What Does IRA-Eligible Mean?

If you’ve been looking into alternative assets for your IRA, you may have stumbled upon the term “IRA-eligible”. And if you already have an IRA or some other type of tax-advantaged account, you may be wondering what IRA-eligible actually means.

For most people who invest in stocks, bonds, mutual funds, exchange-traded funds, and similar financial products, they may not give a second thought to IRA eligibility. But if you’re looking for alternative assets for your IRA, IRA-eligibility could become a consideration.

Once you branch out into self-directed IRAs, which can invest in real estate, private equity, and commodities, you have to start thinking about whether your desired IRA assets are in fact IRA-eligible.

IRAs can acquire a significant range of tangible, physical assets, including precious metals such as gold and silver through a gold or silver IRA. But while there is a nearly limitless range of assets an IRA can acquire, there are some things it can’t.

What Is an IRA?

An IRA is an individual retirement arrangement or individual retirement account, a type of tax-advantaged retirement savings account that was developed in the mid-1970s to help Americans save more money for retirement.

While most workplace retirement plans today are 401(k) plans, Americans actually hold more money today in IRA accounts than in 401(k) accounts. Accordingly, the importance of IRAs to retirement savings is probably greater than that of 401(k)s.

What Can an IRA Invest In?

Aside from assets that are strictly forbidden from IRA acquisition, an IRA can acquire just about any asset under the sun, assuming you have the financial means to fund that IRA and can find an IRA custodian who is willing to administer alternative assets.

Want to buy a house with your IRA assets in order to provide yourself with rental income? You can do it.

Want to buy pork bellies, coffee futures, and other agricultural commodities? You can do it.

Want to buy gold coins and gold bars to provide a hedge against inflation or a safe haven against recession-related loss? You can do that too.

What Can an IRA Not Invest In?

There are very specific rules about what an IRA cannot invest in. Broadly speaking, IRAs are forbidden from acquiring collectibles.

For the purposes of IRA investing a collectible is defined at 26 U.S.C. 408(m)(2) as:

(A) any work of art,

(B) any rug or antique,

(C) any metal or gem,

(D) any stamp or coin,

(E) any alcoholic beverage, or

(F) any other tangible personal property specified by the Secretary for purposes of this subsection.

That last bit means that anything not listed above that the Secretary of the Treasury subsequently deems to be a collectible would be forbidden from IRA acquisition.

Now you may be looking at that list and seeing that coins and metal are both forbidden from IRA accounts as collectibles. So how can you buy gold or silver coins or bars with an IRA?

Exceptions to the Rule

The very next subsection, 26 U.S.C. 408(m)(3) points out some very specific and important exceptions to the definition of collectibles. To quote that subsection:

For purposes of this subsection, the term “collectible” shall not include-

(A) any coin which is-

(i) a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code,

(ii) a silver coin described in section 5112(e) of title 31, United States Code,

(iii) a platinum coin described in section 5112(k) of title 31, United States Code, or

(iv) a coin issued under the laws of any State, or

(B) any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 5 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract,

if such bullion is in the physical possession of a trustee described under subsection (a) of this section.

Those coins described in 26 U.S.C. 408(m)(3)(A)(i) to (iii) are the Gold American Eagle series of 1-ounce, ½-ounce, ¼-ounce, and 1/10-ounce gold coins, the Silver American Eagle coins, and the Platinum American Eagle coins.

With regard to section 408(m)(3)(B), the minimum finenesses for futures contracts are .995 for gold, .999 for silver, .9995 for platinum, and .9995 for palladium. That means that any bullion coin produced to that minimum fineness is IRA-eligible.

For purposes of a gold or silver IRA, that means that popular bullion or investment coins such as Morgan silver dollars, US junk silver, South African Krugerrands, and French and Swiss 20-Franc gold coins are not IRA-eligible because their gold and silver content is insufficiently high to make them IRA-eligible.

IRA-Eligible Gold and Silver

Fortunately there are numerous other IRA-eligible gold and silver coins available. Aside from the aforementioned Gold and Silver American Eagle coins, there are numerous other coins minted to IRA-eligible levels of purity by mints around the world.

Goldco works with many of those mints to bring you high quality, authentic, IRA-eligible coins direct from the mint. Why take the risk that the gold and silver coins you want to buy may not be IRA-eligible, when you can buy IRA-eligible precious metals coins from trusted partners like Goldco who obtain them straight from the source?

If you attempt to use IRA funds to acquire gold and silver that isn’t IRA-eligible, it would be considered a distribution of your IRA assets, which could subject you to potential taxes and penalties.

Learn More About Gold and Silver IRAs

If you want to learn more about gold and silver IRAs, how they function, and the types of gold and silver coins and bars you can add to your precious metals IRAs, talk to the experts at Goldco.

We have a variety of online resources already, such as our Beginner’s Guide to a Gold IRA, that answer many of the questions you may have about how gold and silver IRAs operate. They can give you the basics on IRA rules and regulations, how to start a gold or silver IRA, and what kinds of gold and silver you can buy with a precious metals IRA.

And if you have any additional questions on how gold and silver IRAs work, our specialists are available to answer any questions you may have.

With over a decade of experience and over $2 billion in precious metals placements, Goldco has helped thousands of customers benefit from owning gold and silver. Call Goldco today to learn more about how you can put IRA-eligible gold and silver to work for you in safeguarding your financial future.