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Considering a “Gold” IRA? – Choose Wisely

There are probably 101 good reasons to own precious metals right now, and for the average consumer/investor, almost as many choices to be made.

One option that is currently very attractive is the purchase of gold and precious metals within a Self Directed IRA account. There can be material benefits to this form of Gold ownership, but as with everything these days, there are also some specific rules that must be followed in order to have the investment be qualified.

For example, only specific US gold, silver and platinum coins are allowed like the US Gold and Silver Eagles, along with other bullion coins that meet specific fineness standards (.999 pure) such as the Canadian Maple Leaf.

Numismatic items and coins certified for grade or items that carry a numismatic premium are not allowed. However beware of a common mistake many buyers make, namely purchasing Proof Gold.

The US and other mints generally manufacture both a standard MINT STATE and PROOF version of their bullion coins, however the proof coins are manufactured to a much higher standard, with specially prepared planchets (blanks) and multiple striking. They are beautiful, but this process makes them more expensive that Mint State coins with an equal amount of gold.

The trap is this, if you purchase proof gold for your IRA account, you will end up paying a premium above the actual value of the gold itself. However this premium does not increase as the spot price of the underling metal increases, so in effect you are buying less gold “value” for every dollar. Your best deal is to just purchase regular old mint state gold and silver bullion coins and you will be way ahead of the game.

However, you can’t just drop down to a local coin dealer and buy the coins yourself. In order to qualify as an IRA investment, you need to set up a Self Directed IRA account.

Self Directed IRA’s actually can hold any number of different types of assets, but the two best known and most reputable precious metals administrators for individual investors are GoldStar and New Direction IRA. Yes several of the big banks also offer administration services, but for anyone that wants to make their own choices and avoid the big fees and bureaucracy, I’d stick with the specialized companies such as New Direction IRA and Goldstar.

Now. what does an Administrator do? Well for one, they handle all the money. Once you open your account and fund it either with a direct deposit or a rollover from another 401K or existing IRA, they will make the actual payments to the Bullion/Coin Dealer from whom you are buying your gold.

They don’t care what you buy so long as it qualifies under the IRS rules mentioned above. They will also provide monthly account statements to you, handle the paperwork, etc. All the usual stuff you don’t want to be bothered with.

All this is well and good, but who holds the actual Gold coins in your account?

Under the IRS rules, as the IRA account owner, YOU CAN NOT have control over the underling assets (your coins), nor can the administrator. All the coins, bars and assets in your self directed IRA should be held in a depository, an ultra secure location that is both insured and approved to store precious metals.

The depository has two forms of storage, Fungible meaning your coins are grouped in with other peoples coins and Segregated, where your coins are separate from others within the storage facility, insuring that the exact coins you purchased are the ones returned to you or sold on your behalf at sometime in the future

Depositories charge a small annual account fee plus a storage fee based upon the total value of the account, with a slightly higher amount for segregated storage.

Goldstar, based out of Texas used to use HSBC as its depository, but on July 3rd, HSBC announced that they were no longer going to accept coins for storage, only bars and ingots. Basically they ran out of space.

So now, Goldstar has signed an exclusive agreement with DDSC (Delaware Depository Service Center) as the sole depository that Goldstar uses.

On the other hand, New Direction IRA has dozens of independent franchises across the country that offer the full range of Self Directed IRA services. This might be meaningful to some who prefers to have a face to face meeting with their administrator, rather than just a phone call or email, but some people could care less.

New Direction IRA also does not have an exclusive agreement with any single Depository. The customer is free to select which depository to use, and by extension, shop for the best storage fees possible.

One such depository is First State Depository in Wilmington Delaware. I must state that I am biased, as I know the owners at First State. They run a very clean operation. All of their storage agreements are for segregated storage so you coins are never co-mingled with others, and their fees are significantly lower than similar depository services, (I was told half of what GoldStar/DDSC charges)

Remember, You are the one who should be making ALL the decisions in your Self Directed IRA. That’s why you set it up in the first place!

1) Choose a Bullion Dealer to work with that can deliver the product you order, and remember, stay away from the proof coins. If the dealer tries to sell you these for your IRA, keep shopping.

2) Make sure the coins you purchase are “Qualified” to be included in an IRA

3) Select an Administrator that gives YOU the ability to choose how reports are sent, Offers YOU options as to storage facility, Type of Storage and Timely execution and processing of your purchase orders

4) Shop for the best Depository that is going to suit YOUR needs, and do not settle for the one that is most convenient for your Administrator or Bullion Dealer.

5) Most importantly, develop good solid working relationship with ALL Three of the organizations you need to make your IRA work for you, The Bullion Dealer, The Administrator and the Depository.

The more that each of these are responsive to your needs and requirements, the better off you will be and the easier it will be to sit back and enjoy your Gold investment performance.

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RSS Feed for This Post11 Comment(s)

  1. John Coktsotin | Sep 7, 2010 | Reply

    Great post very helpful for those preparing to buy coins for their IRA. Really like that you talk about mint and proof coins and why you should buy mint.

