An individual retirement account (IRA) is an account individuals use to save and invest for retirement because it has many tax advantages. IRA investments can encompass a wide range of financial products, including mutual funds, exchange-traded funds (ETFs), bonds, and stocks.
A self-directed IRA provides investors with even more investment options like private placements, real estate, and commodities like precious metals. Click here to learn more about ETFs.
What is a Precious Metal IRA?
A precious metal individual retirement account is a type of self-directed IRA. As mentioned above, this type of account allows investors to invest in unconventional assets, including art. IRA experts say that people take advantage of this retirement account because it provides them an avenue to invest in precious metals like gold, silver, palladium, and other approved precious metals that have maintained a historical record of increase in value over the long term.
Having precious metals added to your retirement account has several wealth benefits which include reducing risks and acting as a hedge against an economic downturn in the future; this is especially true for physical gold investments.
How Much of My IRA Should Precious Metals Take?
Experts recommend that investment in this type of account should be done conservatively. Following this advice, no more than 10% of retirement funds should be used on a precious metal IRA. There are several reasons for which experts have cited this low figure, one of which is the fact that highly placed portfolios are diversified.
This means that risks are significantly lower since they are spread over different assets. In clearer terms, no credible financial advisor would advise you to invest all your funds in one asset, in this case, precious metals. Also, while these highly valued commodities have impressive records of continued value appreciation, they do not perform so well in the short term as other assets like stocks, relatively speaking.
What Precious Metals Can I invest in for Retirement?
Presently, you can invest in gold, silver, palladium, or platinum, however, these precious metals must meet specific IRS standards to become eligible.
- The purity of gold must be 99.5%
- The purity of silver must be 99.9%
- The purity of palladium must be 99.95%
- The purity of platinum 99.95%
Products that meet these criteria include the PAMP Suisse bars, Australian Koala bullion coins, and Canadian Maple Leaf coins. It is worth mentioning that while the American Eagle coins doesn’t meet the gold standard, it is still accepted by the IRS. Also, rare, or collectible coins like the British Sovereigns, German Marks, and the Swiss Francs cannot be held in a self-directed individual retirement account.
How Do I Open a Precious Metal IRA?
Opening this account is a bit more complicated than other IRAs like the Roth IRA and the traditional IRA. Below are the necessary steps you should take:
Step one: Choose the Right Custodian
As have been mentioned, a precious metal IRA is a special type of individual retirement account and is held by a custodian. Custodians include banks, brokerage companies, trust companies, and federally insured credit unions, and other IRS approved institutions. These custodians allow you invest in unconventional assets, including precious metals.
Step Two: Choose a Dealer
Once you’ve selected a custodian and you have your account set up, you will have to find a credible precious metals dealer. Ensure the dealer belongs like trade groups like the Professional Numismatists Guild (PNG), Industry Council for Tangible Assets (ICTA), or American Numismatic Association (ANA). Once you’ve found the one you’re comfortable with, money will be sent to them by your custodian for the purchase of the metal(s) of your choosing.
Step Three: Choose the Right Products to Buy
While the choice of what products to buy is entirely up to you, you may find it more rewarding to seek advice from your custodian or the metals dealer. This is because they know which assets are the safest and most rewarding in the long term. That said, a popular choice is the American Eagle Bullion Coins. Visit https://www.usmint.gov/coins/coin-medal-programs/american-eagle/silver-bullion to learn more about the American Eagle Bullion Coins.
Step Four: Select a Depository
Your assets must be stored in a depository like the Delaware Depository that has been approved. Your custodian may recommend one to you but know that the choice to go with any depository is yours to make. Nonetheless, whichever one you select must certain requirements set by the Internal Revenue Code.
Step Five: Finalize the Transaction
You can easily finalize the transaction once you have all the steps mentioned above locked down. Once payment is made by your custodian, your assets are shipped directly to the depository by the dealer.
How Can I Withdraw from My Account?
There are two ways withdrawals can be made from your account. They are:
- Depository purchase: In this option, you can exchange your investment for its dollar equivalent from the depository. Basically, the depository buys the metal from you.
- In-Kind Distribution: You get the actual metal shipped to you when the investment is mature.
This type of account is a great option for people who generally prefer long-term investments and for those who would like to protect their wealth from market volatility and inflation. As an investor, you should know that these accounts are more expensive than traditional individual retirement accounts.
While anyone can explore this retirement investment option, it is most suitable for individuals with a solid investment portfolio looking to diversify.