Donna LeValley
Question: Can you purchase Treasury securities for an IRA directly from the U.S. Treasury through TreasuryDirect? How can you add them to an IRA?
Answer: TreasuryDirect.gov is intended as a way for individuals to buy securities from the Treasury and manage them through an account with the website, so you can’t use it to buy Treasuries for an IRA, said Brad Benson, public affairs specialist with the Treasury Department’s Bureau of the Fiscal Service.
But with the Commercial Book-Entry System, banks and brokerage companies can offer customers marketable securities — including bills, notes, bonds, Treasury inflation-protected securities (TIPS) and floating-rate notes — to invest in an IRA.
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Buying Treasury securities through your IRA brokerage
Check with the institution that operates your IRA to find out how you can buy Treasury securities and any fees that may be associated with it. With Charles Schwab and Fidelity Investments, for example, IRA customers can buy Treasuries through their online account with no transaction fee. If a representative makes the purchase for you, you pay a $19.95 fee with Fidelity and $25 with Schwab.
Vanguard charges no commission to buy Treasuries online or over the phone. You may be able to place an order to buy bonds during regularly scheduled auctions — when the Treasury offers newly issued securities — or purchase securities already circulating in the secondary market.
Transferring Treasury securities to an IRA
You can transfer securities purchased and held in a TreasuryDirect account to an IRA or other account with a broker or bank; check with your institution for details, says Benson.
You can move Treasuries from TreasuryDirect into a Fidelity account, for example, but the process may require a lot of time and paperwork, said Richard Carter, vice president of fixed-income products and services for Fidelity.
Steps to execute the transfer
To transfer securities to a broker/dealer account request, also known as an external transfer, you should gather the following information:
Personal information: Full legal name, address, Social Security number and date of birth.
Account details: Account type (such as individual, joint, IRA) and account number at your current brokerage.
Transfer details: Name of the brokerage firm wire name, routing number, agent/broker name, phone number and address. Whether you want a full or partial transfer and the specific securities to transfer for an "in-kind" transfer of your treasuries.
It's important to contact your financial institution for its routing number and wire name. This is not the type of information you will find in a typical correspondence from your broker.
- Step 1: Log into your primary TreasuryDirect® account
- Step 2: Click the ManageDirect tab at the top of the page
- Step 3: Under the heading Manage My Securities, click "Transfer securities"
- Step 4: On the Transfer page, choose the button beside the security type you want to transfer and click "Submit"
- Dtep 5: On the Summary page, choose the securities you want to transfer and click "Submit"
- Step 6: On the Transfer Type page, choose External and click "Submit"
More about Step 6: A page will display with a link to a Transfer Request (FS Form 5511) needed to complete your transaction. In this case, you must complete the paper form according to its instructions and submit it by mail for processing. The form must be signed in the presence of an authorized certifying official at a financial institution. Certification by a Notary Public will not satisfy the requirement.
A Medallion Signature Guarantee, sometimes referred to as a “Medallion Notary” or “Medallion Stamp,” is not a notarial act. It’s a special type of signature guarantee provided within the banking industry. The requirement makes it harder for people to steal your securities by forging your signature on your securities certificates and related documents.
You can obtain a medallion signature guarantee from a financial institution. However, most financial institutions limit this service to customers. That means your best source of a medallion signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business.
When a request is entered, the securities will appear in a Pending Transfer status until the transfer is complete. After the transfer is complete, TreasuryDirect will send a message to your email address of record confirming the activity in your account, and the Security History in your TreasuryDirect account will contain a record stating that the transfer has been sent.
I bonds can't be held in an IRA
I bonds must be registered to named individuals or particular entities such as corporations, trusts, or estates. In this regard, an IRA falls short because it is not a named individual or a specifically recognized entity under the Treasury's regulations. This is clearly reflected in the bond registration process, which always requires the investor's name. You won't be able to transfer these securities into an IRA properly.
Similar to I bonds, TIPS are issued by the U.S. government, providing them with a high degree of safety and inflation protection. Unlike I bonds, the U.S. Treasury permits the inclusion of TIPS in an IRA. This move allows them to gain the full benefit of the inflation adjustment and avoid paying the annual tax.
Securities you can manage with a TreasuryDirect account
With a TreasuryDirect account, you can purchase and manage marketable securities as well as savings bonds (Series EE and Series I bonds), and you won’t pay commissions. But you can’t buy or sell securities in the secondary market; you must go through a bank or broker.
At TreasuryDirect, you choose the type of security you want to buy, then select the combination of maturity, auction date and issue date (the day the Treasury delivers auctioned-off securities to bidders). You can have proceeds automatically reinvested into a new Treasury of the same type when the one you purchased matures. Your financial institution may offer this option through an IRA or brokerage account, too.
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