How a Precious Metals IRA Works: Setup, Rollover, Custody and Storage Explained

Many people start using individual retirement accounts (IRAs) to buy stocks, mutual funds and exchange-traded funds in order to secure long-term growth before retirement. But you can also get gold IRAs that let you acquire physical precious metals.

These IRAs come with the same tax advantages as regular IRA products, but their focus on precious metals makes them more attractive to people who want to diversify from equities and bonds.

Each precious metal IRA has a multi-step setup process, and there are a few key details that happen behind the scenes, so here’s what you should know before opening a gold IRA.

Gold IRA setup

It’s pretty easy to set up an account, and the entire process typically takes 1–2 business days. You will have to provide basic information, such as your name and email address, to open an account.

Some precious metals IRA providers have small setup fees that can range from $50 to $200, while other companies — like Thor Metals Group, for instance — waive setup fees. Before going through the setup process, you should compare several IRAs to ensure you are choosing the right option. Assess each IRA based on its fees, investment options, customer service, online reviews and other factors.

You can also provide your bank account information during the setup process and make your initial deposit.

Gold IRA rollovers

Some people open gold IRAs and move funds from their bank accounts to the IRA. However, other people rollover existing IRAs into precious metals IRAs. This process takes a little longer and can range from 1–3 weeks.

You will have to contact your existing IRA provider and let them know that you want to conduct a rollover. If you roll over from a traditional IRA to a traditional precious metals IRA, you won’t pay taxes on the transfer. However, converting to a Roth IRA will result in the rolled-over amount being taxed, since Roth IRAs use post-tax dollars.

A direct transfer is the best approach to funding a gold IRA since the custodians handle it for you once you make the request. You also won’t have to worry about taxes or penalties this way.

Custody of precious metals in a gold IRA

If you directly buy precious metals with money outside of an IRA, you can store physical metals in your house. However, if you want the precious metals to be part of a gold IRA, the IRS requires that they be stored in approved depositories.

It is important to stress that: The IRS does not allow people to store precious metals in their home that are supposed to be in their gold IRAs.

For instance, if you invest the maximum $7,500 into a precious metals IRA and then buy another $2,500 worth of precious metals with other funds, you can only have the precious metals in your home that you bought with $2,500. The remaining precious metals that you bought for $7,500 are under the watchful eye of a custodian.

The IRS approves custodians like trusts, banks and other financial institutions that can handle the administrative work associated with monitoring precious metals. These firms simplify gold investing for people who want access to the precious metal but aren’t sure what goes into safely storing precious metals.

Precious metals IRA providers can give you physical gold when you withdraw from your account. You eventually get the precious metals a custodian has been holding, but you must wait until you turn 59.5 years old to ensure you do not incur a 10% penalty fee for an early withdrawal. You can also choose to liquidate precious metals in your gold IRA and withdraw cash when it’s time to.

Understanding gold IRA storage

You aren’t allowed to store physical metals that you buy and keep in a precious metals IRA. However, a custodian will store these items on your behalf in a separate dedicated space. That way, you will receive your exact items back when you withdraw from your account.

You can also opt to store your precious metals with other customers’ metals, but record-keeping will track the exact quantity and type of your precious metals. This latter storage option is cheaper and still provides your precious metals when you withdraw from your gold IRA.

Storage fees vary for each IRA, but they often range from $100 to $150 per year. Some companies scale storage costs based on how many precious metals you buy.

Custodians use multiple security protocols to keep gold safe, including the use of advanced technology and 24/7 surveillance. It’s easier for these custodians to invest more money into optimal security since they are storing more gold in the same area.

Custodians are also subject to third-party independent audits that verify all of the precious metals are still in storage. These audits boost accountability and transparency for investors. You should only work with a custodian that is approved by the IRS.

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