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Last updated: July 2, 2026 · By Gold California Editorial
Quick answer: A precious metals IRA is a self-directed IRA that holds physical gold, silver, platinum, or palladium instead of stocks or funds. Federal law sets one rulebook for all four metals: an IRS-approved custodian holds the account, an IRS-approved depository stores the metal, and only bullion meeting the recognized minimum fineness (or specific U.S. coins) qualifies. California layers its own tax on any distribution: ordinary income at state rates up to 13.3% combined, plus a 2.5% additional tax on early withdrawals before age 59.5, stacked on the federal 10%. The rules for gold, silver, platinum, and palladium are the same at the federal level, but the four metals differ in market depth, dealer spreads, and coin eligibility. California residents also face a distinct fraud pattern: premium-coin upsells routed through retirement funds, most recently documented in the Red Rock Secured consent order.
Short on time? The essentials
- A precious metals IRA is a self-directed IRA holding IRS-approved physical gold, silver, platinum, or palladium; it is not a special California account type.
- An IRS-approved custodian must administer the account and an IRS-approved depository must hold the metal, per IRC 408(m)(3)(B).
- Home storage of IRA metals is not allowed; taking possession is a deemed distribution.
- The IRS-recognized minimum bullion fineness is .995 for gold, .999 for silver, and .9995 for both platinum and palladium.
- American Gold, Silver, and Platinum Eagles qualify under the coin carve-out; the American Palladium Eagle qualifies through the bullion-fineness route.
- California taxes any distribution as ordinary income at state rates up to 13.3% combined, the steepest top rate in the country.
- An early distribution before age 59.5 adds a 2.5% California tax on Form 3805P, on top of the federal 10%, for a 12.5% combined penalty tax.
- The 2026 IRA contribution limit is $7,500, plus a $1,100 catch-up at age 50 and over, so rollovers fund most precious metals IRAs.
- Platinum and palladium markets are far thinner than gold and silver; dealer spreads and back-end liquidity can be noticeably worse.
- California enforcement has focused on premium-coin upsells sold to retirement holders, including the Red Rock Secured case with markups up to 129.97% and more than $56,000,000 in court-ordered relief.
This page groups the four metals a California saver can hold in a retirement account into one picture. The federal rulebook is the same for gold, silver, platinum, and palladium. What changes is the coin eligibility route, the market depth, the dealer spread, and the way California adds its own tax on top of the federal system. Every figure below traces to a primary source, cited inline.
What a precious metals IRA is (and is not)
A precious metals IRA is a self-directed individual retirement account that holds physical bullion or IRS-approved coins in place of stocks or funds. The tax wrapper is identical to a regular IRA. The account still follows federal contribution and distribution rules, and the metal inside it is just the asset the IRA owns.
What distinguishes it is the storage rule. Federal law requires the qualifying bullion to be in the physical possession of an IRS-approved trustee, per IRC 408(m)(3)(B). That means an approved custodian administers the account and an approved depository holds the coins or bars. Keeping the metal at home is a deemed distribution.
It is not a special California account. California does not create a distinct precious metals IRA under state law. It taxes distributions from the account and regulates the companies that sell into it, but the federal wrapper and the IRS coin and bullion tests are what set the rules.
It is not a way to hold "gold IRA" stocks or a gold ETF inside a normal IRA. Those are securities and belong in a regular brokerage IRA. A precious metals IRA holds the physical metal itself, with the extra machinery of a custodian and a depository.
Gold, silver, platinum, palladium: how the four metals compare
All four metals sit inside the same IRA wrapper, but each one has its own eligibility route and market profile. The federal statute at IRC 408(m)(3) permits qualifying gold, silver, platinum, and palladium bullion, plus specific U.S. coins, when held by an approved trustee.
The IRS-recognized minimum fineness comes from COMEX contract-market delivery standards under the Commodity Exchange Act reference inside the statute. In practice this maps to .995 for gold, .999 for silver, and .9995 for both platinum and palladium. Common IRA-approved bars and rounds meet those thresholds by design.
