Precious metals investing could be the ideal supplement to your existing retirement portfolio you have been looking for, especially as stock market conditions become uncertain. For many people, retirement investing in precious metals allows you to diversify and hedge off inflation better than other resources.
Precious metal investing allows you to put money into gold, silver, and palladium, and while they themselves have some volatility, many investors believe that, over the long-term, these metals offer a better route for protecting wealth and growing its valuable. In this guide, we’ll talk about investing in precious metals using an IRA for retirement savings specifically. Though there are other avenues, a precious metal IRA could be the right decision for many people.
Understanding Precious Metal IRAs
A precious metal IRA is a specific type of self-directed Individual Retirement Account (IRA). It allows you to invest in precious metals specifically, though other self-directed IRAs allow for other diversification, such as in real estate. That’s unlike a conventional IRA, which is more stock-based.
With a precious metal IRA, you can invest in physical precious metals without having to have physical ownership of those assets. It is always wise to speak to your financial advisor about the value these can offer to your situation, but for many, they can offer significant diversification since these three metals, in particular, have grown in value historically over the long term.
Are Precious Metal IRAs a Good Investment?
Investing in a Gold IRA or another type of precious metal IRA may offer benefits to some people looking to plan for retirement. Like all investments, there is some risk, and that risk must be weighed against your financial goals and overall risk tolerance.
Pros of investing in a precious metal IRA:
- Portfolio diversification: Most precious metals do not follow the same ups and downs as the stock market, which means that these investments allow you to add diversification to your retirement portfolio.
- Tax advantages: Because these are recognized tax-advanced accounts, they can prove to be a worthy route to putting money away for retirement years and reducing overall taxation paid.
- Security: Many investors believe precious metal IRAs, including gold IRAs, are highly valuable because they offer more stability than more volatile stocks and mutual funds.
- Inflation hedge: Precious metals typically are not hurt nearly as much in terms of inflation as other types of investments. Even with inflation, gold continues to increase in value over time.
Cons of investing in precious metal IRAs:
- Higher fees: Though fees range widely, they tend to be higher in these IRAs than in other types of retirement savings accounts. The initial costs and fees can offset some benefits to investors initially.
- Storage limitations: There is also the need to consider the storage of precious metals. While you do not have to physically maintain the precious metals yourself, you will need to pay for storage or holding fees, which can increase costs for some.
- Liquidity limitations: Though precious metals are a physical asset, they take a bit of work to convert into an actual form of cash you can use.
What Is a Precious Metal IRA?
Let’s take a step back and look at what a precious metal IRA is and what it brings to the table when it comes to retirement planning. A precious metal IRA allows you to invest in gold, silver, platinum, and palladium, allowing you to purchase these assets to hold in your retirement account so they grow in value over time.
To work, you must first choose a custodian and a company to manage your IRA. The job of the custodian is to hold the precious metals for you, holding the value assets in a secure storage facility. Under the rules of the IRS, you cannot use your home as a storage facility if you plan to use a tax-advantaged IRA.
Once you have selected a precious metals IRA company to work with and then selected a custodian, you can fund your account by purchasing the precious metals you desire. You choose the type of metal you desire and the amount you wish to keep in your IRA. Most of the time, you can choose from a range of options and diversify in a way that fits your goals. The IRS does place restrictions on the types of precious metals that can be used within this IRA.
What makes this process different than just buying up metals and storing them in your safe is that they are a type of retirement account. They are placed within a traditional IRA framework, which means that the money is put into an account meant for you to access later in life, during your retirement. As long as the valuables remain there, they have specific benefits including reduced taxation.
You can set up a precious metal IRA as a traditional IRA, which means you contribute to them with pre-tax dollars, or a Roth IRA, which means you contribute after-tax dollars to the purchase of your precious metals. Both options are available and should be carefully considered based on your tax bracket now and later. Seek out financial advisor insight for which strategy is best for your unique needs.
Now that you have some basic insight into how to invest in precious metals, it is time to consider whether this type of investment is the best for you. For many people, the precious metals sector is ideal because it provides an avenue for building wealth that’s different from and sometimes tracks the opposite of other exchange-traded funds. That means that you can purchase physical metals instead of relying on the value of the dollar.
Setting Your Precious Metals IRA
Precious metals investors have ample opportunity to customize their investment processes. Owning physical precious metals could be your objective, and precious metals companies can certainly help facilitate this process, making it rather simple. Here’s what you can expect.
Set Your Investment Goals
Before you buy precious metals, create some established goals. Consider the following specifically:
- What is your risk tolerance: While goal bullion tends to be a very low risk investment, other precious metals, including industrial metals, can be more risky. The market can adjust over time, and if you plan to retire in the next few years, you’ll likely want to choose less risky metals.
- Determine the desired allocation: A diversified portfolio means not just investing in metals, but also in other investments that work for you. That includes bond markets and stocks for many people. Work with an investment manager to customize your investment strategies to include more than just one type of investment.
