My Gold IRA company went bankrupt. What now?

It’s a nightmare scenario for most people, particularly those close to retirement: They’ve made investments all of their lives to secure a future, but suddenly the company keeping them says they have no money.

What happens now? Is everything going to be fine, or have you lost all your savings and have to start over again?

We’ll start with the good news: In most cases, your savings will be covered by government-mandated insurance.

Note how we say most.

How insurance works on IRAs

The US government mandates that all IRA accounts need to be covered for at least $250,000. This cover is expected to be used in cases of funds going missing, as could happened during massive disasters.

If your company closes and for some reason your investments aren’t there (but they’re in the books) you should be covered. You should also be covered if your company falls victim to a robbery that funnels its funds, including the retirement funds and investments of its clients.

The $250,000 number is also a baseline – many IRA companies have insurance for two, three, or even ten times that much. Even if it’s a gold IRA, that should cover your IRA savings. Plus, we have a small detail with gold bars: They’re physical, bullion bars that should still be there anyway.

How gold bars make it simple

Any decent IRA provider will also refuse to be the sole custodian. Instead, most gold bars are kept in secure locations under tight government regulation, such as the Delaware Depository.

As long as your gold IRA puts your bars there, you should still have your investment even if the company disappears. Gold, after all, isn’t liquid and can’t be spent by accident, nor would it be at all easy to funnel gold bars from the facilities where they’re stored.

In most cases, what would happen is that the government would contact you to arrange a transfer of funds towards different management. Another company would take over, and you would barely feel the change. Great, isn’t it?

Well, that’s only if the bankruptcy is due to lack of funds. Things can get much more complicated if there’s fraud involved.

What about IRA fraud?

Most people investing in their IRA never get to see their shares, valuables, or even savings in physical form. They just see numbers on a screen or paper representing them, and assume the company is keeping them safe.

In most cases, companies do keep those things safe and transparently. However, it’s not unheard of for the management of a company like these to get a little bit happy about how funds are managed and on occasion tap onto them. Sometimes, tapping onto them often enough to make the company go broke.

If that’s the case things get a bit more complicated, depending on your actual standing.

Is your IRA company legal?

This is the question that will drive what happens then. If your IRA company was legally registered with the IRS and followed with its regulations – that is, if the company was legal to the government’s eyes, – you’re in luck.

You should be able to retrieve your investments without more than a headache or two. If you’re a victim to IRA fraud in a company the government considered legal, government-backed insurance will kick in.

It’s more complicated if you put your money on an unregistered IRA.

Unregistered IRAs are by definition illegal, and therefore you won’t be covered by any laws that protect IRA customers in these cases. If you put your money on an unregistered IRA you have been the victim of fraud, as the money is gone and there’s no insurance to back it up – nor will there be trustable books to confirm what you had.

In this case, a very long investigation will likely take place, where the IRS will try to ascertain how much each of the victims had stolen from them and in what form. If you’re lucky, they’ll be able to salvage enough from the criminal’s assets to pay you back.

You’re not likely to get lucky.

In most cases, the criminal will have either already spent the money or funneled offshore into banks and investments that can’t be tracked or confiscated. In this case, it’s more likely than not that you will, in fact, have lost everything.

The takeaway: Avoid IRA fraud at all costs

One of the most important decisions you’ll make about your finances will be your IRA manager and custodian, precisely because of this. Your IRA money is only safe if your company is legal. As such, you must do your homework before signing up with anyone. Get references. Ask around. Investigate. Even calling the IRS to make sure the company is in the clear might be necessary.

Do all that, simply because that will give you peace of mind. Having a properly registered IRA manager will protect you against anything that could happen with that money. Don’t take risks with your future, and only put your investments in the hands of people who have the legal clearance to manage it.