A Guide to Gold & Silver IRA Investing

Precious Metals - IRA Investing 

When you are investing in your future, you shouldn’t take any chances and reduce risks as much as possible. Since bonds and stocks are among the riskiest ventures that one could make for the IRA or the individual 401(k), while the economy is faltering and legislation changes are not in favor of the consumers, you might want to consider adding precious metals to your retirement account investment list.

What's an IRA?

IRA stands for an Individual Retirement Account which is a type of savings account that provides tax advantages for retirement savings in the US. There are several types of IRAs, the most common being the Traditional, Roth and Rollover IRAs, which may hold distinct types of investments. Standard IRAs allow you to hold stocks, bonds, or mutual funds, but the investment types and choices are limited and determined by the custodian or trust company. A self-directed IRA account gives you freedom and flexibility in deciding what to invest in, including setting up and investing in a Precious Metals Individual Retirement Account.

Why would I need a self-directed IRA?

If you decided to invest in precious metals individual retirement account, you must do it within a Self-Directed IRA. A Self-Directed IRA Account gives you the possibility to invest in alternative assets, such as futures, real estate, limited partnerships, commercial papers, intellectual property, various notes and precious metals, besides the traditional stock and bond investments. It gives you control over what types of investments you make.

Self-Directed IRAs have been introduced by the Employee Retirement Income Security Act (ERISA) of 1974, and since their inception in 1975, their number is continuously growing as more and more investors look for distinct ways of diversifying their portfolios. However, besides diversification, a Self-Directed IRA is also considered a protection against the volatile stock market and a hedge against inflation.

The IRA limitations have been lifted

Until 1997, several restrictions for the Individual Retirement Accounts were in place. To be more precise, you could only add bonds, stocks, mutual funds and money market funds to your retirement account. The Taxpayer Relief Act implemented in 1997 allows you to make several other types of investments that can even be tax-deferred. Therefore, the IRS allows an IRA to acquire certain precious metals as an asset.

How do precious metals IRA accounts work?

A Self-Directed IRA which invests in precious metals is a Precious Metals IRA. As the name suggests, a precious metal IRA permits you to acquire gold, silver or platinum in the account for the purpose of diversifying your portfolio. Since usually gold is the most preferred precious metals asset, some sources also refer to “Invest in Gold IRA”, although the IRA doesn’t make distinctions between the precious metals type.

While many have already taken advantage of the Taxpayer Relief Act, others are now looking to make the most out of their investment. In fact, some even consider generating wealth from the precious metal IRA, a profit that is ideally tax-free.

How to add precious metals to your IRA

Even though it seems like a complicated process, you can avoid a lot of hassle by working with a service that specializes in precious metals individual retirement accounts. To set up a Precious Metals Individual Retirement Account, you should follow these steps: 

  1. Choose a reputable and experienced IRA custodian – since Precious Metals IRAs are Self-Directed accounts, they are held by an IRA custodian or trust company which acts as a fiduciary on behalf of your account. Select a Precious Metals IRA custodian or trust company which is specifically experienced in IRA rollovers or Precious Metals IRAs.

  2. Don’t withdraw the money from your current IRA Account – If you already have an IRA, your custodian will handle all funds transfer to protect your account status because any accidental withdrawal may be treated as a taxable distribution and could attract penalties.

  3. Open and/or fund your IRA account via a rollover, transfer or/and contribution, with the assistance of your IRA custodian

  4. Choose your precious metal dealer

  5. Decide on the bullion product – only certain bullion products are IRA-Eligible

  6. Select a depository – take note that you can purchase precious metals for IRA only from non-disqualified persons or entities, and store them solely in an approved depository

  7. Agree on a purchase with your dealer (the broker will send the invoice to the IRA trustee).

Once your account has been established, and the precious metals added, you will still be able to contribute more. Your custodian will provide periodic statements on your holdings and their value. While it’s true that you are the direct beneficiary of the investments and returns, take note that the owner of the precious metal is IRA, not you. In fact, the IRS doesn't allow account holders to actually possess the physical metals during the period when the bullion is in the IRA. Therefore, remember that all documents related to purchase, shipping and depository costs should be in the name of the IRA and not your own name.

Also, the IRA custodian doesn’t advise investors on various investment choices or any potential tax consequences. Because of the additional options within these accounts, there are also other potential pitfalls if not following the strict rules or regulations and making mistakes. Therefore, consult your CPA or tax advisor before making investments in Self-Directed IRAs to avoid any potential tax ramifications.

Why can't I take physical delivery of my precious metals?

That’s because a traditional IRA means that you didn’t yet pay taxes on the assets or funds. Thus, the government will protect them until you are allowed to withdraw or are obliged to take required minimum distributions, which can be both money or bullion. However, you can still liquidate your metals at any time, but the funds will be held in your IRA during the established time.

Should I Take IRA loans if I have no funds?

If you are temporarily short on funds, but you want to take advantage of a great investment deal, you have the option to take out an IRA Loan. However, we recommend using IRA Loans only if you have the financial means to quickly pay off this loan because of the risk of incurring a lot of debt due to the loan’s interest rates.

Precious Metals Individual Retirement Account Costs

A Precious Metals Individual Retirement Account is an excellent way to create a bullion portfolio. However, besides the cost of precious metals, you should keep in mind that owning and funding IRA also involves additional fees associated with the account and its approved IRA custodian:

  • Account application fees – an IRA custodian may charge a fee for setting up a new account or performing a Precious Metals IRA rollover. This fee should be around $50, but it can range from one custodian to another.

  • Annual account fees – IRA custodians take care of bookkeeping, maintaining and administrating your IRA account, so they charge this fee for these ongoing services. It can vary up to a few hundred dollars, but some custodians offer discounts based on the size of your account.

  • Transaction fees – applied on purchases or sales of metals within the IRA, this fee is charged per transaction and is usually around $50.

  • Storage fees – all precious metals held in an IRA must be stored in approved depositories which usually charge annual fees for their services. This fee is usually based on your precious metals value and/or size.

  • Wiring fees – similar to transaction fees, custodians charge wiring fees for any funds that should be wired (e.g. payment to a dealer). These fees are usually around $25 for each wire.

But these Precious Metals IRA fees are not associated with the fact that you own physical precious metals. Just like Precious Metals IRA, paper metal products, such as shares of gold ETF, also come with additional costs like management fees. So, both paper and physical precious metals ownership come with various costs, fees, and expenses. However, taking delivery of metals on paper metal products is difficult if not impossible while Precious Metal IRAs give you the chance to choose between distributing in cash or physical metals.

IRA contribution and tax deduction limits

Aside from costs and fees, IRAs also have contribution limits and tax deduction limits which are established each year by the IRS based on the type of the IRA Account. For more details about IRA Roth contribution limits or who can contribute to traditional IRA, please follow this link.

Bullion Exchanges can help you

Our dedicated team is here to make things simple on your end. Fill out the form on this page or call us today at 800.852.6884 and find out more about how you can generate profit and secure your future via your IRA.