The coin carve-out at 408(m)(3)(A) is where the metals diverge. Gold coins under 31 USC 5112(a)(7)-(10), a silver coin under 5112(e), and a platinum coin under 5112(k) are named in the code. The American Palladium Eagle was authorized later, in Public Law 111-303 (2010), and is not listed in the carve-out. Palladium therefore qualifies only through the bullion-fineness route, per 31 USC 5112.
Market depth also differs. Gold and silver run large, deep, well-known markets with tight spreads on common bullion. Platinum and palladium markets are much smaller, driven by industrial demand, and can carry wider dealer spreads and thinner bid-ask liquidity when demand shifts.
| Metal | IRS-recognized minimum fineness | Coin carve-out route | Iconic IRA-eligible coin | Market note |
|---|---|---|---|---|
| Gold | .995 | 31 USC 5112(a)(7)-(10) | American Gold Eagle (via 5112 carve-out) | Deepest, most liquid; tight common-bullion spread |
| Silver | .999 | 31 USC 5112(e), (u) | American Silver Eagle, .999 fine | Larger ounce count per dollar; wider spread on premium coins |
| Platinum | .9995 | 31 USC 5112(k) | American Platinum Eagle, .9995 fine | Smaller market; industrial-demand driven |
| Palladium | .9995 | No coin carve-out; bullion route only | American Palladium Eagle qualifies as bullion | Thinnest market of the four; wider spreads common |
Sources: IRC 408(m)(3); 31 USC 5112; IRS Publication 590-A; IRS Issue Snapshot on collectibles. Checked June 2026. Consult your tax advisor for your situation.
The IRS rules that govern every precious metals IRA
Every California precious metals IRA follows one federal rulebook. The rules cover which metals qualify, who has to hold them, and what you can and cannot do with the account. They apply identically to gold, silver, platinum, and palladium.
First rule: the collectibles ban. The IRS Issue Snapshot on collectibles confirms that acquiring a collectible inside an IRA is a deemed distribution equal to cost. The carve-out for specific coins and for bullion of a certain fineness held by an approved trustee is what keeps a precious metals IRA out of collectible treatment.
Second rule: physical possession by an approved trustee. Only a bank or an IRS-approved non-bank trustee can hold the metal, and the metal must be at an approved depository. IRS Publication 590-A puts it plainly: an IRA can invest in certain U.S. gold and silver coins minted by the Treasury and in certain platinum coins and gold, silver, palladium, and platinum bullion.
Third rule: the same contribution and distribution limits as any IRA. The 2026 IRA contribution limit is $7,500, plus a $1,100 catch-up at age 50 and over, per IRS Newsroom IR-2025-111. Because the limits are small, rollovers from an existing IRA or 401(k) fund most precious metals IRAs.
Fourth rule: prohibited transactions. Self-dealing, personal use of IRA metal, and transactions with a disqualified person count as prohibited transactions under IRC 4975(c), with severe tax consequences. The metal is owned by the IRA, not by you personally.
The California layer: tax and consumer protection
Federal law says how the account works. California says how the distributions are taxed and who oversees the companies that sell into the account.
California taxes any traditional-IRA distribution as ordinary income. The rate ladder runs through nine brackets topping at 12.3%, plus a 1% Mental Health Services Tax on taxable income over $1,000,000, for a top combined marginal rate of 13.3%. That is the steepest state income tax rate in the country. Most retirees never touch the top bracket, but every distribution dollar climbs the ladder.
California adds a 2.5% additional tax on early distributions taken before age 59.5, reported on FTB Form 3805P. That state tax stacks on the federal 10% under IRC 72(t), for a 12.5% combined penalty tax before ordinary income tax (source: California FTB, Early distributions). California does not conform to every federal exception, so a distribution that escapes the federal 10% can still owe the state 2.5%.
