Questions & Answers About IRA Investment in Precious Metals

Q: How can an investment in precious metals be made through an Individual Retirement Account or Arrangement?

A: An investor with a self-directed IRA may direct that some of the funds in the IRA be invested in gold,  silver, or platinum coins minted by the United States. Beginning in 1998, IRA investments may include any gold, silver and platinum bullion or coins which meet the refinement requirements of bullion traded through commodities contracts. American Church Trust Company , is one of the nation's leading independent trust organizations equipped to handle these unique requirements.

Q: What other investments can be directed through American Church Trust Company?

A: American Church Trust Company first established its IRA department in 1990 specifically to allow IRA holders to invest in bonds issued by churches. Many clients also direct investments in mutual funds and listed stocks. For investment in U.S. Treasury Bills, Notes & Bonds, American Church Trust Company can settle directly with the U.S. Treasury Direct program. A few accounts have directed investments in unsecured notes and in notes secured by real estate liens or mortgages.

American Church Trust Company is not presently accepting investments in assets unless a fair market value is readily available. For this reason, investments cannot be held in limited partnerships, stock, privately-held companies, or real estate.

Q: Can precious metals investment be made through the client's current IRA?

A: Yes, provided the current trustee or custodian is willing to administer an investment in precious metals. However, many self-directed IRA custodians or trustees are affiliated with an investment provider such as an insurance company selling annuities or a mutual fund company, and are not equipped or willing to handle other types of investments. Others may have difficulty meeting the storage requirements for holding precious metals in and IRA. ACT is willing and able to serve as custodian of self-directed IRA accounts for clients who wish to direct investment in precious metals.

Q: How much does a typical IRA investor invest in precious metals?

A: The limit on annual contributions to an IRA is $2,000 but IRA holders often have much more accumulated in their IRAs. Contributions over many years will be combined with earnings on investments, and many people have moved substantial sums from retirement plans into an IRA when leaving previous jobs. Investments of $10,000 to $20,000 are fairly common, with the amount invested in precious metals sometimes reaching $100,000 or more.

Q: What about minimal investments of $2,000

A: The investor should carefully consider the annual carrying costs of the IRA account when deciding whether to invest smaller amounts through an IRA or directly from after-tax dollars. As of 2004, the annual costs of a self-directed IRA at ACT are typically $125 the first year and $85 per year through the life of the investment. For a $2,000 investment, this represents about 5% per annum in carrying costs. We prefer that IRA investments in precious metals be a minimum of $5,000 so that relative carrying costs are reduced to 2% per annum or less. Bear in mind also that investments in precious metals do not yield any cash income, and these costs must be paid annually in cash by the investor.

Q: What portion of an IRA is appropriate for investment in precious metals?

A: This is an important question which the client should consider and discuss with AmeriGold and tax and investment advisors. Factors to consider are the investor's age and total assets, expected needs for liquidity in upcoming years, and investment philosophy. Precious metal investments can represent a stable foundation for safety and security, but are not generally expected to achieve growth objectives such as a stock fund might do. Also bear in mind that once an investor reaches age 70, a required minimum annual distribution will apply. Provisions should be made to leave some liquidity in the account, or the mix of investments should be planned so that the necessary value can be segregated and withdrawn in kind.

Q: Are there any guidelines regarding allowable precious metals investments for an IRA?

A: An IRA may hold investments in certain specifically-permitted precious metals. Otherwise, coins and bullion are considered to be collectible under the meaning of the Internal Revenue Code, and are disallowed for IRAs. The allowable exceptions were broadened by the Taxpayer Relief Act of 1997, effective January 1, 1998.

The specific precious metals permitted are: U.S. Gold Eagle coin, U.S. Silver Eagle coin, U.S. Platinum Eagle coin, a coin issued under the laws of any State, and gold, silver, platinum or palladium bullion that meets certain requirements. The requirements for bullion are that it be of a fineness equal to or exceeding the minimum fineness related to certain regulated futures contracts and that the bullion be in the physical possession of a trustee qualified to serve as an IRA trustee.

Q: What are fineness requirements for bullion?

A: The minimum fineness for bullion is specified in the Code by reference to regulated futures markets and contracts. Generally, it appears that gold must be .9950 pure, silver must be .9990 pure, platinum must be .9995 pure and palladium must be .9995 pure.

To be acceptable to ACT, bullion bars must be fabricated by COMEX or NOMEX approved refiners. This is necessary for the bullion to be stored and recorded at the custodial facilities of ACT.

Q: Can bullion coins be held in the IRA?

A: Yes, we recommend staying with the American Eagle bullion coins for use in IRA accounts.

Q: How does the client direct the investment in precious metals?

A: Each specific investment by a self-directed IRA requires written instructions of the account holder to ACT. The instructions will detail the investment to be made with AmeriGold providing the precious metals. The form "Investment Direction by IRA Account Holder for Precious Metals" is available for this purpose. The account holder should provide investment directions directly to ACT as the IRA custodian. ACT will then issue a purchase order to AmeriGold and complete the investment.

Negotiation of the quantity, form, grade and price of the precious metals should be handled directly with AmeriGold before preparing detailed investment directions.