A Comprehensive Guide to Precious Metal IRAs

Are you searching for a safe-haven investment? Since the stock market gets incredibly volatile, many investors flock to safer assets, like precious metals. Although these commodities are volatile on their own, they are believed to be better long-term investment options.

Nevertheless, precious metals cannot be held in a traditional individual retirement account (IRA) but a self-directed one. There are numerous precious metal dealers selling such commodities. If looking for such a dealer, this is what we found out about Birch Gold Group, offering an experienced team of investment experts.

The guide below will teach you everything about such IRAs.

What is a precious metal IRA?

It’s a type of self-directed individual retirement account, allowing individuals to invest in various alternative assets, like art, precious metals, real estate, and others, not available in conventional IRAs. People opt for this type of account for their retirement plans due to the value growth of gold, silver, and palladium throughout history.

The inclusion of precious metals in one’s retirement account helps individuals protect their wealth in a couple of ways, such as reducing potential investment risk and volatility. It serves as a hedge against economic downturns and reduces tax on potential gains. Most investors aren’t exactly certain about the retirement funds they should invest in these commodities.

According to experts, individuals should invest between five and ten percent of their retirement funds in such assets. The best portfolios are supposed to be diversified, meaning individuals shouldn’t take an unnecessary risk by investing in one asset type. Financial advisors don’t typically recommend investing all assets in precious metals.

Even though gold and the rest of these metals have retained their value throughout history, they don’t perform as well as the other assets, like stocks. It’s paramount not to neglect the volatility of these commodities, which have shown similar volatility as stocks.

When the stock market struggles, the prices of precious metals rise. Nevertheless, their prices fall when stocks recover. Therefore, it’s important to include different types of assets in your portfolio.

What precious metals can be included in your IRA?

Investors are allowed to invest in gold, platinum, silver, and palladium, but not just in any metal. The IRS imposes special standards that precious metals must meet in order to be included in the account. Gold has to be of 99.5 % purity, while silver must have a purity of 99.9%. Platinum and palladium have to be 99.95 % pure. Find out how to identify the purity of gold.

The acceptable gold products include American Eagle bullion, Australian Kangaroo coins, Australian Lunar Series coins, Austrian Philharmonic coins, British Britannia after 2013, Canadian Maple Leaf bullion coins, Chinese Panda coins, US Buffalo bullion, and others that meet the fineness requirements.  American Eagle coins are allowed in spite of not meeting the purity standard of 99.5%.

Acceptable silver coins include the above-mentioned bullion variants, only available in silver. In this category, some other products are included, such as America the Beautiful coins, Australian Kookaburra coins, Mexican Libertad bullion, etc. Investors aren’t allowed to hold collectible and rare coins, Belgian Francs, German Marks, Swiss Francs, Italian Liras, Hungarian Koronas, Columbian Pesos, Chilean Pesos, etc.

Important considerations

Investors are expected to get familiar with some important considerations prior to setting up a self-directed IRA. This type of self-directed IRA is costlier compared to the other options for investment. There are more fees to pay compared to conventional IRAs, such as setup, custodial, transaction, and storage fees.

The majority of these fees cannot be avoided. For instance, investors aren’t allowed to store precious metals in their homes, as it’s contrary to the rules of the IRS. Storing these physical assets at home leads to paying additional penalties and taxes. They must be stored in depositories approved by the IRS.

How to set up such an IRA?

What is a precious metal IRA

The process of setting up a precious metal IRA tends to be more complicated than setting up a traditional or Roth IRA. These accounts must be held by custodians, which are either banks or trust companies approved by the IRS. These custodians allow investors to invest in precious metals and other alternative assets.

The following step is selecting a precious metal dealer and directing your custodian to send the dealer money to purchase gold, platinum, palladium, or silver. Prior to choosing a dealer, you should conduct research and make sure the dealer is a member of a reputable industry trade group. The dealer will assist you in choosing the best products. The most common choice is the American Eagle bullion.

As already mentioned, these commodities have to be stored in an IRS-approved depository. You can either choose one yourself or get a recommendation from your custodian. In any case, you cannot store them on your own. The ultimate step is completing the transaction. The custodian is in charge of handling the payments, whereas the dealer will ship the assets to the selected depository.

Withdrawal rules

When making a withdrawal, account holders are provided with two alternatives, an in-kind distribution or a depository purchase. The former option means you can have the precious metals delivered to you following the distribution. The latter option enables investors to sell their assets to the depository and be provided with the dollar value of their investments.

Whatever option you choose, the custodian should be contacted to initiate the transaction. The same rules apply to both traditional and precious metal IRAs. The value of the investment can increase while in the account, without taxation. Nevertheless, upon withdrawal, account holders are likely to owe penalties and taxes, depending on their age and account type.

Account-holders are obliged to take minimum distributions when reaching the age of 72. These withdrawals might turn out complicated, as you’ll have to conduct them in intervals. It’s of crucial importance to consider every single rule prior to making an investment.

The bottom line

Alternative assets are a worthy investment, as they protect from stock market volatility and diversify savings!