You’ve worked hard over the course of your career to save enough money for retirement, and you’d hate to see any of that hard work go to waste. That’s why it’s important to do whatever you can to give yourself the best possible chance of keeping that value you’ve worked for intact. A precious metals IRA is one method retirement savers can use to improve those chances.
You have surely heard the old axiom that you shouldn’t “put all your eggs in one basket.” When you’ve only put your savings into one kind of asset, the value of your retirement hinges entirely on the success or failure of that one asset. In the past, this has proved catastrophic—just ask anyone who was counting on the success of their stocks during the 2008 financial crisis.
There can be a danger in leaving your financial future entirely in the hands of sometimes-volatile paper assets. That’s why economists recommend spreading out your savings into different classes of assets—and a precious metals IRA might just be the best asset to balance your savings. We’ve spent a lot of time vetting gold IRA companies, and we chose Augusta Precious Metals as our #1 choice. We’ll share more information about them throughout this article. If you’d like to know more about them, visit their webpage here.
What Is a Precious Metals IRA?
A form of self-directed IRA, a precious metals IRA is very similar to a standard IRA you might get through your employer. The primary difference is that instead of holding paper assets such as stocks and bonds, a precious metals IRA holds physical, tangible precious metals in the form of bars and coins. The fact that it is self-directed means you are in control of what’s in it and what you do with it, as long as you follow IRS rules. This is different from assets such as money market accounts, which are directed by account managers in common with management fees.
Self-directed IRAs can also hold a number of other assets, such as real estate or cryptocurrency. But precious metals are a popular choice for people who want to diversify their savings because of a historically inverse relationship between the value of precious metals and the value of paper assets.
Other than holding a different type of asset, a precious metals IRA is mostly identical to a standard IRA. This includes the kinds of IRA available (such as traditional, simple or Roth IRAs), contribution limits, and penalties for early withdrawal.
How to Open a Precious Metal IRA
If you haven’t worked with a precious metals or other self-directed IRA before, the process may seem complex and intimidating compared to a standard IRA you might get through your employer. But don’t worry—it’s not as difficult as it seems, and when you work with an excellent gold IRA company, they’ll help you through the majority of the process.
If you’re interested in starting a precious metals IRA, here are the steps you should take:
- Choose a Precious Metals IRA Company
Once you’ve decided that you’re interested in a precious metals IRA, you should begin by researching the gold and silver IRA companies you want to work with. Choosing a good company will make the rest of your process go smoothly, as the best precious metals IRA companies will assist you in the process.
In fact, many of the best companies have a wealth of educational resources you can use to inform yourself about IRAs and gold’s place in the market. Armed with this information, you’ll be much better equipped to make decisions about your IRA.
It’s important to avoid companies that put pressure on retirement savers to buy from them. This can even take the form of lies, gimmicks and misleading tactics some companies will use to scare you into opening an account. Augusta Precious Metals is one company that offers information about how to avoid these high-pressure tactics. You can find this information here.
One good way to choose a precious metals company to work with is to look at ratings and reviews former customers have left about their experience with the company. You can do this on consumer watchdog websites such as the Better Business Bureau, the Business Consumer Alliance, Trustlink and others.
There are many different precious metals IRA companies to work with, so take your time and weigh the pros and cons of each. Personally, we recommend Augusta Precious Metals. You can read more about them here
- Choose the Type of Precious Metals IRA You Want
Just like a standard IRA, there are several different types of precious metals IRAs that come with different pros and cons (see more below). You need to choose which type of IRA is going to be right for you and your goals based on the kind of tax benefits each one offers.
For example, in a traditional precious metals IRA, your contributions to your IRA will not be taxed up to the amount you’re allowed to contribute. What’s more, you may be able to claim those contributions as deductions, potentially putting you in a lower tax bracket than you otherwise would be in. However, you will need to pay taxes on the money you take out later in life.
Tax laws are, of course, subject to change—so for those who would rather have a more predictable amount left over after taxes, there’s the option to use a Roth IRA. A Roth IRA works the other way around—your contributions are taxed, but when you start to withdraw that money, it’s tax-free.
These are the two most common IRA options, but there are others as well. Talk to your financial advisor about what will best fit your long-term savings goals.
- Decide What Precious Metals to Buy
The most common precious metals used in IRAs are gold and silver, followed by platinum and palladium at a distant 3rd and 4th. Each of these metals moves independently in the markets, and each have their own strengths, weaknesses and applications.
A representative of your precious metals company may be able to inform you about the properties of these metals and their place in the market, but they are not financial advisors. If you want a recommendation on which you should choose to meet your goals, you will need to talk to a licensed financial advisor—or else learn as much as you can so you can make an informed choice on your own.
