Can Gold Bullion Be Held in a Retirement Plan?

Holding gold bullion in an IRA generally involves more effort and expense than holding securities.

Holding gold bullion in an IRA generally involves more effort and expense than holding securities.

Gold is sexy, and it has a low correlation of returns with other asset classes, which means it can hold its value or rise when other asset prices fall -- and it may fall when other assets rise. Gold bullion is one of the more exotic choices for owning gold. You may hold such assets in a self-directed retirement account, as long as you meet IRA eligibility requirements. However, unless you really want assets you can touch and see, bullion may not be the best way to take advantage of gold as a long-term investment.

Self-Directed IRAs

While most people stick with stocks, bonds and mutual funds for their retirement plans, the IRS lets you invest in a smorgasbord of asset types through a self-directed IRA including real estate, private equity, mortgages, tax liens and certain types of precious metals. The average financial broker isn't equipped to handle most of these assets, which is why most people don't choose them for a retirement account. Contributions are subject to the same limitations governing regular IRAs, such as annual contribution limits and tax treatment.

Fees

One drawback of self-directed IRAs is that custodians can and do charge high fees for their services. Fees may run upward of $200 per year simply for required paperwork and record keeping. If you own gold bullion or coins, storage fees can run into the hundreds of dollars annually as well. You can't keep the stuff sitting around in the living room or the IRS considers it a distribution from your IRA -- you must, instead, pay a custodian to keep it for you. Management and holding fees come out of the value of your investment, rather than being paid separately, eating up a portion of each year's contribution. Some storage companies charge fees in grams of gold, so you can literally watch your balance dribble away.

Bullion vs. Other Formats

For a self-directed IRA, you may hold physical gold, defined as any gold coins minted by the U.S. Treasury, Canadian gold maple leaf coins, and bars that are 99.9 percent pure. However, bullion is not the only way to tap into gold's financial power. Consider other forms if your main goal is to hold an asset that keeps its value in a down market. You can invest in gold exchange-traded funds, which are sold and managed by investment firms like Barclays, iShares or State Street's SPDRs. While gold purists argue against such funds because of management overhead, holding securities lets you avoid storage fees.

Do More Homework

You already know to check into any investment before you send money. With gold bullion and a self-directed IRA, you're working at a whole new level of potential pitfalls. Check out your intended trustee or custodian carefully before setting up your account, and make sure the gold dealer and storage company don't charge excessive commissions or storage fees. in other words, check references and shop around.

 

About the Author

Naomi Smith has been writing full-time since 2009, following a career in finance. Her fiction has been published by Loose Id and Dreamspinner Press, among others. She holds a Master of Science in financial economics from the London School of Economics and a Bachelor of Arts in political economy from the University of California, Berkeley.

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