Understanding Home Storage Gold IRA
Defining Home Storage Gold IRA
Before proceeding, it’s essential to understand what is meant by a physical possession of gold IRA. Under normal circumstances, the precious metals associated with an IRA such as physical gold coins will be stored in an approved depository.
As the name implies, now you’re talking about a retirement account in which the gold and other precious metals are stored at home.
Legality of Home Storage Gold IRA
Under normal circumstances, there is a legality issue here as the IRS simply does not allow this. If you were to try and be discovered, there would be potential penalties and sanctions, plus the 10% withdrawal penalty that’s applied to early withdrawals in a traditional gold IRA context.
Comparing Gold IRA to Traditional IRA
A traditional or Roth IRA and their respective traditional gold or Roth gold IRA counterparts operate similarly in the taxation and withdrawal penalty respects, with the differences being in the underlying assets.
In a traditional IRA, for example, pre-tax dollars are used to contribute, with taxes being calculated at withdrawal time, which is after 59 1/2 years old. Any withdrawals before this attract a 10% tax penalty. A traditional gold IRA functions in the same way.
Eligibility and Qualifications for Home Storage Gold IRAs
IRS Guidelines for Gold IRA Home Storage
While having this kind of gold IRA account is not allowed by default, some stipulations must be followed to make it possible, which include:
- A limited liability company must be created with a specially written operating agreement and in your name.
- There must be a minimum of a $250,000 net worth following audits and incorporation.
- A $250,000 fidelity bond must be put up by all employees and trustees as corporate insurance.
- Trustee corporation ownership must be divided among several people.
- The applicant must have demonstrable experience in retirement fund handling alongside other verifiable fiduciary experience.
- There must be an address accessible to the public associated with the trustee corporation.
- A detailed audit must be completed by a qualified public accountant annually and the applicant must have appropriate legal counsel on retainer.
Custodian Role in Home Storage Gold IRA
The role of a custodian becomes minimized with a home storage IRA since there is no longer a liaison needed with the depository. However, you will still need to purchase the gold through the custodian for the account.
Types of Precious Metals Allowed in a Gold IRA
Under normal circumstances, your coin and bullion choices for an IRA include a laundry list of approved items by the IRS. However, with a home storage IRA, you become limited to just American Eagle gold coins.
Establishing a Home Storage Gold IRA
Provided that the eligibility requirements are well understood, it then becomes time to open the home storage IRA, which is more practical than you would expect.
Steps to Set Up a Home Storage Gold IRA
- The fee and process will need to be taken care of to set up the LLC, with you being appointed as a non-compensated manager.
- Next, choose a bank and visit it to open a checking account for the LLC. The account and its checkbook become your investing platform, which means that purchases will need to be completed through the writing of a check.
- With that out of the way, it’s time to open a self-directed IRA, with the LLC account being used to fund it.
- From there, choose a reputable dealer, and have the precious metals purchased and shipped to your address. This is different from where a gold IRA custodian would typically have the precious metals purchased and sent to whichever depository is associated with your account.
Role of Precious Metals Dealers in a Gold IRA
The role of the dealer is simply to be the supplier of the gold that will be used to back the account. The purchase will be completed by the custodian on your behalf. Working with a reputable custodian means a verification of the quality of the gold is certain.
Transferring or Rolling Over an Existing IRA to a Gold IRA
Another way to fund a gold IRA is to use funds from an existing IRA. This will be done via a transfer or a rollover. Both processes are pretty similar. The difference is that the transfer is seamless from the existing account to the gold IRA account without your having to be very involved in the process while the rollover sees you getting the money with a 60-day time limit to have it placed into the new account.
Risks and Safety Measures of Home Storage Gold IRAs
Potential Risks of Home Storage Gold IRAs
As you can imagine, storing gold in your home can put you in a very vulnerable and dangerous situation. You will likely not have the security to protect the gold from criminal elements, and if a theft happens, not having the right insurance compounds the problem.
There’s also the fact that missing even one element of IRS compliance could see you having a series of penalties fall on your plate.
Mitigating Risks of Home Storage Gold IRAs
Getting a proper insurance policy and putting a strong focus on compliance actions are good ways of mitigating the risks highlighted above. However, it may be much easier to just have a standard gold IRA set up instead.
Importance of Insurance in Home Storage Gold IRA
The thing about a bank safe deposit box or an approved depository is that the physical gold assets stored in them have a strong measure of protection because of the investments made in security.
It’s one of the reasons they get IRS-approved. You do not have the same kind of security at your home. Additionally, insurance tends to be covered in the agreement with the depository to offer loss compensation. This is a venture that would need to be taken up independently where home storage is being used.
