An IRA custodian is an IRS-approved institution that handles your account paperwork, maintains adherence to tax regulations, and executes your transactions.
Depending on the type of IRA, their specific duties may look a bit different. When purchasing a Precious Metals IRA, it is recommended to work with a custodian who specializes in this type of retirement account.
With a Precious Metals IRA, planning for your retirement will include deciding which type of self-directed IRA (SDIRA) account you want to open (Traditional, Roth, SEP, or SIMPLE), how much and when to contribute, and which assets to hold. You’ve got a lot of options when choosing how to build your retirement nest egg, which you’ll carefully consider with your Precious Metals Specialist in tow to help walk you through your options and get your questions answered.
As you consider your precious metals storage and what to look for in the depository where you keep your gold and silver, you’ll also likely need to open an account with a new custodian who’s familiar with the necessary documentation.
In the sections that follow, we will review what a custodian does, why you need one, and what tax considerations and fees you need to know about.
What Does a Precious Metals IRA Custodian Do?
A custodian is a financial institution that oversees the assets within its clients’ accounts. The custodian handles IRS reporting, withdrawals, and transactions within accounts like IRAs, from conventional through self-directed IRAs.
All IRAs have custodians that oversee the assets for their clients. Precious Metals IRA custodians vary to a degree, since these types of accounts are designed to hold physical metals that must be stored. Because of this need, Precious Metals IRAs require a depository for the asset storage portion of duties. The custodian then manages the paperwork and reporting for the assets stored at these depositories.
Therefore, to own a Precious Metals IRA, you’ll need a custodian to carry out your transactions, as well as to handle tax reporting and paperwork for your physical gold, silver, platinum, or palladium.
To make ownership of a Precious Metals IRA easy, your Precious Metals Specialist can help connect you with and answer questions about your custodian, along with all the other parts of your gold IRA.
SDIRAs, the IRS, and Custodians
Why do I need a custodian?
The simplest answer is that the IRS requires a custodian for all retirement accounts.
Even if you are enthusiastically hands-on when it comes to which assets to buy, including which specific gold and silver you want in your IRA, custodians are critical for several reasons.
- Custodians handle the actual processing of the transactions. After all, there is paperwork associated with these transactions. Since they are specialized in precious metals, these custodians are familiar with the paperwork required and can act quickly on your behalf.
- Custodians manage a relationship with the depository in which your physical metals are placed. They help organize the storage of your metals ensure that the appropriate documentation is filed as required.
- Custodians take care of the administrative responsibilities. These tasks can include everything from IRS reporting to withdrawing your assets (per your request) and distributing them accordingly. Aside from familiarity with the documentation required, custodians also have safeguards in place to protect your transaction details.
Who can be a custodian? The IRS specifically approves certain banks, trusts, and other similar entities to serve as custodians for retirement accounts.
Now, Precious Metals IRAs are a special instance of retirement savings account. To store precious metals in an IRA, you must have a self-directed IRA, or SDIRA.
Most IRAs limit the types of holdings to stocks, bonds, and funds approved by the specific custodian; the custodians of self-directed IRAs (SDIRAs), however, accept the broadest range of IRS-approved assets for placement in these SDIRAs. Hence, precious metals are accepted, and you have the widest selection of options for what you can by.
Gold IRA Custodian Tax Considerations
What tax considerations factor into how I work with my custodian?
Here at Birch Gold Group, we don’t give individual tax advice. We always recommend you consult directly with your certified tax expert and discuss the details of your particular situation. However, there are some important tax concepts worth learning about and keeping in mind when discussing the function of Precious Metals IRA custodian.
Owning precious metals like gold in a SDIRA can quite a bit different than owning stocks, bonds, or mutual funds in a conventional IRA, but it does share some similarities. With those conventional options, you most likely just buy and sell them within your retirement account, pay taxes upfront (Roth IRAs) or upon distribution or withdrawal, and be done with it.
Similarly, inside a Precious Metals IRA, you can purchase gold, hold it through a depository with the management of a custodian, and initiate transactions through your Specialist.
In that scenario, precious metals act like any other asset class in an IRA. Contrast this with physical possession of gold outside of an IRA, where you are subject to capital gains taxes and other layers of complication.
And within a Precious Metals IRA, the account is in your name but you don’t gain physical possession—in the eyes of the IRS, for tax purposes—until you take a distribution. Instead, the custodian holds onto the account for you, managing its reporting and executing its transactions for as long as you keep it open.
Service Costs for Your Gold IRA Custodian
What are custodian fees?
Specific fees may vary slightly depending on the custodian you choose, but overall you will run into three central instances of fees.
First, you’ll encounter one-time fees to set up your account, transfer funds over, and handle any other transactions. For the custodians that Birch Gold Group generally works with, the negotiated rate for each one of these fees will fall somewhere between $30 and $50.
Then, you will run into annual management fees, which cover the costs of the annual reporting and paperwork that your custodian completes on your behalf. The negotiated rate for these is usually around $80 per year. In parallel, you’ll be charged an annual storage fee, usually around $100 per year, which will include insurance on your precious metals.
For more details about fees and any other questions you may have, ask your Precious Metals Specialist.
Trusting Your Gold IRA Custodian
How do you know a custodian is legitimate and trustworthy?
Clearly, your account’s custodian plays an important role in setting up, managing, and handling transactions and distributions, and so it is critical that they are consistent, reliable, and thorough.
Birch Gold Group works with custodians like Equity Trust Company and STRATA Trust Company, who are specialized in not just self-directed IRAs but also precious metals. These custodians are IRS-approved, demonstrating compliance with the requirements outlined by the IRS in order to handle IRAs. Our custodian partners maintain A+ ratings with the Better Business Bureau, and have outstanding track records of ongoing service and reliability.
Your Precious Metals Specialist will walk you through these custodians we work with most frequently. Your Specialist’s own reputation is as much on the line as the physical metals under custody; their goal is to give you the best service while you want your retirement savings to be safe and properly accounted for.
While we have custodian partners with whom we work regularly, you are welcome to work with any approved custodian.
An IRA custodian is another component of a legal, secure self-directed IRA, whether it holds precious metals or other assets. When you work with Birch Gold Group, your Precious Metals Specialist will help you learn about, set up, and manage your savings—including dealing with your custodian.
Learn more about how a Precious Metals IRA can If you haven’t yet, check out this page about Precious Metals IRAs and how your Specialist can help you.