  2. Don A. | Sep 9, 2010 | Reply

    Actually I purchased the gold Eagle coins in the Proof variety and the bullion variety almost 5 years ago, the Proofs have far outperformed the bullion. Most reputable advisors will tell you that the bullion is best for short term (less than 2 years) trading but if you want a less volatile, long-term investment then the Proofs are definitely the way to go. Besides, the Proof coins haven’t been made in 2 years and if our government makes it illegal to own gold again, they could seize our bullion in the depository but not our Proofs because they are American treasures. Think about that before you go either way!

  3. John M | Nov 24, 2010 | Reply

    Thanks so much for your candid article. Very impressed.

  4. Loren W. | Jan 24, 2011 | Reply

    This is Loren Whitney in business development at Entrust New Direction. We are mentioned above as an IRA provider for precious metals. If anyone is interested in talking with me personally about how self-directed IRAs and precious metal investments, I’m happy to take your call. 303 546 7930, x103. You can also visit our website at I’ll be happy to provide you with some additional information and a precious metals transaction guide for self-directed IRA purchases.

  5. Nakor | Feb 10, 2011 | Reply

    If they can change the law to seize gold (Don A.) they can change the law to seize proofs as well. The best way to handle all this is to buy physical yourself and hold on to it. So you get to invest with pre-tax money if you go the IRA route, but you also have to pay upkeep and transfer fees, blah blah… forget that. If you go to a coin shop and buy more than $1,000 at a time you don’t have to pay taxes on it. If you need to withdraw from your own physical stash, then you are covered, just go down to the shop and trade in your gold/silver for fiat. No penalties or waiting and you don’t have some company or government keeping track of you.

  6. Brian | Feb 25, 2011 | Reply

    The more I read about the options of owning gold, I am tending to agree with Nakor’s take on all this. I definitely disagree with the article’s statement about proof gold as not being a smart option, and agree with Don A. in this regard. This is due to the added numismatic value on top of the gold. The proofs tend to be more rare, as their mintages are limited. I am considering an IRA or Roth IRA with gold, but the storage fees are a disadvantage to simply storing your own gold yourself in a secure place.

    Is the difference in these options primarily related to paying capital gains tax? Meaning, if you hold gold yourself for 20-30 years and then sell for a profit, you are expected to pay tax on that profit. If you hold gold in an IRA then you don’t have to pay tax on the capital gain, correct? Does anyone have an opinion on this?

  7. Brian | Feb 25, 2011 | Reply

    One other comment after reading through this – the article states “Make sure the coins you purchase are “Qualified” to be included in an IRA”. Now wouldn’t that be part of the administrators job? They should be directing you on which coins qualify under the IRS rules, shouldn’t they?

  8. CoinLink | Feb 25, 2011 | Reply

    There are many different opinions on the MS vs Proof question. The point in the article was that the more premium you are paying for proof items, the less actual gold you are buying. And if the idea is to purchase gold because of concerns over fiat currency, then you want as much “bang for the buck” as you can get.

    As far as your other points, virtually none of the proof bullion coins are really “rare”, and if you are looking to invest in numismatic items that truely are rare, then there may be much better choices than proof bullion products.

    On storage fees, if you elect to place gold in an IRA, Roth or otherwise, you almost have to use a storage facility. The law requires the the owner of the IRA MAY NOT have control and custody of the assets, so you can’t set up an IRA, buy the gold and then hold onto it yourself.

    Also the list of coins and products that are “Acceptable” to place into an IRA are specified by the IRS, and “numismatic items” are not allowed, nor are certified coins.

    On taxes, you need to consult an accountant, but my understanding is that regular IRA distributions are taxable at the time of withdrawal because you can deduct the value of the items from your income, up to specific limits, for the year in which you make the contribution.

    Roth IRA contributions are made with “after Tax” contributions and I think these are indeed tax fee upon withdrawal, but I may be wrong.

  9. Wayne | Aug 19, 2011 | Reply

    Very informative articcle-

    I am definately theinking about cashing out my 401 K and other stock invetmentsm take the hit from the IRS and invest in precious metals (gold and silver).

    The way the global economy is tanking, I can’t risk losing anymore of my money…

  10. Jack Steffen | Oct 23, 2011 | Reply

    I’ve been seriously thinking about starting a gold IRA as I will be coming into some money that I will be able to invest. The only thing I am leery of is the fact that your gold is stored somewhere by someone else and you don’t have easy access to it, but the government might. The U.S. government has confiscated people’s gold in the past, what’s to stop them from doing it again if times get really terrible?? I’d actually feel more comfortable just going to a local coin dealer and actually buying the coins myself at the lowest price I can get, then just keep them myself and hide them. I know that sounds “risky” but IMO there is just as much risk letting a repository (I’m sure they are watched and monitored by the government) or bank safe deposit box (same problem – govt could confiscate sd boxes at banks too) Is there anyone out there who can give me rock solid assurances that this won’t ever happen?? Right now it looks like just buying gold on your own, keeping quiet about it – don’t broadcast to every Tom Dick and Harry “Hey I’m stockpiling as much gold as possible” and keep it hidden well somewhere where only you will know about it and can easily access it if and when things totally go to 7734 in a handbasket

  11. Jack Steffen | Oct 23, 2011 | Reply

    Some links to what I am talking about – Americans have had their gold confiscated before.…/109743

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