Part 2 can be found here: Allowed and Disallowed Precious Metals in a Self-Directed Solo 401(k)
Assuming that your self-directed solo 401(k) allows for the investment of certain precious metals that are permitted under the IRS regulations, you, as trustee of your solo 401(k), will be able to direct the purchase of the precious metals for your plan/account, such as gold, silver, coins, bars, etc., per the guidelines below. Also, since our self-directed solo 401(k) allows for investment into approved precious metals, it essentially already is a ‘precious metals solo 401(k)', so a separate plan is not required.
Diversifying into Precious Metals
As long your self-directed solo 401(k) invests in allowable precious metal types and quality/purity, precious metals may be a good investment diversification option especially for hedging against inflation. To qualify for investment in your solo 401(k), precious metals such as gold, silver, platinum, and palladium must meet the minimum fineness of 995 parts per 1,000, or 99.5% pure.
There are a number of gold bullion coins issued by governments worldwide that satisfy the fineness standard, but the following do not and are therefore disallowed: Belgian 20 Franc, Franc 20 French, British Britannia, Corona, and Austrian 100, 20, to name a few. Precious metals not meeting these requirements are considered prohibited investments and cannot be held in your self-directed solo 401(k).
Refer to the Part 2 post coming out on 7/7/21 for a more extensive list.
Requirements for Taking Physical Possession and Storing Precious Metals
Precious Metals in bar or coin form including gold, silver, platinum, and palladium owned by the self-directed solo 401(k) have to be stored with an approved depository such as the Delaware Depository Service Company. Alternatively, since the self-directed solo 401(k)’s trustee is an individual, he or she may safe keep the physical metal coins for the benefit of the solo 401(k) at a local bank or credit union. See IRS Private Letter Ruling 200217059 for more information.
5 Steps to Purchase Precious Metals
1 – Open and fund - Open a self-directed solo 401(k) plan with a provider that allows investing in precious metals. Fund the account with contributions and/or by rolling over pre-tax retirement account(s).
2 – Acquire the metals - As trustee of the plan, select a precious metals dealer and then choose the approved metal type to invest in.
3 – Get an invoice - The metals dealer will issue an invoice in the name of the self-directed solo 401(k) FBO your name as trustee. For example: ABC Company Solo 401(k) Plan FBO Jane Doe as Trustee. Wire or mail a check from the solo 401(k) funds to the metals dealer with instructions for where to mail the metals.
4 – Metals get shipped - The dealer will ship the metals to the solo 401(k) trustee for storage at an approved depository institution or local bank. Do NOT have the dealer ship the metals to the plan provider, or the bank or brokerage firm holding the rest of the solo 401(k) funds.
5 – Store the metals – As the trustee of the self-directed solo 401(k), you are ultimately responsible for managing all assets of the plan. Be sure that any metals owned by the plan are held in a depository taking institution, such as your local bank. This is often done by opening a safe deposit box in the name of and using the EIN for the plan.
Additional Tips
- Do not use your personal funds to acquire the metals and then have the solo k reimburse you.
- Do not sell your personal metals to your plan.
- Do not use a safe deposit box that holds your personal items.
Precious Metals Distribution and Withdrawal
By reviewing the daily precious metals prices for gold, for example, it should be easy to get the value if/when you decide to convert it from the pre-tax account to the Roth account or when you begin to take taxable distributions of the gold as income in retirement.
