerical figures in a report on your holdings. Given this common restriction, there’s no wonder why certain investors prefer to store their gold in their own personal vaults.
“But what if I want to store my precious metals assets at home? What can I do?”
There are special circumstances in which you might be able to legally store your metals at home. The following is short list (not a comprehensive one) of what to follow or avoid so as to not run afoul of regulations. Do your homework, and be aware of the consequences should you violate the rules!
- Separate your metal assets from your personal assets
- Never list your metal assets on your homeowner’s policy
- Set aside a separate IRA insurance policy for your metal assets
- Do not ever use your assets for personal gain
- Do not try to qualify as a trustee
Ultimately, you may find that the cost of meeting all of the requirements may not be worth the effort for home storage. Most of these costs will be comprised of additional insurance fees. But again, it may be worth it depending on your own personal circumstances.
It’s best to consult an IRA specialist with experience in precious metals. Contact us to see if home storage for your gold IRA might be suitable for your particular situation.