Precious Metals IRAs
What Are Precious Metals IRAs and How Do They Work?
Precious Metals IRAs allow you to fund your retirement account with Precious Metals, as opposed to traditional stocks, bonds or mutual funds. Precious metals, such as Gold and Silver, have been historically proven to be a wise investment choice for those looking to secure their financial future.
When you invest in a Precious Metals IRA, your metals will be held by a trustee or custodian until you retire. This will allow you to make tax-deferred profits from your investments as long as the proceeds are maintained with your custodian or transferred to a separate IRA account.
There is some paperwork involved but if you work with the right precious metals advisor, you can make the whole process less complicated. You’ll have access to real time support through phone and online that’ll make the whole experience worthwhile.
You should also know that Precious Metals IRAs require you to put your money into coins and bars. Moreover, the IRS only allows certain IRA-approved coins to be acceptable for this program. If you were to do this without appropriate advice, you could really get entangled with a serious tax situation. So be sure to read on!
The Benefits of Investing in Precious Metals IRAs
Stock markets fluctuate, currencies can decrease in value, and global situations can arise without notice. Thus, it’s important to bear in mind that financial markets are always accompanied with unpredictability. For this reason, investing in precious metals can help balance your portfolio against chaotic market conditions.
We’ve listed below some of the benefits of investing in Precious Metals IRAs:
Control
With precious metals IRAs, you have direct control on the allocation and distribution of your assets.
Safety
It has lesser risks as compared to paper assets. The reason behind this is that their value often remains constant. Even in the event of an economic crisis, it’s value will never decline to zero.
Diversification
Although you can also diversify with stocks and bonds, diversification in precious metals entails better benefits. With precious metals IRAs, your portfolio can continue to grow, regardless of the domestic economy’s performance.
Insurance
The market for precious metals moves independently from financial markets. Thus, you can use it as a hedge to provide balance in your portfolio when the market weakens.
Inflation Hedge
It’s a given that when inflation arises, paper currencies weaken in value. Precious metals, on the other hand, normally retain their value and worth.
What Are the Different Types Of Precious Metals That Can Be Invested in?
Precious Metal | Purity |
|---|---|
Silver | 99.9% |
Gold | 99.5% |
Platinum | 99.95% |
Palladium | 99.95% |
Precious metals that can be invested in include gold, silver, platinum, and palladium. Each metal has its own unique benefits and characteristics that can make it appealing for an IRA investment.
For example, gold is often seen as a safe investment option due to its historic value, silver is known for its affordability, platinum is prized for its durability and rarity, and palladium is valued for its resistance to corrosion.
To the left are the specific IRS standards that your precious metals must meet to be considered eligible for an IRA investment:
Some products that meet this eligibility criteria include the PAMP Suisse bars, Australian Koala bullion coins, and the Canadian Maple leaf coins. Although American Eagle coins do not meet the 99.5% purity criteria for gold, the IRS considers it as a collectible and therefore, can be included in your IRA account.
How to Invest in Precious Metals IRAs?
Setting up a Precious Metals IRA can be a bit more challenging than Traditional IRAs. Well, you shouldn’t need to worry because we’ve listed what you would need to do:
The next step is to connect with a precious metals dealer. You will be directing the IRA custodian to transfer money to the dealer, which will be used to buy silver, gold, palladium, or platinum. You should choose a dealer that is connected with trade groups like the Industry Council for Tangible Assets (ICTA), American Numismatic Association (ANA), or Professional Numismatists Guild (PNG) to ensure their quality.
IMPORTANT - Don’t forget to do your own research!
You’ll be given a list of IRS-approved products to choose from. The American Eagle Bullion coins would be a good start!
Your precious metals IRA must be stored in a trusted depository. You can get a recommendation from your custodian, but you can also connect with a depository of your own choice, as long as they are within the scope of the Internal Revenue Code. Take note, the IRS specifies that you cannot store precious metals held in your IRA at home or in a safe-deposit box.
Once you’re done with the preceding steps, you can now complete your transaction. Your IRA custodian will be in charge of the payment, while your dealer will handle the shipment of your precious metals to the depository.
How Can You Receive Distributions From A Precious Metals IRA?
You have two options to take a withdrawal:
Depository Purchase
Your depository can buy the precious metals from you, and you’ll receive an amount equivalent to the value of your holdings.
In-kind Distribution
Once you are ready to retire, you can have your physical precious metals shipped to you at a location of your choosing.
To complete any of these options, you will have to contact your custodian to prompt the process. Note that your Precious Metals IRAs are similar to that of normal IRAs. This means that when you withdraw, you may incur taxes and penalties depending on your age and account type.
Once you reach the age of 72, you will be receiving the required minimum distributions (RMDs). This is where it gets complicated. You’ll be required to receive the distributions in intervals while matching the precious metals you own. At this instance, you may have to withdraw more than you normally would. Meaning, you’ll have to sell on the double so that you can pay the taxes on the precious metals that were already shipped to you.
What to Watch Out for When Investing in Precious Metals IRAs
When investing in Precious Metals IRAs, it's important to watch out for scams. Some companies will promise huge returns on your investment, but may not be legitimate. Make sure you work with a reputable company that has a good track record.
Because they don’t only involve the purchase but the storage of physical precious metals, it's a given that investing in this type of IRA will charge a few extra costs. You will have to consider more fees than normal, including setup, custodial, storage, and transaction fees.
When choosing a Precious Metals IRA provider, it's important to compare rates and fees. Some providers will charge a higher fee for storage and administration, while others may have a lower initial investment requirement. Make sure you find a provider that fits your needs!
The Tax Implications of Precious Metals IRA Investments
Precious metals IRAs provide tax advantages for investors. They can be funded with either pre-tax or after-tax dollars through your custodian.
When you invest with pre-tax dollars, your earnings will grow on a tax-deferred basis, which means you will be paying taxes on withdrawals upon retirement. On the other hand, when your investments are funded with after-tax money, there is no immediate tax advantage. You will be taxed when you begin taking distributions.
Best IRA Investing Companies
When it comes to precious metals IRAs, there are a handful of reputable companies that investors can trust. Below is a list of some of the best companies in this industry:
Goldco has over a decade of experience providing brokerage services for precious metals-funded IRAs. They generally help customers with setting up and managing their retirement accounts.
One of the highlights of their services is the buyback program that allows customers to resell physical precious metals at distinct rates. Although they do not offer custodian and storage services, they help customers connect with reputable vendors.
Augusta Precious Metals is a family-owned company with over 50 years of experience in the industry - dedicated to providing the best possible service to their clients. They offer gold and silver bullions, premium coins, as well as rounds and bars in various weights.
The company also sells collector sets and proofs, certified coins, and commemorative coins.
Noble Gold focuses on providing precious metals investment guidance and offering a simplified Gold IRA rollover process. They consult with financial professionals to provide reliable information to clients. The company also offers retirement investment transfers, physical gold and silver, and collector coins.
It’s a given that each of these companies are equipped with highly trained staff who can assist you every step of the way. What’s important is you go with a credible and knowledgeable firm that strictly adheres with the IRS-guidelines. These are just a few of the many companies that offer precious metals IRAs, so be sure to explore your options before making a decision!
Considering A Precious Metal IRA?
Consult with a financial advisor to determine whether it would fit your portfolio and your overall financial goals. Remember, it’s never a good idea to throw all your cash in one gamble. Don’t forget to do your research and weigh your alternatives!
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