SDIRA Precious Metals Rules

IRS Purity Requirements for IRA Metals

Not every gold coin or silver bar qualifies for inclusion in an IRA. The Internal Revenue Code (IRC Section 408(m)) establishes minimum fineness (purity) standards that precious metals must meet to be held inside a Self-Directed IRA. These standards were designed to ensure that IRA-held metals are investment-grade bullion, not collectibles or numismatic items.

The American Gold Eagle is a notable exception to the purity rule. Despite being only 91.67% gold (22 karat), it is specifically exempted by law and is one of the most popular IRA-eligible gold products.

Storage Requirements

All precious metals held in an SDIRA must be stored in an IRS-approved third-party depository. This is one of the most important — and most frequently misunderstood — rules governing precious metals IRAs.

You cannot take personal possession of IRA metals while they remain in the account. Storing IRA metals at home, in a personal safe, or in a safety deposit box under your name is considered a distribution, which triggers income taxes and potentially a 10% early withdrawal penalty.

Approved depositories include facilities like the Delaware Depository, Brinks, and International Depository Services (IDS). These facilities provide segregated or commingled storage, insurance, and regular auditing.

Prohibited Transactions

The IRS defines certain transactions as "prohibited" when they involve an IRA and a "disqualified person." Prohibited transactions can result in the entire IRA being disqualified, meaning the full account balance is treated as a distribution and subject to taxes and penalties.

Disqualified persons include:

• •The IRA owner and their spouse
• •Lineal descendants and their spouses (children, grandchildren)
• •Lineal ascendants (parents, grandparents)
• •Fiduciaries and service providers to the IRA
• •Entities owned or controlled by disqualified persons

Common prohibited transactions include buying metals from yourself or a family member, using IRA metals for personal purposes (wearing coins as jewelry, displaying them at home), and pledging IRA assets as collateral for a loan.

Contribution and Rollover Rules

SDIRAs follow the same contribution limits as traditional and Roth IRAs: $7,000 per year for 2024, with an additional $1,000 catch-up contribution for those 50 and older. However, many investors fund their precious metals IRAs through rollovers from other retirement accounts, which are not subject to these annual limits.

You can roll over funds from a 401(k), 403(b), TSP, or another IRA into an SDIRA. Direct rollovers (trustee-to-trustee transfers) are preferred because they avoid the 60-day rollover window and the risk of the transfer being treated as a distribution.

Required Minimum Distributions (RMDs)

Traditional SDIRA holders must begin taking Required Minimum Distributions at age 73 (as of the SECURE 2.0 Act). RMDs are calculated based on the total value of the IRA at the end of the prior year, divided by the IRS life expectancy factor.

Because precious metals aren't liquid like stocks or bonds, meeting RMDs from a metals-only IRA requires liquidating some metals. It's important to regularly check your IRA's current value so you can plan for upcoming distributions.

Roth SDIRAs are not subject to RMDs during the owner's lifetime, making them an attractive option for investors who want to hold metals long-term without forced liquidation.

Choosing a Custodian

Not all IRA custodians support precious metals. You'll need a custodian that specifically handles Self-Directed IRAs with alternative assets. When evaluating custodians, consider:

• •Fee structure: Annual account fees, storage fees, transaction fees, and setup fees vary widely.
• •Depository options: Some custodians work with multiple depositories, giving you a choice of location and storage type.
• •Dealer relationships: Custodians may work with specific authorized dealers. Ensure the dealer offers competitive pricing.
• •Customer service: Look for custodians with responsive support, clear documentation, and a strong reputation.