Once you have decided on the type of metal you want in your precious metals IRA, you’ll need to choose the actual products. These can come in the form of bars or coins approved by the IRS for use in precious metals IRAs. See the earlier section on this page for information about what standards the IRS has for metals used in an IRA.
- Complete the Transaction
Once you know which company you want to work with and what products you want, there’s not much left to do! Talk with your chosen precious metals IRA company about getting your products. Make sure you everything about the transaction is transparent and you have a clear understanding of what fees you’ll have to pay and how your metals will be secured.
From there, you’ll just need to fill out the paperwork to buy your products or roll over your existing IRA into a precious metals IRA. Many of the best precious metals IRA companies will assist you with this process, making it very easy and straightforward.
Then you’re done! You can always add more products to your IRA as time goes on. Enjoy the peace of mind that comes with having a diversified retirement account.
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Why Should I Get a Precious Metals IRA?
While only you can determine the best financial plan for you and your family, there are a number of attractive benefits a precious metals IRA can offer for long-term retirement savers. These benefits have made precious metals IRAs popular for those who don’t want to trust their entire savings to the success of paper assets.
The fact that precious metals have a historically inverse relationship with paper assets such as stocks and bonds means that when paper assets have gone down, precious metals have often gone up. This makes a precious metals IRA a great hedge against a potential stock market crash, as well as other economic stresses like the ones our nation has seen recently. A study of gold and silver prices shows that precious metals have historically held their value or increased in value even during times of economic volatility.
If part of your savings is invested in a precious metals IRA, that amount is less likely to fall in value when other assets are dropping in value and the economy is in turmoil. If the prices of precious metals increase—as they have been known to—you may even offset part of what was lost.
It can be hard to pinpoint exactly why precious metals have this reaction to unsettled economic periods in our history. And no one can predict how any asset will react to any specific time in history. But if we had to guess, it seems likely that in times of economic uncertainty, people want to put their trust in a real, tangible asset with practical uses.
The Benefits of a Physical Asset
Let’s take gold, for example: it has not only represented a store of wealth for millennia, it also has very practical uses in the modern age. Gold is an essential component of most electronic devices, being a very good conductor and resistant to corrosion. Gold is also commonly used in dentistry as a material for fillings.
These practical uses ensure that gold is unlikely to ever become totally worthless. As long as gold continues to be used in manufacturing, there will probably always be some demand for it.
Silver has practical uses, too. It’s used extensively in the automotive industry, for example. It also is often used in the manufacture of electronics and in the medical field. Silver is also a component in some chemical processes—it’s necessary to create antifreeze, for example.
You can see why many investors see value in holding physical assets such as precious metals in their savings. And a precious metals IRA pars the benefits of those physical assets with the tax benefits of an IRA—it’s a win-win.
The Benefits of an Precious Metals IRA
There are a number of different types of IRA available, even when you’re planning on getting a precious metals IRA. Depending on what kind of IRA you decide to get, you’ll get different benefits.
A traditional IRA, for instance, defers all taxes on the income you invest in your precious metals IRA until you start taking deferments later in life. What’s more, your contributions to your IRA may be tax-deductible up to a certain amount.
Of course, tax laws are subject to change. Retirement savers who would rather pay their taxes upfront can take advantage of a Roth IRA, which is taxed when it’s put into the account—but then can be withdrawn later in life tax-free.
Regardless of what type of IRA you decide to get, there are certain restrictions. You can only contribute a certain amount per year, and if you decide to withdraw any money before you turn 59½, you’ll be subject to penalties. Still, the benefits of an IRA make it a great way to save money for later in life.
If these benefits sound promising to you, it might be a good idea to look into getting a precious metals IRA. It can be a great way to diversify your savings and make it more likely that you’ll be able to live comfortably after retirement.
How Much Should You Put in a Precious Metals IRA?
Deciding that you want to store a portion of your retirement savings in a precious metals IRA is only the beginning. You have a lot to decide about the specifics of your investment—first and foremost, what portion of your savings do you want to roll over into your precious metals IRA?
Experts sometimes recommend a conservative investment of up to 10% of your retirement funds. Of course, each person’s financial plans are different, and some people have even invested their entire savings into precious metals! It’s important to talk with your financial advisor about what will match your goals.
Usually, advisors will recommend against putting all of your money into a single asset. It’s generally accepted that retirement savers will have the best chance of success when they diversify their savings into different assets. That reduces the risk that you’ll lose a large amount if the value of your investment plummets.
At the end of the day, only you can decide how much you want to put into a precious metals IRA. Do your due diligence and make sure you have an understanding of the risks and benefits that come with any asset. Talk to a financial advisor if possible, and make the choice that’s right for you.