California also protects consumers. The Department of Financial Protection and Innovation (DFPI) takes complaints on precious-metals fraud and joins federal actions where warranted. That authority is the reason the state layer matters for a scam-averse saver, not just the tax rate.
| Tax layer | Federal | California |
|---|---|---|
| Ordinary income tax on the distribution | Yes, at your federal rate | Yes, at rates up to 13.3% combined |
| Additional early-distribution tax (under 59.5) | 10% of the taxable amount | 2.5% of the taxable amount |
| Where the early tax is reported | Form 5329 | FTB Form 3805P |
| Combined penalty tax before income tax | 12.5% (10% federal plus 2.5% California) | |
| Social Security on the state return | Partially taxable federally | Not taxed at all by California |
Sources: IRS Publication 590-B; California FTB, Early distributions; FTB Form 3805P; FTB Publication 1005. Checked June 2026.
How a California resident funds a precious metals IRA
Because the annual contribution limit is small, most California residents fund a precious metals IRA with a rollover or transfer from an existing retirement account. The account you already have decides which method applies.
Direct trustee-to-trustee transfers between IRAs are the cleanest route. Money moves between custodians without passing through your hands. There is no mandatory withholding, no 60-day clock, and no once-per-year rollover limit.
Rollovers from a 401(k), 403(b), or 457(b) plan can be sent as direct rollovers to the new custodian. If the plan cuts a check to you instead, 20% federal withholding applies to a 401(k) or 403(b) payment, and you have 60 days to redeposit the full pre-withholding amount to avoid tax.
California public-pension refunds have their own set of rules. A monthly defined-benefit pension cannot be rolled over. A CalPERS, CalSTRS, or UC refund of member contributions after separation can be, per the CalPERS refund page. Refunds are irrevocable and end future pension rights. Consult your tax advisor before triggering one.
Custodian and depository: who does what
Two separate parties keep a precious metals IRA legal. Mixing them up is a common source of confusion, and a common opening for a bad sales pitch.
The custodian is an IRS-approved bank or non-bank trustee. It opens the IRA, files the annual reports, tracks contributions and distributions, and signs the paperwork that makes the account real. Only a chartered bank or an IRS-listed approved non-bank trustee can act as custodian, per IRS regulations at 26 CFR 1.408-2.
The depository is the vault. It receives the metal from the dealer, stores it under the custodian's account, and provides audit and insurance records. Well-known IRS-approved depositories used for California IRA holders include Delaware Depository in Wilmington, Brink Global Services (which operates a Los Angeles vault, giving a California in-state option), and International Depository Services in Delaware and Texas.
The dealer is the third party that sells the coins or bars to the IRA. Dealers are not custodians. A dealer that claims to open your IRA, take your money, and store your metal in one bundle is either using a custodian behind the scenes or is offering something that will not withstand IRS scrutiny.
Storage inside the depository can be segregated, meaning your specific coins and bars are kept apart, or commingled, meaning like-kind metal is pooled with other clients' holdings and tracked by ledger. Segregated storage costs more; commingled storage is cheaper and still legal.
The fees that erode a small precious metals IRA
Fees inside a precious metals IRA come in five common layers. Each one is a small line, but small accounts and short horizons feel the total.
The first layer is the setup fee charged by the custodian to open the account. The second is the annual custodian administration fee. The third is the annual storage fee at the depository, which varies with segregated or commingled storage and with the metal value stored.
The fourth is the dealer spread on the initial purchase, the gap between the coin or bar price and the wholesale metal value. The fifth is the wire or shipping fee at each transaction. Add these up as an all-in cost, not one line, because the setup fee waived in year one still leaves the storage and dealer spread every year.
The dealer spread is the largest single lever. Common bullion, such as generic 1-ounce gold bars or standard American Silver Eagles, tends to trade at a low single-digit percentage over the metal value. Premium or "rare" coins can carry markups an order of magnitude higher, as the California DFPI-joined Red Rock Secured order showed. That is where a $50,000 rollover can lose real ground before the market ever moves.
Red flags California savers should know
California has been a repeat venue for precious-metals fraud aimed at retirement holders. The pattern shows up again and again: a low quoted markup on common bullion, followed by an upsell to "premium" or "rare" coins carrying a markup an order of magnitude higher. The Red Rock Secured case, filed in the Central District of California, is the most-cited recent example.
