People invest for a variety of reasons. It can be to generate a steady stream of passive income that helps supplement their salary or build personal wealth and create a legacy they can pass on to future generations. Others do it to provide a much-needed retirement nest egg.
Each person will have a different motivation, but the common denominator is that it’s an effective way to increase wealth and financial security. Standard investment modes include bonds, stocks, mutual funds, and commodities.
Precious metals are considered rare commodities that investors have valued for a long time. They have traditionally been used as a means of exchange, but these days they are primarily bought and sold as a method of portfolio diversification and inflation hedging.
A home storage gold IRA (or precious metals IRA) is an attractive investment option for many. However, before deciding whether this mode is the right choice, it is important to consider the possible risks and drawbacks.
Understanding IRAs
An IRA is a type of savings account designed to help people save for retirement, allowing them to benefit from tax-free growth or tax deferment.
When an IRA is opened, the investor can fund it in a variety of financial instruments, such as bonds, stocks, mutual funds, and exchange-traded funds (ETFs).
Traditional IRA
This type of IRA allows individuals to make deductible contributions, defer taxes on earnings and withdrawals, and benefit from tax-deferred growth.
Roth IRA
With this account, individuals can make contributions with after-tax dollars, and withdrawals and earnings are tax-free.
Simplified Employee Pension (SEP) IRA
SEP IRA is designed for self-employed individuals and small business owners. It allows them to make bigger contributions than traditional and Roth IRAs.
Savings Incentive Match Plan for Employees (SIMPLE) IRA
This is designed for small business owners and their employees. Employers and workers can make contributions, and business owners can make matching contributions.
Self-directed IRA
Self-directed IRAs (SDIRAs) allow investors to make all their own investment decisions and give them access to a wider range of investments, such as mutual funds, bonds, stocks, real estate, and commodities, including precious metals.
What Is a Gold IRA Account?
This account is an investment mode that stores gold and silver coins along with other precious metals. Intended to be utilized for retirement savings, these accounts allow for tax-free investment growth until the time for taking withdrawals arrives.
Investors can use a self-directed account to securely hold valuable gold IRA assets for the long term without being concerned about market volatility or changes in daily valuation. This minimizes certain tax burdens and protects profits from potential theft or cybercrime.
Investing in precious metals through a self-directed IRA also provides diversification across asset types while not being subject to the same downturns as other investments.
How Does a Home Storage Gold IRA Work?
A home storage gold IRA is exactly what it sounds like—a depository at home. Gold IRA investors wary of storing their physical assets in third-party locations can find solace in home storage.
Keeping other precious metals at home means no storage fees. Some Gold IRA companies offer the option of home storage for your gold assets, and may even provide you with a free safe to store them in.
The Internal Revenue Service (IRS) requires specific requirements to be met for individuals to store their precious metals or gold IRAs at home. Unfortunately, IRS rules and regulations are often not mentioned by gold IRA companies.
Taking the home storage gold IRA route means investors must understand that it is a stringent process with restrictive rules.
IRS Problems with Home Storage Gold IRAs
Before 2009, individuals commonly invested in physical gold for their IRAs rather than with paper certificates or futures contracts.
The IRS cautioned that holding physical precious metals as part of an IRA could incur penalties, as gold is not viewed as an allowable investment for IRAs according to its standards.
Home Storage Gold IRA Rules
Although it is possible to buy and keep physical gold in a personal safe, the IRS does not allow this with precious metals purchased with an IRA.
According to the IRS code, only certain types of metals are eligible for purchase with a self-directed IRA and must be stored by a trustee.
To further explain: under the IRA statutes, gold, and other bullion (precious metals) are deemed as “collectibles”. Therefore, the law discourages their storage in IRAs.
However, there is an exception for some highly refined bullion as long as it is kept in the physical possession of an approved bank or nonbank trustee. These metals include IRS-approved gold bullion, palladium, platinum, and silver.
Penalties for Incorrectly Establishing a Home Storage Gold IRA
It is important to understand the rules and regulations governing the opening of a home storage gold IRA before attempting to do so. As with any financial transaction, there are potential penalties for breaking the rules.
If the IRS identifies an issue with a home storage gold IRA, the assets will no longer receive the tax-deferred benefits of an individual retirement account.
Holders of IRA accounts that are in breach will need to pay taxes on their precious metals. They will also face a 10 percent penalty for early withdrawal, imposed by the federal government.
Read how to open a gold IRA tax and penalty free so you don’t make any mistakes.
Reputable Gold IRA Companies for Home Storage Gold IRA
Investors, whether involved with stocks, mutual funds, or precious metals, know the importance of securing their money.
It is critical to work with reputable gold IRA companies when considering the home storage gold IRA option.
A notable gold IRA company is Red Stock Secured. The privately owned company based in California aims to ensure clients’ financial security by providing premium and secure products, education, and customer service.
What Red Stock Secured Does
Red Stock Secured makes it easier to set up a home-storage gold IRA. With this company, clients can have their precious metals shipped to them to be kept in a secure place close to their residence, such as a safety deposit box, a bank, or a similar secure location.
Is Red Stock Secured IRS Compliant?
The first thing investors should do with any investment, including physical gold, is ensure the legitimacy of the institution they use.
They should also find out if the company follows the rules and has a reputable financial background. This gold IRA company is an A-graded Better Business Bureau Accredited organization.
When setting up home storage gold IRAs, clients can rest assured that Red Stock Secured is 100 percent legal and compliant with IRS rules.
