New Tax Legislation:
Rare Coin in IRAs
New Tax Legislation Recently Introduced In The Senate
Could Pour Unprecedented Amounts Of Liquidity
Into Rare Coins And Revolutionize The Rare Coin Market.
That new legislation, entitled Options for Investors
Through United States Certified Coins Act of 2007, was
introduced in the Senate on May 25, 2007. The bill
proposes the amendment of the Internal Revenue Code
to permit the inclusion of U.S. certified rare coins as
eligible assets for acquisition by Individual Retirement
Accounts (IRAs). Imagine the potential effects for the
numismatic market if this legislation is passed – a hope
that could become a reality as soon as the fourth quarter
of 2007.
In 1974, the Employee Retirement Income
Security Act was passed by Congress and signed into law
by President Gerald R. Ford. This Act transformed the
investment and accumulation of retirement assets
through its creation of the Individual Retirement
Account, or IRA. These retirement accounts give
Americans an opportunity to independently save for
retirement through tax-deferred accounts. Furthermore,
IRAs provide a secondary benefit by giving individuals
retiring or changing employment the ability to transfer
existing plan balances into their IRAs in order to
maintain the current asset value derived from their
previous employment-sponsored retirement plans.
Since its creation in 1974, the IRA has been
modified and fine-tuned to expand its eligibility and
effectiveness. These changes include the creation of an
IRA that permits after-tax contributions, as well as raises
in individual contribution limits. Such modifications
have led to the establishment of a massive pool of
retirement funds that has grown from $1.4 billion in
1975 to a staggering $3.8 trillion in 2006.
The Individual Retirement Account is an integral
part of the retirement saving structure, as is apparent from
a recent report done by the Investment Company Institute.
IRA assets represent one of every four dollars in U.S.
retirement funds, making them the largest component of
the $11.6 trillion retirement market. Over 40% or 45.2
million of the entire nation’s households own IRAs.
From 1976 to 1980, a broad-based index of
the rare coin market went up 1,195%, driven in
part by the surge in demand that came from IRAs.
The relationship between IRAs and rare coins was a
symbiotic one in which IRAs provided liquidity needed
for the market and rare coins provided a wonderful
diversification for a long-term portfolio. However, that
mutually beneficial relationship was not to last.
