In theory a home storage gold IRA sounds like a great idea.
You get to blend your individual retirement account with how we all like to store gold bullion: the good old-fashioned way.
There's always been an allure to self-storing precious metals, and with good reason. They come with no counterparty, they need no counterparty.
That's all fair and good, and it might be true. Here's the flaw with that line of thinking, though: the gold IRA invariably comes with a counterparty, which is the government itself.
You can't "bypass" third parties in gold IRAs as you would when purchasing bullion and locking it up for storage yourself.
So, why shouldn't you buy and store precious metals on your own?
We'll explore everything you need to know about home storage gold IRAs in this article. Let's go!
TL;DR - Is a Home Storage Gold IRA a Good Idea?
The precious metals IRA is an excellent way to buy and hold physical gold and silver on a tax-deferred basis. But the hard truth is that home storage gold IRAs don’t work and are ill-advised.
Not all companies will tell you this, though, and some might advertise ownership of one directly. That this is done through a loophole tells you right off the bat that it's not a good idea.
After all, we're talking about your retirement account, not a short-term speculative investment.
So: the short answer? No. Home storage Gold IRAs are not a good idea. They carry risk, and you’re better off with secured storage.
For the long answer, and the complete guide, read on.
What is a gold IRA?
When you open a gold IRA account using the traditional method, there are fairly narrow guidelines to follow.
A gold IRA is a self-directed retirement account. A self-directed IRA (SDIRA) opens the door to a number of alternative investment options that are typically not allowed in most 401(k) or IRA accounts.
A self-directed IRA allows you to invest in physical precious metals, cryptocurrencies, real estate, and even private businesses. You must work with a self-directed IRA custodian that facilitates these accounts. You're directing what IRA-eligible assets you’re investing in, but must handle this IRA in compliance with the IRS tax rules.
Note: The term “gold IRA” (aka precious metals IRA) is a catch-all term for a self-directed IRA used to buy physical precious metals, including certain gold, silver, platinum, and palladium bars and coins that are IRS-approved for inclusion in an IRA.
The self-directed part can be confusing to some, as it might imply that you yourself purchase the metals and store them.
That is not the case, and the same goes for handling the paperwork. We'll address the paperwork part separately, as it warrants special attention.
IRA companies are there for a reason
Companies that specialize in gold IRAs are just that: specialists.
They have taken every effort to facilitate the opening of a self-directed retirement account, assist in the selection and purchase of IRA-eligible metals, and ensure you set up proper storage for your physical gold and silver. These gold IRA companies have entire teams that can hold your hand in setting up your new account, from start to finish.
The company sources the precious metals, stores them through a third-party vault storage depository, and works alongside your new custodian, handling most if not all of your paperwork.
Just as important, most reputable companies in the field will caution against opening home storage gold IRAs.They are, actually, recommended against by the Industry Council for Tangible Assets and pretty much every governing body.
How does a home storage gold IRA work?
IRS rules actually prohibit IRA owners from holding IRA assets.
Take a look:
"If my IRA invests in gold or other bullion, can I store the bullion in my home?
Gold and other bullion are "collectibles" under the IRA statutes, and the law discourages the holding of collectibles in IRAs. There is an exception for certain highly refined bullion provided it is in the physical possession of a bank or an IRS-approved nonbank trustee. This rule also applies to an indirect acquisition, such as having an IRA-owned Limited Liability Company (LLC) buy the bullion. IRA investments in other unconventional assets, such as closely held companies and real estate, run the risk of disqualifying the IRA because of the prohibited transaction rules against self-dealing." - source.
This should be enough reason for most to stay away from a home storage precious metals IRA, but it often isn't.
In order for you to have a home storage gold IRA "semi-legally", whoever is providing you with one or advising you to get one will probably recommend something called a "checkbook LLC" (the loophole we were referring to earlier).
This LLC is used to handle bullion purchase and storage, effectively making you your own custodian.
And that's where the legal issues begin, if they haven't already.
Being a custodian of precious metals in an IRA is a lot more complicated than it sounds. It involves constant and careful management of assets, keeping track of laws and amendments to them, filing reports and so on.
If you had enough experience with this, you'd probably either be working for a custodian or run your own custodian business. Since you aren't, you know that there's simply too much to tackle for an ordinary IRA owner, however familiar with finance they might be. That's just the start of the legal woes, though.
