All About Silver in IRAs

Can I have silver in an IRA?

Yes, with certain restrictions. The short answer is that you can have any .999 fine (or better) silver in your IRA (or .995 fine or better gold), if it is kept with a custodian (a bank, or someone who receives special authorization).

What are the advantages?

The advantage is that the gains are tax-free. This is helpful since gains on silver (and gold) are treated as capital gains on collectibles in the U.S., which means that you are taxed at the normal income tax rate (which is higher than the normal capital gains tax rate).

What are the disadvantages?

The main disadvantage is that you do not have physical possession of your silver (or gold). Under normal circumstances, this is fine. But if for some reason the metal isn't there when you go to sell it, you lose all the money you put in, and you lose all the gains you may have had.

What kind of silver can be in it?

It appears that any silver that is .999 fine (or better) can be in there, as well as any gold that is .995 fine or better. All U.S. Eagles (the ones made in and after the 1980s) are definitely allowed. Technically, any .900 fine (or better) silver and .9167 fine gold (or better) may be allowed. From the laws, it appears as though the silver does not need to have any specific hallmark on it (as one dealer claims), nor does it need to be in kilogram amounts (as another implies). See more details below.

Who can be a custodian (have possession of the silver)?

26 USC 408(m), that covers collectibles, refers to a trustee as mentioned in 26 USC 408(a)(2). That requires the trustee to be a bank or someone who obtains approval of 'the Secretary' (presumably someone at the IRS). A bank (per 26 USC 408(n)) can be a bank, an insured credit union, or a corporation that is subject to supervision and examination by the Commissioner of Banking (or equivalent in the state that the corporation is incorporated in).

How does the process work?

Normally, you would open an IRA account with a company that can act as the custodian (a/k/a a 'self-directed IRA'). Then, you tell the company to buy the silver (or other precious metal) from the bullion dealer of your choice. You will likely need to fill out a form authorizing the purchase.

What are the details?

IRAs are covered by 26 USC 408. Section 408(m) covers 'collectibles.' Collectibles are items normally not allowed in IRAs (technically, they are allowed, but the amount spent is considered a distribution, and is subject to penalty). Collectibles covers coins and bullion, with some exceptions.

IRAs are allowed to contain U.S. Eagles (gold, silver, or platinum), coins issued under the laws of any State, or any gold, silver, platinum, or palladium bullion 'of a fineness equal to or exceeding the minimum fineness that a contract market requires for metals which may be delivered in satisfaction of a regulated futures contract'. It does not state anything about minimum quantities.

The two most common regulated futures contracts for precious metals are COMEX 5000oz silver and 100oz gold contracts. The 5000oz silver contract is defined with a minimum purity of .999 ("Silver delivered under this contract shall assay to a minimum of 999 fineness."). The 100oz gold contract is defined with a minimum purity of .995 ("Gold delivered under this contract shall assay to a minimum of 995 fineness").

So it seems that any silver with a fineness of .999 or higher is allowed in IRAs (and any gold with a fineness of .995 or higher).

Note that $1000 face value bags of 90% silver, as well as Krugerrands (.9167 fine) used to be traded, and still appear to be considered by the CFTC to be valid commodity contracts, and the IRS wants dealers to report when dealers buy these products. So .900 fine or better silver, or .9167 fine gold could probably be used legally in an IRA -- but doing so involves the risk that the IRS may feel otherwise. That's a risk you probably don't want to take.

Note that the exception allowing these bullion items to be in an IRA requires that they be in the physical possession of a custodian.

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