CFTC Release 8898-24 reports a consent order entered April 23, 2024. It requires Red Rock Secured, its CEO, and a senior salesperson to pay $38,984,313.90 in restitution, $5.1 million in disgorgement, and a $12.25 million civil penalty. That total exceeds $56 million, alongside permanent trading and registration bans. The California DFPI and Hawaii securities regulators joined the underlying suit.
The conduct window ran from roughly November 2019 to June 2022. At least 950 customers paid more than $69 million for Canadian Red-Tailed Hawk coins worth only $30 million on the wholesale market, with markups ranging from 91.89% to 129.97% over Red Rock's cost. Most customers used tax-deferred or retirement funds. The bait-and-switch quoted a 1% to 5% markup on common bullion, then routed customers into the far-higher premium coins.
The takeaway for a California saver is not that precious metals IRAs are inherently unsafe. It is that the dealer choice is where the trap sits. A published BBB profile, a written fee schedule, a named IRS-approved custodian, and a named IRS-approved depository are the checks that keep the account clean. If any of the four is missing, the risk is on you.
How to set up a precious metals IRA in California, step by step
The steps below describe the mechanics a California resident follows to set up a precious metals IRA. They are not tax advice, and your custodian and tax advisor handle the specifics.
- Decide the funding source. Confirm whether you will contribute new money, transfer from another IRA, or roll over from a 401(k), 403(b), 457(b), or eligible public-pension refund. The source sets the paperwork.
- Choose an IRS-approved custodian. Confirm the custodian is a chartered bank or on the IRS Approved Nonbank Trustees list. Verify the written fee schedule and the depository choices in advance.
- Open the self-directed IRA account. Sign the custodian's account paperwork. Fund the account by direct transfer or direct rollover to avoid the 20% mandatory federal withholding on a check made out to you.
- Choose an IRS-approved depository. Confirm the vault (for example Delaware Depository, Brink Los Angeles, or IDS Delaware or Texas) and choose segregated or commingled storage. The custodian coordinates with the depository.
- Pick the metal from an approved list. Buy only bullion meeting the IRS-recognized fineness (.995 gold, .999 silver, .9995 platinum and palladium) or coins named in 31 USC 5112. Get the price, product, and total cost in writing.
- Send the metal directly to the depository. The dealer ships the coins or bars to the depository, in the IRA's name, per the custodian's instructions. Never take personal possession of IRA metal.
- Keep the annual paperwork. The custodian files Form 5498 with the IRS each year for the account's fair market value. Save the statements, invoices, and depository confirmations for your records.
If any step in this sequence feels rushed or unclear, stop and ask questions. A legitimate custodian and depository will document every hand-off. If they will not, that is a signal.
When a precious metals IRA is a bad idea
A balanced read has to name when a precious metals IRA is the wrong tool for a California saver. Several situations turn the fees, the illiquidity, or the tax layer into a real drag.
- Small starting balance. Fixed setup, custodian, and storage fees eat a large share of a small account. On a $5,000 to $15,000 balance, the fee percentage can outrun any medium-term move in the metal itself.
- Short horizon. If you need the money in five years or less, the dealer spread on the way in and out plus the California ordinary income tax on distribution can wipe out modest gains.
- Under 59.5 with no exception. The 12.5% combined federal and California early-distribution tax is one of the costliest ways to touch retirement money, and taking metal in-kind does not avoid it.
- Retiree with no cash cushion. Physical metal in a depository does not pay income and takes days to sell and settle. If your monthly bills come first, the account should not be your emergency fund.
- Concentration risk. A retirement plan holding almost only one asset class is exposed to a single market. Whether that is stocks or metal, spreading across accounts is the general principle, and the specifics belong with a licensed advisor.
- Attraction to "premium" or "rare" coin pitches. The Red Rock Secured order documented the precise pattern that turned this account into a trap for hundreds of retirement holders. If the pitch leads with a proprietary coin, walk.