Home storage gold IRA and The IRS
The IRS takes special note of those with a home storage IRA.
They know that anyone attempting to have their own IRA are almost guaranteed to have overlooked something, and probably trying to rely on a loophole. And almost universally, that oversight tends to translate to taxes, penalties or even the liquidation of the account.
As some experts have candidly noted, the IRS is always looking for money. The federal deficit is higher than it's ever been, and it's ballooning.
The government wants more money, and your home storage gold IRAs might as well have a big target on its back. The IRS will watch this account and strike when it sees most fitting, probably when there's the most penalty to be made.
There was a recent semi-high-profile case where a couple that acted as their own precious metals IRA custodians got a $300,000 fine.
The two did a bit more than just improperly invest in gold and silver to accrue this, and certainly, the size of the fine is what attracted attention. But the same can happen to anyone dabbling in self-custody of IRA assets.
How can I open a gold IRA the right way, then?
If you want to buy physical gold and hold it in an IRA, an SDIRA with IRS approved gold bullion and gold coins can be a great investment choice. After all, long-term and long-term go well together.
But home storage gold IRAs aren’t the right choice for your physical gold retirement savings. Instead, you should look for a company that offers to open the aforementioned self-directed IRA on your part.
When you get in business with a specialist like this in good standing, you'll have peace of mind regarding your retirement assets.
As complicated as it might seem, there is very little knowledge needed on your part. These companies have experts on the front-end to educate you whenever you have questions, and on the back-end to manage the IRA over months, years and decades.
That's just the thing: do you want to place heaps of unnecessary paperwork on yourself that you'll have to file for decades, essentially employing yourself full-time? You'll be paying the gold IRA custodian and vault storage facility, sure, but the amount is minor in comparison to what you're getting.
How do gold IRA companies do it, then?
A company that is advertising proper gold investment in retirement accounts, one that doesn't involve a home storage gold IRA, usually lays the process out for you on its website.
They talk to you about your financial and legal status and work with top rated custodians to open a self-directed retirement account on your behalf. Some might find companies with "quick opening" preferable, but the reality is that the waiting can be well-worth it to ensure that the account is fully compliant.
One thing we've noted and that can't be overstated is that an IRA needs to have staying power. It can't become the victim of oversights or haphazard decisions that will place its status, as well as that of the funds within it, in question.
That account is perhaps the most important account you'll ever own, one that ensures your prosperity down the line even if you've made some wrong financial choices elsewhere. In other words, it's the thing you don't want to mess around with.
Once the account is opened, the gold IRA company will work with a third-party IRA custodian and IRS-approved storage facility to handle the purchase and storage of physical gold on your behalf.
If there is a gold IRA company that also acts as its own custodian, we haven't heard of it. Instead, these companies "lease out" custody of your physical gold to a third party.
Just as the gold IRA company is a specialist in its own domain, the custodian is in its own, too. These custodian companies can be as large as the gold IRA company itself, and are oftentimes larger. They can handle precious metals storage for multiple companies, and tend to do just that.
The custodian itself isn't the vault, but will work alongside your gold dealer and chosen storage depository to ensure everything is set up properly. The custodian's primary role is to file all that paperwork on your behalf year after year. They're ensuring that nothing happens to the account and keeping track of laws while you make investment choices.
IRS rules require that all retirement accounts have their own registered custodian. But even if that wasn't the case, you'd probably want one. Even the biggest car enthusiast eventually encounters a problem for which they need a car mechanic for.
And let's be real: there aren't many paperwork-filing enthusiasts.
Equally as important, the gold IRA company and custodian will likely have recommendations for an IRS-approved vault where your physical gold is going to be stored in. This vault, unlike your home storage gold IRA, will have top-to-bottom security and an insurance policy that's going to cover all of the metals inside.
So long as you've picked the right company, you don't need to worry about the safety of your precious metals, and you can keep piling them up in the IRA without storage space concerns.
Yes, both the IRA vault storage depository and the custodian have to make money somehow, and they do it by charging fees. However, these fees are affordable for anyone who can dabble in precious metals investment to begin with, and they are a non-factor when it comes to IRA consideration.
Gold IRA vs physical gold - which is best?
Probably because of that "long-term-long-term" correlation we mentioned above, investment in gold IRAs gets confused with regular physical gold bullion investment.