Therefore, it can be considered one of the best gold IRA companies to start retirement accounts or other investment reserves.
Opening a Home Storage IRA with Red Stock Secure
Investing in precious metals within an IRA is an effective way to protect and increase retirement savings with Red Rock Secured. There are two different self-directed IRA options: a home delivery or a depository.
Depository Storage
Metals held in a gold IRA are securely stored in a premier depository facility with the highest level of security and are fully insured. Clients can rest assured that their physical retirement assets are always secure in the depository.
Documentation is maintained to verify that the metals stored in gold IRAs are legally owned and that their account is accurately tracked. Additionally, physical gold and other precious metals are kept off the depository’s balance sheet.
This means that in the event of depository failure, metals are never at risk of being seized in bankruptcy proceedings. Account holders can visit the depository in person anytime to view their metals.
Home Delivery
Red Rock Secured understands that having a wide variety of investment options is essential for financial stability. That’s why they offer home storage gold IRAs, which provide a secure and diverse way to invest in precious metals.
Account holders are in complete control of their investments. The company delivers silver and gold coins and bullion to their client’s homes, so they don’t need to worry about going to a bank or investment firm to collect their assets.
This way, they can be sure that precious metals in their home storage IRAs are always safe.
The Home Delivery Process
Red Rock Secured has found a way to make owning a home storage gold IRA easier despite the stringent IRS rules.
To get privacy and easy access to gold IRAs, the home delivery option is ideal. The physical gold will be shipped directly to the investor to be stored in an approved facility. Here is how it works:
- Open a Self-Directed IRA. First, open an IRA account that is legally allowed to hold precious metals and other non-traditional assets. Commodities can be transferred from existing retirement accounts to new self-directed gold IRAs without tax penalties or fees.
- Start an LLC to hold metals. This Limited Liability Company will become the legal owner of the metals, which can be stored anywhere that is IRS-approved. This includes a safety deposit box at a bank. The LLC will allow clients to bypass the requirement that their IRA must hold its metals through a depository.
- Buy physical gold. After purchasing tangible assets, investors can secure metal investments by having them delivered and stored in a location of their choice. Thanks to regulations, the metals held in the LLC will remain confidential, and the IRS will only be aware of the investment in the LLC, not the metal assets it holds.
Suggested Reading: Gold IRA Guide
A Look at Precious Metals IRA
Precious metals IRAs are a type of self-directed account that allows investors to hold physical gold, silver, palladium, and platinum in the form of coins or bars inside their retirement account.
This type of IRA presents unique tax advantages and diversification benefits, allowing investors to protect their retirement investments from inflation and market fluctuations.
Type of Precious Metals
Gold
This common metal is often chosen for home-storage gold IRAs. It is a precious commodity prized for its beauty, luster, and rarity, which makes it a popular choice for jewelry and other decorative items. Gold is also a popular investment option due to its relative stability.
Silver
Another acceptable precious metal for a gold-IRA is silver. It is known for its beauty and is used to make jewelry, coins, and other decorative items. Silver is also used in industries to produce electrical components and medical equipment.
Platinum
Platinum is a rare and valuable metal known for its attractiveness and strength. This metal is often used to make jewelry and other accessories as well as in industrial applications.
Similar to gold, it is also a popular investment option because of its stability, making it excellent for a gold IRA.
Palladium
Investors interested in starting a home storage gold IRA can consider palladium. It is a rare and valuable metal used to make jewelry.
This precious metal is also used in catalytic converters and other industrial applications. Palladium has a silvery-white color and is known for its strength and durability.
Is a Gold IRA a Good Investment?
Despite the IRS rules and penalties that accompany home storage IRA gold accounts, there are benefits to this type of investment. If interested parties go through a legitimate gold IRA company, the process can be done right.
Gold and other precious metals are safe-haven assets that offer protection against market volatility and inflation. Prices are relatively stable over time and have historically outperformed other asset classes when markets are unpredictable during economic instability.
Additionally, gold offers portfolio diversification and helps protect against losses in other investments. By including metals in a retirement portfolio, investors can reduce the overall risk of their investments, as they typically move inversely to stocks and bonds.
Financial professionals usually suggest allocating between 5% and 20% of portfolios to gold or other precious metals, though some advocate for a higher percentage.
Furthermore, this investment provides a tangible asset that can be physically owned and passed down to future generations. This makes it a great way to preserve wealth over time and provide a secure financial future.
FAQs About Home Storage IRA Gold and Other Metals
Can I store my gold IRA at home?
Although it is possible to self-manage IRA investments if certain conditions are fulfilled, physical gold can’t be kept at home.
As per IRS rules, it must be stored in a secure facility, such as a safety deposit box or bank, registered under the LLC’s name.
Therefore, home-stored IRA gold does not literally mean keeping it in the house.
Is it possible to store other types of precious metals in my gold-IRA in addition to gold?
Yes, it is possible to store other types of precious metals in an IRA gold reserve, such as silver, platinum, and palladium.
The Bottom Line
Investing in retirement is a wise move. Of course, finding the right ways to invest hard-earned money is crucial.
Investors looking to diversify their retirement portfolios and protect their savings from economic downturns may consider a home storage gold IRA.
This is a legitimate way to invest. However, while this method can be beneficial, there are potential risks and tax penalties involved.
The best thing for investors to do is to seek a reputable gold IRA company for advice and guidance through the process of starting an account.
Legitimate companies are IRS-compliant and will help investors avoid breaking the rules and regulations set by the financial institution.