None of this makes a precious metals IRA wrong for every Californian. It means the account fits some savers and not others. A licensed advisor can map it to your situation before the paperwork is signed.
California precious metals IRA questions, answered
What is a precious metals IRA in California?
A precious metals IRA is a self-directed IRA holding IRS-approved physical gold, silver, platinum, or palladium instead of stocks or funds. It follows federal IRA rules, with an approved custodian and an approved depository handling the metal. California does not create a special version of the account; it taxes distributions from it under ordinary California income rules.
Which metals can I hold in a California precious metals IRA?
Only IRS-approved gold, silver, platinum, and palladium qualify. Bullion must meet the recognized minimum fineness (.995 gold, .999 silver, .9995 platinum and palladium). Specific U.S. coins listed in 31 USC 5112 also qualify. The American Palladium Eagle qualifies through the bullion-fineness route, not the coin carve-out.
Can I store the metals at home in California?
No. Federal law requires the qualifying bullion to be in the physical possession of an IRS-approved trustee. Taking IRA metal home is a deemed distribution, taxable as ordinary income, plus the 10% federal early tax under age 59.5. California layers its 2.5% additional early tax on top through Form 3805P.
Does California tax my precious metals IRA differently from any other IRA?
No. California follows the federal characterization of the distribution. The taxable amount enters your California adjusted gross income as ordinary income and is taxed at state rates up to 13.3% combined. There is no special California rule for metal held in the account.
What is the early-withdrawal penalty on a precious metals IRA in California?
For a distribution before age 59.5 with no qualifying exception, you owe a 10% federal additional tax and a 2.5% California additional tax, 12.5% combined. That penalty stack sits on top of ordinary income tax at both levels. Report the California portion on FTB Form 3805P.
How do I fund a precious metals IRA if the yearly limit is only $7,500?
Most California residents fund the account with a rollover or transfer from an existing IRA or a 401(k), 403(b), 457(b), TSP, or eligible public-pension refund. Direct trustee-to-trustee transfers move money without mandatory withholding. The $7,500 (plus $1,100 catch-up at 50 and over) annual limit still applies to any new contributions.
Are platinum and palladium IRAs riskier than gold or silver IRAs?
The federal rulebook is identical. What differs is the market. Platinum and palladium markets are smaller and more industrial than gold or silver. Dealer spreads tend to be wider, and the bid-ask gap can move sharply when demand shifts. Plan for thinner liquidity when you eventually distribute or sell.
Who regulates precious metals IRA sellers in California?
The California Department of Financial Protection and Innovation (DFPI) accepts complaints on precious metals fraud and joins federal enforcement. The CFTC, SEC, and state attorneys general can also take action. The Red Rock Secured consent order was a joint DFPI, CFTC, and Hawaii action against a California-active operator.
Sources
- Cornell Legal Information Institute, 26 U.S.C. 408 (Individual Retirement Accounts). Checked June 2026.
- Cornell Legal Information Institute, 31 U.S.C. 5112 (Denominations, specifications, and design of coins). Checked June 2026.
- IRS, Issue Snapshot, Investments in collectibles in individually directed qualified plan accounts. Checked June 2026.
- IRS, Publication 590-A, Contributions to Individual Retirement Arrangements. Checked June 2026.
- IRS, Publication 590-B, Distributions from Individual Retirement Arrangements. Checked June 2026.
- IRS Newsroom IR-2025-111, 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. Checked June 2026.
- California Franchise Tax Board, Early distributions. Checked June 2026.
- California Franchise Tax Board, Form 3805P instructions (Additional Taxes on Qualified Plans). Checked June 2026.
- California Franchise Tax Board, Publication 1005, Pension and Annuity Guidelines. Checked June 2026.
- CalPERS, Refund Member Contributions. Checked June 2026.
- CFTC Release 8898-24, Red Rock Secured consent order (Apr. 23, 2024). Checked June 2026.
- California Department of Financial Protection and Innovation, Submit a Complaint. Checked June 2026.
