18 Sep Should I put gold coins in my IRA?

Q. I’ve heard commercials that tell you to put gold coins in your IRA. It sounds dumb. Is there something I’m missing?

A. You can invest all of part of your IRA in precious metal coins and bars, but should you?

First, let’s talk about gold in general, and then get into detail about the investments.

“One reason to consider owning gold is that it may offer a long-term hedge against inflation and geopolitical crisis,” said Gerry Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield. “In times of financial crisis like in 2008, gold was viewed as a safe haven against the devaluation of the U.S. Dollar and other paper currencies.”

Holding actual gold is different than holding a gold mutual fund, which may also invest in companies that are in the mining business. One could argue the mutual funds will offer more diversity than owning the actual metal.

But if it’s metal you want, Papetti said, many financial institutions can facilitate the purchase of gold, which will be kept in an IRS-approved depository until you direct the sale or have them shipped directly to you.

You can transfer/rollover your existing IRA to an IRA that holds gold through a process known as a “direct transfer,” he said. Such a move is a tax-free transaction because you are simply moving funds from one IRA to another IRA.

From 1986 to 1998, the IRS limited IRA account holders to storing only gold and silver American Eagle coins, Papetti said. However, changes in the IRS Tax Code in 1998 granted the opportunity to hold a wider range of precious metal coins and bars within IRAs.

“Today, Self-Directed IRAs can hold gold, silver, platinum and palladium bullion and proof coins that meet certain minimum fineness requirements,” he said.

IRS regulations specify which types of bullion can be added to a gold IRA. Some of the most common IRA-permissible coins are American Gold Eagle Bullion Coin, Proof Gold American Eagle Coin and American Gold Buffalo Coin, Papetti said.

But is it right for you?

Gold is traditionally viewed as a long-term investment, Papetti said.

“Individuals looking to retire in 5, 10, 15 or 20 years want to have something with potential to grow in value while keeping up with the cost of living and inflation,” he said. “Therefore, an investor should consider the minimum 5- to 10-year holding period for gold and other precious metals.”

So now that you know you can put gold coins in your IRA, should you?

“No, you are right, it is dumb and it could involve costly custodian fees to hold the coins,” said Reed Fraasa, a certified financial planner with Highland Finanical in Riverdale. “It makes no sense.”

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This story was first posted in September 2015.