Self Employed Retirement Savings and Precious Metal Investment
After the financial market went through a crisis in 2008, precious metals have become popular again, especially for retirement plans. For self-employed retirement savings such as Solo 401k and SD IRA, are there any rules and regulations regarding precious metal investment?
As Solo 401k and Self directed IRA both allows non-traditional investment assets, account holders are now not only able to invest in precious metals through funds, they can also purchase and hold precious metals directly. The IRS has two requirements applying to this type of investment: first, the precious metals have to be non-collectibles and second, they must be stored properly.
Types of precious metals allowed for self employed retirement savings
Although self employed retirement savings can hold precious metals, they are not allowed to hold any collectibles, including collectible coins. Retirement plans are allowed to hold IRS-approved coins like American Gold or Silver Eagles. Bars or coin bullion is also allowed with specifications in IRC 408(m)(3):
- Gold, minimum fineness requirement of 99.5%
- Silver, minimum fineness requirement of 99.9%.
- Platinum, minimum fineness requirement of 99.95%.
- Palladium, minimum fineness requirement of 99.95%
Other precious metals that are not on this list are deemed Collectibles and cannot be held by self employed retirement savings. Once a Solo 401k or a self-directed IRA purchases a collectible item, it will be recognized as a distribution from the account, and taxes will apply.
Physical holding requirement
The second requirement by IRS applying precious metal investment by a self employed retirement savings is storage requirement. An account owner of a self employed retirement saving is seen as a disqualified person. Therefore, holding physical precious metals in their possession is not allowed. Although there is little IRS guidance on holding IRS approved coins personally, it’s fairly safe to assume that they should be in physical possession of a trustee (U.S. bank or financial institution). In fact, most tax practitioners believe they should be held by a trustee, as coins may also be bullion.
As with the non-collectible requirement, failing to follow this storage requirement will be seen as a distribution from the self employed retirement savings. Therefore, account holders are recommended to follow the rules when investing to avoid tax and penalty charges.
Related Search Terms
- Solo 401k rules
- How to invest in precious metals with Solo 401k
- Gold and silver investment in Solo 401k
- Precious metal IRA account
- IRA approved precious metals