What Precious Metals Can I Put in My IRA?
The metals generally used in a precious metals IRA are gold, silver, platinum and palladium—with gold and silver being the most popular options by far. Each of these metals has different strengths and weaknesses in the market, but they all hold value as a physical asset.
The IRS has strict standards for the quality of metals used in an IRA:
- Gold must be at least 99.5% pure
- Silver must be at least 99.9% pure
- Platinum must be at least 99.95% pure
- Palladium must be at least 99.95% pure
There are quite a few products available that meet these standards. For example, gold is available in the form of American Gold Buffalo coins, Australian Gold Koala coins, Canadian Maple Leaf coins and more. There are occasional exceptions to the IRS’s fineness restrictions—American Gold Eagle coins, for instance, do not meet the 99.5% standard, but are specifically allowed.
Special Considerations for Precious Metal IRAs
A precious metals IRA has quite a few benefits that make it an attractive vehicle for your retirement savings. But that doesn’t mean it’s a perfect fit for everyone—there are a few things to keep in mind.
To start with, precious metals IRAs can be more expensive than other retirement options. They can have more fees than a standard IRA, since you’ll need to pay custodial fees, storage fees, and other fees associated with holding a physical asset such as gold or silver. Because the IRS won’t allow you to store the precious metals used in an IRA in your home, you won’t be able to avoid these kinds of fees. Though that may be for the best, since your metals will be far more secure in the vault of an approved custodian.
This could certainly be a good argument for not putting all of your savings into precious metals. Still, some people find those fees to be a small price to pay for the advantages of holding part of your savings in a precious metals IRA. In the end, only you can decide if it’s worth it.
How Do You Retrieve Your Money from a Precious Metals IRA?
Of course, you don’t want to jump into any financial commitment without an understanding of how you’ll get your money back. Fortunately, withdrawing money from a precious metals IRA is easy.
There are some restrictions, however. To begin with, you cannot withdraw any money from your IRA until you’re at least 59½ years of age. If you do withdraw money early, you’ll be subject to penalties from the IRS.
Furthermore, unless you have a Roth IRA, you’ll need to start taking the required minimum distribution (RMD) out of your account every year once you hit the age of 72. This is because the tax has been deferred on most types of IRAs—but your Roth IRA has already been taxed, so you’re allowed to hold onto it as long as you like.
It should be noted that unlike some other kinds of IRAs, taking only RMDs from a precious metals IRA can be a bit tricky. Because your money is saved in the form of physical assets, you won’t be able to sell only part of a coin or bar—you’ll be limited based on the market value of that asset. This may require you to withdraw more value than the minimum and—if you haven’t chosen a Roth IRA—pay taxes on that amount.
Carefully consider how long you plan to hold your precious metals in your IRA when making decisions about what kind of account you want. You’ll thank yourself later in life!
The Types of Precious Metals IRA Distributions
Depending on what your plans are, you have two different ways that you can take distributions from your precious metals IRA: in-kind distributions or a depository purchase.
Taking in-kind distributions means you’ll directly claim the asset held in your IRA. In the case of a precious metals IRA, this means having your metals shipped directly to you. Once those metals are in your hands, you can decide what to do with them. Sell them, store them, or bury them in a wooden chest—they’re all yours.
A depository purchase, on the other hand, liquidates your assets into currency by selling the metals to your depository. This allows you to spend the money right away if you need it to pay for bills or have some other purchase in mind.
When you want to make a withdrawal from your precious metals IRA, you’ll simply contact the precious metals company you’re working with and let them know your intentions. They’ll walk you through the process from there, and you can enjoy the fruits of your savings!
Conclusion: The Benefits of a Precious Metals IRA
Hopefully, by reading this article, you have a better understanding of what a precious metals IRA is, what the benefits of having one are, and what’s involved with the process of obtaining one. It is important to carefully consider the pros and cons, but many people have found a precious metals IRA to be an excellent way to diversify their retirement and hedge against inflation.
They bring together the benefits of an IRA with the benefits of a physical asset such as gold or silver, which can make them well-suited to be a part of long-term savings.
If this article has piqued your interest in precious metals IRAs, you may want to contact your financial advisor to learn if your retirement account might benefit from the inclusion of precious metals. Alternatively, you may want to start browsing precious metals IRA companies to decide who you’ll want to work with. There are many precious metals IRA companies out there, but, as mentioned, we suggest Augusta Precious Metals—click here to learn more.
No one can say what the future will hold, and for that reason, many people have found peace of mind by diversifying their savings to hedge against inflation and other economic forces. If you’re worried about whether or not your retirement will be able to weather the years, a precious metals IRA just might be the solution for you.
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