Silver IRAs have garnered a great amount of interest in recent years. As they gain in popularity, confusion surrounding the rules that govern them has increased for many investors who are new to these particular retirement accounts. There are a number of investors under the illusion that you can take money from your IRA accounts and go yourself to buy silver coins and bars from a coin shop. Some people think you might be able to keep the silver for the account at home in a safe or hidden somewhere in your home. Others are unclear about which types of IRA administrators are able to create and manage a Silver IRA account. The IRS makes the rules that impact Silver IRAs, and they are quite specific. The essential ones are covered below so that you are able to invest in these tax deferred accounts and have tangible silver included in your retirement holdings with confidence.
Rules About Silver IRA Rollovers
Rolling over your funds from an existing traditional IRA must be executed according to particular timeframes. Either the administrator of your old IRA will handle this directly with the Silver IRA administrator, or they will send you the balance your request from your old account by check. Should you receive the funds by check, it is essential that you transfer these funds to the new Silver IRA administrator quickly. This is because IRS rules give you 60 days to finish the financial transfer. When you exceed this amount of time, the IRS then treats transfers such as this as distributions instead of rollovers. You are also restricted to doing these rollovers once each year. This limitation does not apply to funds transfers from one existing IRA to an existing Silver IRA.
Rules About Allowed Silver
Not all silver coins are permitted in this type of IRA. There are certain ones from which you can select. Those coins that the IRS labels as collectible can not be held in a Silver IRA. If they are graded or certified by one of the grading companies like PCGS or NGC they are also not allowed. The minimum purity level for silver coins has to be at least 99.9% pure. There is also an approved list of mints from which these coins can come. The silver coins allowed in the IRAs are one ounce versions and larger.
Rules About Custodial Maintenance
A custodian is a necessary part of having a Silver IRA. The rules are very firm on this point. You can not store your silver at home in your own custody. In order to have this account properly set up and maintained, you are required to select one of the approved Silver IRA custodians to manage and store your silver coins and bars. If you do purchase the silver yourself directly and then try to transfer it to the administrator, these metals will be considered invalid for the Silver IRA. Even keeping the silver in your possession for one day would invalidate it from inclusion in your IRA. If you violate these rules, then the IRA funds you use to illicitly obtain and store the silver will be treated as a distribution from the account. They would then be subject to penalties and taxes.
The way that you have to operate your Silver IRA account is to allow your IRA administrator to handle all of the transactions on your behalf. You actually give the purchase and sell orders to them, and they will obtain the silver for you and send it to the third party depository you selected where it will be insured and stored. Some Silver IRA administrators are approved depositories as well, but this is unusual. Most of them are working with one of the major national depositories like Delaware Depository or Brinks. The only involvement you should have with the silver included in your IRA is to give orders to your administrator for acquisitions, disposals, and distributions. Your administrator can also help to advise you with these transactions.
The depositories also have rules they have to follow to comply with IRS regulations for Silver IRAs. The IRS must approve them to be IRA storage vaults. They have to charge an annual storage fee to be taken from your IRA. They are required to hold your silver metals in an insured vaulted location all the way to the point when you instruct through your administrator for the silver to be distributed or sold.
Rules About Silver IRA Contributions and Distributions
Contributions are handled with Silver IRAs like they are with traditional IRAs. The IRS contribution rules are in fact the same. For any given year, a limit applies to how much you can contribute for that year. In 2015 and 2016, this dollar limit amounts to $5,500 for Silver IRAs which are Self-Directed IRAs, as it does to other forms of IRAs as well. There are provisions for individuals who are behind and who are over 49 years of age. In these cases, the limits are raised to $6,500 each year to assist these people in catching up on savings for retirement. In the event that you contribute too much to your IRA account in any given year, the excess funds are taxed at a rate of 6% each year until they are withdrawn.
Distribution rules for Silver IRAs are generally the same as for other kinds of IRAs. At any time you wish, you can sell your physical silver at no penalty, so long as the funds remain in the IRA account. If you sell it then take these funds as a distribution before reaching the retirement age, then they are treated as a distribution and taxed and penalized as early withdrawals. These IRAs also allow you to have your custodian send your silver home to you. This is also considered a distribution, and the taxes would be based on the value of the silver at the time you take it out of the Silver IRA. Later when you sell the silver, any and all gains are then taxable at a 28% capital gains rate.