Investing in Precious Metals With a Home Storage IRA

In 1998, the IRS gave taxpayers a chance to broaden their horizons by allowing them to invest in precious metals as part of an IRA.

Some companies now promote home storage IRAs as a convenient and low-cost way to hold your precious metals. However, the process is complex and requires extensive legal compliance. It’s not a good idea.

Getting Started

Home storage iras are a type of self-directed IRA that allows you to invest in gold and other precious metals. This type of IRA can be an excellent way to diversify your retirement savings and add a little extra security to your portfolio.

But before you go ahead and open a home storage ira, you need to make sure you’re properly prepared for this type of investment. There are certain risks and penalties that come with this kind of IRA, so you’ll want to do your research before you get started.

While these kinds of IRAs are popular, they can be a dangerous investment for investors. This is why you should opt for a self-directed IRA managed by an authorized custodian instead. These companies can help you set up and manage your precious metals IRA without any of the risks associated with a home storage ira.

Requirements

There are a few requirements you must meet to set up a home storage IRA. These include setting up an LLC, putting up a $250,000 fidelity bond and following the IRS’s rules.

You also need to have verifiable fiduciary experience. This means you must be an experienced investor who knows how to handle retirement funds and know how to store them properly.

This can be a very complicated process and requires a lot of time, money and effort on your part. However, it is an excellent way to diversify your investments and hedge against inflation.

Taxes

Home storage iras are great for investors who want to invest in precious metals without the tax penalties of regular IRAs. However, they carry their own set of risks that should be considered before you start investing in them.

Specifically, if you don’t comply with IRS requirements and open a home storage ira, you could be hit with serious penalties. Keeping your gold IRA outside of an approved custodian may lead to distribution penalties that can be up to 10%.

This could also mean a possible IRA audit, which can result in additional fines and penalties. There are a few simple things you can do to avoid these kinds of penalties and keep your IRA in compliance with IRS rules.

Insurance

Storage insurance can protect your stored goods from certain perils that aren’t covered by homeowners or renters insurance. These include fire and flood, as well as theft or damage from vandalism.

Usually, your personal property insurance will cover items in a storage unit up to 10% of the maximum personal property coverage limit set for your home. This is a good thing because it means your belongings are more likely to be protected.

However, this coverage is limited to the amount of personal property in the storage unit and may not cover expensive items like jewelry, furs, tools or firearms. For these types of items, you’ll need to purchase scheduled personal property coverage or add an endorsement or rider.

Liability

A home storage IRA is a burgeoning trend in the retirement industry. It allows investors to diversify their IRA assets with precious metals.

Unfortunately, it’s also a highly-loaded legal and regulatory liability trap that could have serious consequences for those who get audited by the IRS. If the IRS deems that you violated the IRA’s custodial and third party requirements, your IRA’s tax-advantaged status would be revoked, and you’d face significant fees and penalties.

Ultimately, the responsibility for storing your IRA’s precious metals rests with you. Unethical dealers who promote home storage IRAs will refer you to an attorney that establishes a limited liability company (LLC) and infer that by taking possession of your metals, you have satisfied the custodial and third party requirements.