Many clients are inquiring about their self directed New Direction IRA account buying metals. If you’ve taken an interest in purchasing real precious metals with your retirement account, it’s important to know what types of metals are allowable and the qualifications that must be followed to satisfy the IRS’ guidelines. This article sheds light of many of the different options available to precious metal investors and covers some of the more specific information regarding specific types of coins and bullion products for IRA investments.
First, let's cover the basics. Your self directed IRA can only invest in Gold, Silver, Platinum and Palladium. The keyword here is "invest". Your IRA cannot buy collectibles – your IRA is only investing in the metal itself, not rare or attractive coins. The metal must be in a certain form (usually coins or bars) and/or of certain purity. The purity or fineness of the metal is how the quality of the metal will be measured for your IRA.
When most of us hear about gold investment we picture the 400 ounce gold bars we have seen in movies. Extraordinarily heavy (about 25 pounds), those bars are also quite the expensive items, particularly with the recent price increases in gold. IRAs are often priced out of the gold bar market, but, fortunately, other options exist. One other option is smaller units of bullion, provided they meet the fineness, or purity level, requirement. Another option is coins.
Initially, the IRS deemed all coins to be collectable and disallowed IRA investments in coins.
In the mid-1990s, after realizing that a 400 ounce gold bullion bar would be prohibitively expensive for most IRAs, Congress revised the rules and allowed IRAs to own certain coins in addition to bullion.
Generally these IRA allowable coins fall into two categories:
Category #1: Coins specifically listed in the Internal Revenue Code, and defined as NOT being collectable. These include only the American Eagle coins minted by the US Mint. Specific coins include:
- American Gold Eagles – Proof and Non-Proof
These coins are issued by the US Mint in both Proof and Uncirculated (non-proof) form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA. Prices for Proof and Non-Proof Gold Eagle coins vary due to a number of factors including the availability, original production, and date.
Interestingly, these US minted coins are not of sufficient purity to classify them as bullion. They are only approximately 91% pure gold. The other material in the coin off sets the softness of the gold and makes the coin more durable. Gold Eagles arrive in one of 4 forms: 1/10, ¼, ½ and 1 full ounce coins.
- American Silver Eagles. – Proof and Non-Proof
These coins are issued by the US Mint in both Proof and Uncirculated form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA in proof and non-proof form. Prices for Proof and Non-Proof Silver Eagle coins vary due to a number of factors including the availability, original production, and date. Silver Eagles land in only one form: 1 full ounce coin. They are of bullion fineness, but are only .999 (three nines) due to the addition of a touch of copper for added durability.
- American Platinum Eagles. Proof and Non-Proof.
These coins are issued by the US Mint in both Proof and Uncirculated form. Because the coins are specifically listed as NOT being collectables, they are allowed in your IRA in proof and non-proof form. Prices for Proof and Non-Proof Platinum Eagle coins vary due to a number of factors including the availability, original production, and date. The rarest of birds, the Platinum Eagles are minted in 4 forms: 1/10, ¼, ½ and 1 ounce coins. These are of .9995 fineness.
Any of the above coins which have been graded for condition by certification organizations and placed in tamper-proof plastic containers called “slabs”, will generally fall into the collectible category and thus are not allowed for IRAs. Recently a national certification service has initiated an authentication service for bullion coins. Authentication provides a guarantee as to the purity of the metal and the weight of the coin. While the authentication process does place the coin in a tamperproof container and give it a unique serial number, it is intended for verification only and does not move the bullion into the collectable category.
If you’re not sure about this, ask your self directed IRA provider or metals dealer. All US minted coins have nominal face values, but the true value is based on the value of the metal in the coin.
Category #2: Some coins meet the minimum fineness requirements but are not rare enough to receive collector attention.
- American Gold Buffalo coins. Non-Proof Only
First minted in 2006, they are of bullion fineness, .9999 fine (known as four nines). Note that the specially processed proof version of this coin is NOT acceptable, due to the treatment raising the value of the coin beyond the value of the metal.
- Gold Coins – .995+ note that gold is a soft metal (although heavy) and thus most typical minting includes other alloys to harden the coin. Therefore most minted gold coins intended for use as currency do not meet the fineness requirement.
- Silver Coins – .999+
- Platinum – .9995+
- Palladium – .9995+
Non-coin forms of metal, such as smaller gold bars, must be manufactured to meet specific weight specifications for the amounts of metal included and meet the above fineness requirements.
In addition to these American options, there are some coins issued by mints of other nations that do meet the fineness requirements:
- Australian Nugget (Kangaroo) Gold coins .9999 fine
- Australian Kangaroo and Kookaburra Silver coins .999
- Australian Koala Platinum coin .9995 fine
- Austrian Philharmonic Gold coins .9999 fine
- Austrian Philharmonic Silver coins .999 fine
- Canadian Maple Leaf Gold coins .9999 fine
- Canadian Maple Leaf Silver coins .9999 fine
- Canadian Maple Leaf Platinum coins .9995 fine
- Canadian Maple Leaf Palladium coins .9995 fine
- Mexican Libertad Silver Coins .999 fine
- Isle of Man Noble Platinum coins .9995 fine
Some examples of coins that don’t meet the fineness requirements are: Austrian Corona and Ducat, Belgian Franc, British Sovereign and Britannia, Chilean Peso, Columbian Peso, Dutch Guilder, French Franc, German Mark, Hungarian Korona, Italian Lira, Mexican Peso and Ounza, South African Krugerrand, Swiss Franc, and any coin that falls into the “Rare”, and thus collectible, category.
Again, if you’re not sure about the fineness, ask your metals dealer to verify it.
Next time, we will talk about the process of getting metals into your IRA or other tax sheltered account. Note that Health Savings Accounts, another plan that can be self directed, is also eligible to be self directed and purchase metals.
Since 2003, New Direction IRA, Inc. has been a leading provider of Self Directed IRA’s, offering administration for a wide array of assets including precious metals, real estate, private equity, notes, and many more. During that time, we have enjoyed the support of our ever-growing clientele due to exceptional client service, prompt transactions, competitive fees, plentiful educational opportunities, and a deep knowledge of IRA asset acquisition.