Though a big oversight, it's easy to see how one might believe that they can just chuck the precious metals they own in a home storage gold IRA and everything will be dandy.
Self-storage of physical metals works and is very popular, but it has little to do with your self directed IRA. You can both own physical gold outside an IRA and have a self directed gold IRA that's packed with them. Most physical metals aficionados do.
While the IRA company will offer to buy precious metals for you on every opportunity, you might need a different kind of specialist for the metal in your home: a bullion dealer.
The company in question might also assist with providing consumer physical gold and other precious metals, or it might not. It's an important distinction to make. Either way, a reputable bullion dealer will provide you with the metals you can store in your own home.
You'll have to learn how to swim in these waters: it can take weeks of research for a newcomer just to figure out which bullion products are ideal for their home safe.
It’s important to note that most of the big precious metals IRA companies can also facilitate the direct sales of precious metals. But because their focus is almost exclusively in retirement accounts, their minimum purchase for cash sales tend to be higher than other bullion retailers.
For example, Birch Gold Group has a $10,000 minimum for cash purchases. If your plan is to slowly stack gold and silver through small purchases, this $10,000 minimum may be high.
Then comes assessing premiums and delivery costs. And, equally as important, finding a company that's going to have the products you need and has a reputable financial background.
Storing precious metals on your own will obviously grant you more freedom, but it can also prove challenging. You need either a safe or a vault, depending on the amount. The less these are seen, the better.
You'll also be looking into insurance policies, more than likely, if you've accumulated a fair amount of bullion.
Gold and silver coins and bars, but also rounds, as well as platinum and palladium products are all good investment choices. But the selection is considerable, and it will be up to you to decide what's right.
Recommended Gold and Silver IRA Companies
If you're looking for reputable gold IRA companies, we've been building a list of trusted companies:
# 1 - Augusta Precious Metals (Most Trusted)
Augusta Precious Metals is our top gold IRA company recommendation. They have a great reputation, are great for high networth individuals, and have been around since 2012. They are almost completely focused on precious metals as their name suggests. Augusta Precious Metals is extremely well rated by both the Better Business Bureau as well as the Business Consumer Alliance.
# 2 - Birch Gold Group (Best Choice For New Investors)
Birch Gold Group is a company with almost two decades of history. They’re gold IRA specialists with a great reputation that charges low fees and has an excellent as well as easy buyback program. Birch Gold Group is recommended for new investors since they’re easy and efficient to work with, have low fees and you can start a gold IRA with them for as low as $10,000.
# 3 - Advantage Gold (Best For IRA Rollovers)
Advantage Gold is a relatively young company that’s been in business since 2014 and an awesome gold IRA company to work with for a rollover. They specialize in converting eligible accounts into precious metals IRAs and deal with both precious metals IRAs as well as cash sales of precious metals.
# 4 - Goldco Precious Metals (Best Gold Selection)
Goldco Precious Metals has been around since 2006 and they handle both IRA as well as non-IRA transactions. Goldco Precious Metals is highly rated on multiple sites such as TrustLink, Google Reviews and most importantly the Better Business Bureau.
# 5 - American Hartford Gold (Best Customer Service)
American Hartford Gold is easily one of the most trustworthy gold IRA dealers, with near pristine ratings and reviews online, great product inventory, and super a super helpful team with great customer service. It's obvious they care about their customers. On the other hand, if you're looking for platinum or palladium, you're out of luck. We gave AHG 5 out of 5 stars.
Gold in an IRA versus home storage gold IRA: hands-off versus hands-on
That's the best way to describe it, really.
Gold IRA companies' bottom line is providing their customers a hands-off approach to investment. They give you information, a custodian, a vault and whatever IRS-allowed precious metals you'd like.
Once they're in the IRA, you don't have to spend too much time thinking about them unless you're trading. Even better if you aren't thinking about them, as most precious metal IRA investors are in it for the long-haul.
Home safes let you feel and touch your gold and other metals, but it's a "clunkier" investment option. You'll have a much harder time buying and selling in the short-term than you would with an IRA. It's up to you to secure the metals to the best of your abilities, as well as assess how much it's advisable to own.
Ultimately, both gold investment in an IRA and gold storage at home are good choices. They are often mixed, but when done, it must be done independently to avoid losses, penalties and headaches.