A lot of people want to protect their retirement savings from inflation and market drops, and that’s why some turn to precious metals. You can use your IRA to invest in gold, silver, and other precious metals. This strategy can help you find balance in your retirement plan and give you peace of mind.
However, there are important things you need to do if you want to make this kind of investment. You need the right kind of IRA, a good custodian, and the right commodity. Let’s walk through how to do it the right way.
Table of Contents
What is a Precious Metal IRA?
This is a self-directed IRA that allows you to buy and hold commodities like gold, silver, platinum, and palladium. These items must meet IRS rules for them to be eligible. According to the IRS, gold must be 99.5% pure, silver must be 99.9% pure, and platinum or palladium must be 99.95% pure. You can read this article to discover other rules about this investment.
Even though you “hold” these items, you can’t store them yourself. What that means is that you can’t keep these items at home or store them somewhere else. Instead, they have to be stored with an approved depository.
Different Types of Precious Metal IRA
You can open different types of accounts based on your tax goals:
- Traditional Gold IRA: You fund the account with pre-tax dollars, and you pay the taxes when you withdraw money from the retirement account.
- Roth Gold IRA: This is funded with after-tax dollars, which means you don’t pay taxes at withdrawals.
- SEP Gold IRA: This option is perfect for freelancers and small business owners since the account is funded by the employer with pre-tax dollars.
These accounts follow the same rules for storage and usage.
How to Start Investing
Here are the steps to follow to invest in this retirement account.
Pick a Self-Directed IRA
A lot of big banks and investment companies don’t offer gold or silver IRAs, which is why you need a self-directed IRA (SDIRA). With this account, you have more options and more control. However, confirm that the custodian supports precious metals, and follows all of the IRS’s rules.
Open the Account
Opening a self-directed IRA is simple. After you’ve chosen a custodian, fill out the forms, and sign the agreements. Some companies will also help you find a dealer for these commodities.
Bear in mind that there may be setup fees and yearly account fees as part of this process. These fees are normal when you buy and store these items in an IRA. So, don’t be alarmed when you see such fees.
Put Money into the Account
There are different ways to add money to your account:
- Make a direct contribution from your bank
- Roll over money from another IRA to this one
- Transfer money from a 401(k)
The yearly limit for most people is $7,000, but you can put in $8,000 if you are 50 or older. To know more about this limit, preciousmetaliraaccounts.com covers this and other limits you need to be aware of. If you try to exceed this limit, you might end up in trouble with the IRS.
Choose the Commodity You Want to Invest in
You can pick the commodity you want to invest in after you’ve funded your account. Gold and silver are the most popular, but platinum and palladium are also good options.
You can invest in:
- Gold or silver coins (like the American Eagle or Canadian Maple Leaf)
- Bullion bars
- Certain proof coins that meet IRS purity rules
Your custodian will buy these items for you and send them to a secure depository; you don’t handle them yourself.
Choose a Storage Facility
All precious metals must be stored safely in an IRS-approved vault, which you and your custodian will choose. These depositories provide either segregated or non-segregated storage. When you use segregated storage, the items are stored separately, while they are stored with others in the non-segregated option.
Common Fees and Costs
There are some extra costs that come with owning real precious metals, such as:
- IRA setup fees
- Annual account maintenance fees
- Storage fees
- Dealer markups when buying these commodities
These costs are different for each company and custodian. Before you sign anything, always ask for a list of fees.
Why Invest in Precious Metals with Your IRA?
These are some reasons to go ahead with this investment:
- Protection from inflation: When prices go up, precious metals usually retain their value.
- Diversification: Adding these commodities to your portfolio lowers the risk associated with stocks and bonds.
Things to Watch Out For
Precious metals offer protection from inflation, but there are some things to keep in mind:
- Liquidity: It may take longer to sell these precious metals than stocks.
- Volatility: Prices can still go up and down.
- Scams: There are many individuals and fake companies that are scamming people, which is why you should only deal with trusted dealers and custodians. Partner with companies that have good reviews and check their ratings with the Better Business Bureau or a similar group.
You can visit https://consumer.ftc.gov/ to learn how to avoid investment scams.
Conclusion
Putting precious metals in your IRA can protect your retirement. It makes your savings plan more balanced, but it’s not suitable for everyone. This is why you should take the time to learn about the rules, costs, and options available.
If you are sure it’s the best investment option for you, ensure you choose a good custodian to set up a self-directed IRA. You also need to be careful when picking your precious metals, and ensure they meet the rules set by the IRS. Once you’ve purchased the commodities, your custodian will help you store them in an approved directory.
