What is Gold Storage?
Gold storage is a simplified term for storing physical holdings of gold and other precious metals. After the price of gold and other metals rose dramatically during the 2000s, the IRS got specific about what types of precious metals you can put in a self-directed IRA and where you can store them. Unlike stocks that don’t require physical storage, investors must store gold purchases in a physical location somewhere safe.
Why Do I Need Gold Storage?
Proper gold storage is important to protect the high value of gold bars and bullion. If you have stocks, your ownership can be stored electronically or on paper, but gold and other precious metals take up space and require storage in a secure location safe from theft. If you plan to set up a precious metals IRA, there are legal restrictions on how you can store them.
Gold Storage Dos
DO follow the law
IIf your purchases are for a self-directed IRA, your choices for storage are limited. Per IRS Publication 590A and Section 408(m)(3) of the code, you cannot keep IRA-eligible gold in your home or in a local security deposit box. Instead, you must store them “in the physical possession of a trustee.” There are several IRS-approved storage facilities, including the Delaware Depository Service Company, JP Morgan Chase, HSBC, and CNT Depository. These companies partner with brokers and IRA custodians to securely ship and store your investments. Many of these companies have insurance available or included with storage plans.
DO learn about storage types
The storage depository offers two types of storage options: commingled (segregated) and allocated. Ask your gold IRA company how they store your assets in the depository.
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Commingled storage, also called segregated storage, keeps your metals in the same facility or area, but they are physically separated, or segregated, from the metals of other people.
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Allocated storage maintains a record of the deposits in your name, but the physical asset might mingle with the holdings of other depositors. This process increases the time needed to withdraw assets and makes some investors worry that assets might be misplaced or lost.
DO research private storage facilities that partner with your broker
Your precious metals broker or IRA custodian will provide a list of gold storage companies they work with frequently. Working with their recommendations can streamline the storage and shipment process, you are not required to use them. Still, this partnership may make quick liquidity possible due to the well-established chain of custody on the precious metals. The precious metals broker can trust the gold transferred to them for sale will be of the promised quality when it arrives.
DO make sure you are insured
If you choose to store physical metals at home, make sure your homeowners insurance covers collectible coins in full. Many policies have limit caps on value, which can be as low as $1,000. Also, if you are using a safety deposit box, the bank will not cover you. Neither the bank nor the FDIC insures the contents of safety deposit boxes. You can purchase insurance for gold storage, but rates and company reputations vary widely.
Gold Storage Don’ts
DON’T bury it in the backyard
Never trust a broker who suggests you bury your assets (this actually happens). This type of storage lacks the proper insurance or security required for such a large investment.
DON’T let people know you store gold at home
If you are considering home storage, remember that it can put you at risk. For one, you’ll need to ensure your shipping method protects your privacy without alerting someone with bad intentions to the valuables in your home.
Safety deposit boxes at banks have been the vault of choice for precious items such as birth certificates, bonds, family heirlooms, and much more. However, the materials are not insured by the FDIC if damaged or stolen. Plus, access is limited to the bank’s operating hours. Any private storage company you consider should have clear policies in place for access times and speed at which you can retrieve your gold.
DON’T forget to see what others say about storage companies
When researching a gold storage company, customer reviews are an excellent place to start. Check their Better Business Bureau rating and history to see possible complaints and how the company responds to those complaints.
Bottom Line: Can I Store my Gold from an IRA at Home?
You can surely purchase and hold physical gold in a home safe, but the IRS does not allow this with gold purchased for an IRA. If you unlawfully keep IRA-purchased gold at home, you could face distribution penalties and taxes. Home storage qualifies as a distribution, which signals a 10% penalty if you’re under age 59 1/2. This also means that the investments are not tax-deferred, so you’ll owe hefty income taxes on the distribution.
Of course, if the IRS gets wind of your storage method, it could lead to a potential audit. The best way to store your gold is with a vetted, reputable depository that will insure and protect your valuable assets.