Click here to get this post in PDF
Whereas traditional individual retirement accounts (IRAs) have now been around for nearly 50 years, they only allow you to invest in conventional assets. But if you want to diversify your retirement portfolio and invest in alternative investments such as precious metals, real estate, or cryptocurrencies, a self-directed IRA is what you want. If you choose to get the precious metals IRA, you should be ready to pay greater fees than those charged by Roth or traditional IRAs, specializing in investing in mutual funds, bonds, and stocks.
Now that it’s clear you can hold precious metals in your self-directed IRA let’s dive further and learn more about precious metal IRAs.
What’s A Precious Metal IRA?
The precious metal IRA is a unique type of self-directed individual retirement account that differs from traditional retirement accounts by allowing you to invest in unconventional assets. Examples of these assets you can hold in your precious metal IRA include physical gold, platinum, silver, and palladium. This IRA is also known as the gold IRA because gold is the most precious metal stored in this retirement account.
You enjoy greater control with the self-directed gold IRA, unlike with 401(k) or traditional IRA held with a brokerage firm or bank. Therefore, you have the power to make investment decisions and pick the IRA that appears the best fit for precious metals. However, precious metals must meet certain purity requirements to be IRS-eligible, and this includes;
- Gold should be 99.5 pure
- Silver should be 99.9% pure
- Palladium should be 99.95% pure
- Platinum should be 99.95% pure
Besides these purity requirements, there are other obligations you must satisfy, and this includes;
- Precious metal should be complete and stored in original packaging
- The bars should be manufactured to a precise weight
- There must be a certificate of authenticity
- The precious metals should be damage-free and uncirculated
How Do You Invest In A Self-Directed IRA Account?
Creating the self-directed account follows a couple of easy to follow steps and this include;
- Open a self-directed IRA (SDIRA)
When opening the IRA account, you’ll be required to complete all the necessary paperwork and have it over. This isn’t a complicated process and will only take a couple of steps to be finalized.
- Choose A Reliable Custodian
When opening a precious metal IRA, you should proceed to pick the precious metal you wish to invest in and learn about it before you part with your hard earned money. You should do this under the advice of a reputable precious metal IRA custodian. As you do this, consider the quality of their services and how much they charge.
- Put Funds Into Your Self-Directed IRA
The next thing you have to now think of once you’ve picked your preferred custodian is how to fund your self-directed IRA account. The two ways of funding the account can either be rolling over funds from a different retirement plan, for instance, TSP, 403(b), 457 (b), and 401 (k) plan. You can also transfer these funds from the Roth or traditional IRA. If done in the right order, you shouldn’t pay any penalty or taxes after this transaction.
- Choose The Metals To Invest In
Not all precious metals can be invested in the precious metal IRA, and there are certain restrictions put in place by the IRS. For instance, the purity of all gold being invested in this account must be 99.5%. With this in mind, here are examples of some coins that meet the standards to be stored in the self-directed IRA;
- American Eagle coins
- Canadian Maple Leaf coins
- Mexican Libertad coins
- Isle of Man Noble coins
- Australian Kangaroo coins
- Austrian Philharmonic coins
- Australian Koala coins
Any of these coins are accepted by the IRS because they satisfy the set quality standards in terms of their weight and purity. In addition, these coins only include those issued by specific government mints such as;
- United States (US) Mint
- Royal Canadian Mint
What Are The Benefits Of A Self-Directed Precious Metal IRA?
There are numerous benefits you’ll get from opening a self-directed precious metal IRA and this include;
- Wealth growth: If the underlying value of the precious metal stored in your self-directed IRA increases in value, you’ll, in the long run, realize a greater return on your investment.
- Diversification: The future is filled with uncertainties, and because of this, you don’t want all your eggs placed in one basket. The self-directed precious metal IRA gives you a platform to shield yourself from any unforeseen downturn in the future that might negatively impact your retirement savings.
- Hedge against inflation: Unlike fiat currencies, precious metals such as gold typically don’t lose value. Therefore, the precious metal IRA helps you retain your purchasing power since it grows faster than most currencies.
- Greater control: With traditional IRAs, you don’t have too much control over your retirement savings, but this doesn’t apply with self-directed precious metal IRAs.
- Tax advantages: Your contributions towards the self-directed IRAs are tax-deductible, and this helps you make considerable savings in the future.
You may also like: The Pros and Cons of Using a Gold IRA for Your Retirement
Image source: Shutterstock.com