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Close Out Your Unallocated Storage of Precious Metals IRAs

Hundreds of thousands of Americans have self-directed Precious Metals Individual Retirement Accounts. Virtually all of them have chosen the less expensive form of “unallocated storage” for their holdings in these IRAs, explains Patrick Heller, editor of Liberty’s Outlook newsletter.

As we learned during the bankruptcy of MF Global during the Great Recession, unallocated storage means you don’t own real gold and silver. In unallocated storage, you have a claim against the assets of the operator of the storage vault, who is the party who has title to the gold and silver that you think you own. The assets titled to the vault operator are subject to third-party claims. There is also a great risk that the gold and silver inventory may be subject to claims by multiple owners (some analysts project as many as 100 claims for each ounce), some of whom may have pledged the gold and silver as collateral for loans they may not be able to repay.

With professional money managers converting their paper gold and silver into physical, the risks of you ending up not owning any gold or silver in your IRAs in unallocated storage are rising. If you cannot get your metal, you may be settled for cash. Or, if the vault operator such as MF Global is in bankruptcy, you may receive little or nothing.

If you have a Precious Metals IRA using unallocated storage, you can take at least two actions to protect yourself. Option 1 is to convert to “segregated storage.” This costs more because specific inventory is set aside (segregated) for you alone. It is your asset, not that of the vault operator. While this is an improvement, there were people in the MF Global bankruptcy who did not receive all of their precious metals in segregated storage.

Option 2 is to get delivery of your metals into your direct custody. This would be considered a distribution of your account, meaning you would have to pay income and possibly excise taxes on the current value of what you receive. Plus, you will have to pay shipping charges. Before going this route, be sure to check with your financial and tax advisors.

Since many other coin dealers depend on many customers owning precious metals in such IRA accounts, don’t expect them to give you straight answers about the risks of losing your holdings.

You may have little time to protect your assets. If you don’t own physical, you don't own gold or silver!

Editor’s Note: Patrick Heller is editor of Liberty’s Outlook, 1 year, 12 issues, $159, published by Liberty Coin Service, 400 Frandor Ave., Lansing, MI 48912. Liberty Coin Service has been a dealer in rare coins and precious metals since 1971, www.libertycoinservice.com.

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