Choose the Right Precious Metal
Precious metals allowable in an IRA under IRS guidelines include the following:
- Gold: It must be 99.5% pure
- Silver: It must be at least 99.5% pure
- Platinum and palladium: They must be at least 99.95% pure
You can choose a range of products, too, such as bullion bars, rounds, coins, and other forms, though they must meet the same standards. Gold IRAs tend to be a popular option because of their recognized value. There are other routes to invest in other metals, including rare metals, but they must meet IRS requirements to benefit from the tax advantages of these accounts.
Select Your Precious Metals IRA Provider
There are numerous companies involved in helping to set up gold IRAs, and you should do some solid research to compare what they offer and the costs based on your investment objectives.
The precious metals provider helps you to:
- Set up your account
- Establishes the process of buying precious metals
- And often provides custodian services (or will direct you to do so)
Decide on Your Precious Metals Products
You also have numerous types of investment options to consider. Consider the following types of physical bullion:
- Bars: Bars are some of the most favorite precious metal investments because they are available in various weights and sizes. Gold bars can be as small as just one gram (thanks to high gold prices), while silver bars could be as small as an ounce due to silver prices. If you want to quickly build a large portfolio, bars are a good option overall.
- Coins: It is not uncommon to invest in coins for IRAs. Both gold and silver coins are common options. Gold bullion coins have a bit of a different added benefit in that some carry a collector’s value to them. That is, people buy them for investment reasons but also because they collect the coins. That includes both newer and older coins. For example, if you find American gold coins minted prior to 1933, these tend to be worth far more than just gold prices.
- Rounds: A third option is the round. They are a more modern option in that they are easy to invest in. Most are made of silver, though you can find other options as well. They weigh from 1 to 5 troy ounces, which gives you ample opportunity to find the size best suited for your needs.
How Your Precious Metals IRA Are Stored in a Depository
Purchasing your precious metals is just the first step. You then need to be able to store them (which is what the custodian does for you). Remember that you must choose a location that meets the IRS guidelines and regulations.
Managing Your Precious Metals IRA
If you have stocks or other exchanged traded funds, you know that you will buy and sell over time to see value growth in your investments. Precious metal companies can help you set up these accounts, but like with mutual funds, it’s best to have a professional helping you manage and hold precious metals to achieve your long-term goals.
Understand the Withdrawal Procedures
As with other investment accounts, the IRS expects you to keep the funds in your account until you reach retirement age. If you have a traditional Gold IRA, you need to keep those funds in place until 59 ½ years of age, or if you withdraw sooner, you face a 10% penalty. If you establish a Roth IRA for gold investing, you can withdraw earlier without fees as long as you meet other requirements.
The withdrawal process then follows the same process as withdrawing from your other investments. When you reach the desired age to start distributions, you have two avenues:
- In-kind distribution: This means that you will receive the gold bullion or bars shipped directly to you, which you can do with as you like.
- Standard liquid distribution: The more common option is to have the gold sold and then receive a check or wire transfer of the value to your account.
Special Considerations for Precious Metals IRA
There are a few differences that you need to consider when investing in these funds, especially since there is so much economic uncertainty and many people are looking to these alternative investment options as they gain exposure.
- Fees: Precious metals prices are one component of this type of strategy, but you also will hold precious metals, which means there are higher fees. Fees are higher for setup, storage, and transactions.
- Storage regulations: You must use IRS-approved storage options, which means an approved depository.
- Tax implications: You will need to follow the rules associated with withdrawing your investment of either physical metal or liquid funding to meet your cash flow goals.
The Potential Advantages of a Gold IRA
As you think about the next investments you may make, don’t overlook the value of investing in Gold IRAs in particular. Some of the benefits of gold-specific investments include:
- Investing in gold within an IRA is a straightforward route. The underlying metals are well-respected for being highly valuable. Historically, gold is stable in value, not likely to fall significantly. There is also ongoing, investor demand which means gold values continue to rise.
- Reduced complexity is another core benefit. Gold IRAs are readily available and tend to be a bit easier to navigate with broader applications than other metals.
The Better Alternative: Set Up a Gold IRA Account
Saving for retirement with a Gold IRA is a good move for many people. As you take into consideration the range of options you have to get started, check out Wealth Protection Research Gold IRA. Learn as much as you can about how well this type of investment works for your needs.
Frequently Asked Questions about Precious Metals (FAQs)
What is the most expensive precious metal?
The most expensive precious metal is rhodium, which is difficult to obtain and far more rare than gold mining.
How to store precious metals?
If you plan to use a gold IRA, you will need to choose an IRS-approved depository to manage your investment.
What are the risks of investing in precious metals?
All investments carry some risks, and while owning precious metals can be a worthy decision, it is critical to consider the potential fall in value of some metals. More so, gold miners and political strife carry some risk for investors as well.
Are there tax benefits to investing in precious metals?
Yes, if you invest in IRS-approved strategies, you can get the same benefits as any other tax-advantaged IRA or Roth IRA, meaning you pay fewer taxes overall.
What factors influence the price of precious metals?
Economic conditions, supply and demand, government policies and regulations, and the value of the US dollar are some factors to consider.
Conclusion
Investing in a precious metals IRA could prove to be the ideal choice for many who want to diversify from other types of investment strategies. Gold IRAs are, in particular, a highly desirable option for their flexibility and historic stability.Learn more when you visit Wealth Protection Research Gold IRA. For many, investing in precious metals is the ideal opportunity.