Evaluating Home Storage Gold IRAs: Pros and Cons
Advantages of Home Storage Gold IRAs
- There is no wondering about the holding and placement of the gold bullion in the precious metals IRA since it is all being held in the home.
- No depository fees will need to be paid for gold storage since there is no agreement engaging any such company.
- Establishing the LLC and setting up a home storage IRA means that there isn’t any early withdrawal penalty for holding the gold at home.
Disadvantages of Home Storage Gold IRAs
- The requirements for having IRA gold at home are very stringent, and much of it speaks to elements that need to be maintained over time. If it should be discovered that you fall out of compliance at any point, the penalties for this can be incredibly steep.
- You don’t have the measures of protection for your gold that would typically be offered by keeping it within the confines of an approved depository.
Gold IRA as an Investment Diversification Tool
By understanding what a gold IRA is, you should also be aware that gold prices don’t have a synchronous relationship with Fiat currencies and this precious metal makes an excellent diversification tool. Other investment types can fail and it would still stand and vice versa.
Exploring Alternatives to Home Storage Gold IRAs
It may sound attractive to buy gold coins and store them at home. However, there are better alternatives to doing this that would offer greater security and a measure of insurance that is a plus for recouping any potential losses that may occur.
Bank Safe Deposit Boxes for Gold IRA
Since you are free to store your gold in a place of your choosing with this kind of IRA, perhaps a bank-safe deposit box would be a better alternative to just a safe or other holding place in a home. Being in a bank means that there is threat protection, security, and insurance.
Private Gold IRA Vault Storage
This is another high-security option that you may consider for a fee. The employees of such facilities tend to be highly trained in areas such as logistics and security, which makes it the perfect secure holding place for your gold.
Offshore Gold IRA Storage
Another way to go may be to store the gold in a different country. Now, there’s regional diversification and the fact that doing this provides access to certain tax benefits.
Stock IRA as an Alternative Investment
Gold doesn’t even have to be the full extent of your alternative investment type. Another option is to use a standard IRA that uses stocks as the underpinning assets. This can be used instead of a gold IRA or alongside one.
After all, there is no limit to the number of IRAs that you can have. With a stock IRA, the performance of the account depends on the performance of the stocks that are being invested in.
Frequently Asked Questions
Is It Legal to Store Gold from an IRA at Home?
In the standard sense, storing gold associated with an IRA at home is strictly prohibited by the IRS. However, setting up an LLC and following a set of defined policies could see you have the ability to store the precious metals wherever you desire including at your home.
What Are the Penalties for Non-compliance with the IRS Rules on Home Storage Gold IRAs?
There is no telling the extent of the penalties that you can or will face based on a lack of compliance with IRS rules and regulations. If an audit is done, the action that is taken depends on what is found and what enforcement policies the IRS chooses to enforce.
Note, however, that if you should choose to set up this kind of retirement account and fall short of the requirements, the penalties will likely make all of what you went through to be able to store your gold at home seem as if it wasn’t worth it.
This gets even more frightening considering that penalties can apply for simply not having security that’s up to scratch all the way up to gross policy violations.
What Types of Gold Investments Are Allowed in a Home Storage Gold IRA?
Home storage IRAs limit your options to just American Eagle coins. While there are limitations on IRAs where the gold is stored in a depository, there are a lot more options on the table.
What Are the Potential Downsides of Investing in a Home Storage Gold IRA?
The biggest potential downside will always be the risk that comes with being seen as out of compliance with one or more policies and the sheer financial disaster that this could mean for you.
Additionally, you don’t have the kind of security that depositories can provide, which means theft is a huge concern.
What Are the Alternatives to Home Storage for a Gold IRA?
The best alternative is to simply go through a gold IRA company and set up a precious metals IRA in the normal fashion.
Outside of that, you could consider other retirement account types or other investment alternatives entirely such as stocks, bonds, or real estate.
Making the Decision: Home Storage Gold IRA
Factors to Consider Before Investing in a Gold IRA
Before setting up a gold IRA, ensure that you understand all the requirements as well as the earning potential that comes with going this route.
Long-term Implications of Gold IRA Investment
The implications of long-term investment in gold will be based on how you go about the account. For example, home storage gold IRAs will mean having to constantly stay on top of IRS requirements that are very stringent.
A traditional or Roth gold IRA account will require you to make considerations for where taxation will occur.
Home storage IRAs may initially sound attractive, but they may not be worth the time and effort involved. In any case, ensure that you have a working understanding of all you will need to do initially and thereafter if you should choose to create one. Do not discount the risks highlighted either.
Consider it putting yourself in the firing line and hoping for the best outcome if you choose to setup such an IRA. Remember that a typical gold IRA has much of the heavy lifting taken care of for you.