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Sometimes it feels like new economic concerns are cropping up every day. Americans are worried about how quickly the dollar is losing value due to rapid inflation. Gas prices keep fluctuating. The world is still recovering from a massive pandemic that paralyzed global trade. The stock market is constantly affected by occurrences multiple continents away.
At the same time, the wealth of the average American is shrinking. Only one in three US citizens in the workforce regularly make retirement contributions. Two-thirds of the American public aren't even saving for retirement because they're too busy living paycheck to paycheck.
For people who do have retirement plans and accounts, economic concerns are a major issue. The growth of an account can be severely impacted by global turbulence. Some retirement assets can be totally wiped out if the stock market plunges.
Precious metals often become a part of the investment conversation when there's economic uncertainty. After the 2008 recession, the price of gold shot up and remained high for years. The price went through a slightly less dramatic, but still significant spike in 2020. Historically, gold increases in value when the economy is struggling, because there's a higher demand for precious metals.
The other major benefit of precious metals is how they hedge against inflation. The US dollar is depreciating rapidly these days, and you want to make sure that your assets keep their purchasing power. In a few decades, a dollar that you save today might be worth just pennies. So it's a good idea to tie your cash savings into precious metals, so you can liquidate them for their full value later.
It's possible to put precious metals directly into an individual retirement account. But because of the number of rules and regulations, many people get overwhelmed by the process. There are precious metals IRA dealers that help connect people to custodial companies and streamline the application and paperwork.
Let's take a look at exactly what a precious metals IRA is.
About Precious Metals IRAs
IRA stands for individual retirement account. This is a type of retirement account that is divested from your employer and other employees at your work. While you can open an IRA through your employer, these accounts are less commonly associated with corporate culture.
There are traditional IRAs, which involve traditional assets managed by a financial professional. This financial professional chooses how to allocate your holdings for growth and stability. But you can't put precious metals into one of these accounts.
Then there are self-directed IRAs, which you manage yourself. You can buy alternative assets including precious metals, as long as you comply with federal regulations. Nobody can tell you how to allocate your funds except you. There's complete freedom over how you diversify your portfolio and how you manage your account's growth over time.
Even though you're in charge of the asset allocation and acquisition, you do still need a custodian. This is a financial institution that maintains your account. They make sure that your holdings are all accurate, issue ongoing reports, and help file tax paperwork to ensure that your retirement account complies with IRS standards.
A precious metals IRA is a self-directed IRA that has been used to buy precious metals. Many people create a self-directed IRA for this purpose alone, rather than buying multiple assets. Then they have their traditional IRA with a financial manager for the rest of their growth potential. Other people choose to invest in multiple alternative assets at once, like gold, silver, Bitcoin, and real estate.
Again, you have total freedom over what you do with the account. Keep in mind that more complex accounts might have higher custodian fees, especially if the custodian charges for individual transactions and reports.
Traditional Versus Roth IRAs
You need a self-directed IRA if you're buying gold and silver. But you have the choice of a traditional or Roth IRA structure.
Every retirement account is set up with certain tax advantages. The right one for you will vary. Most people prefer traditional IRAs, but a select few with specific financial goals might choose a Roth IRA instead.
With a traditional IRA, you aren't taxed on your initial contributions. Each contribution is then invested into different assets to create a balanced portfolio. Since you haven't paid taxes, you have the maximum amount of money possible for investment, which means extra potential for growth. That adds up quickly, especially if you have a few decades left for your account to grow.
Then you pay taxes when you take distributions. You'll only pay taxes on the money that you take out of the account. You can't take distributions without an additional financial penalty until you're at least 59 and a half. Once you get to the age of 70, you will be legally required to take minimum distributions out of the account.
A Roth IRA is set up with the tax advantage reversed. Instead of paying taxes when you take distributions, you pay taxes upon making your contribution. But in return, your distributions are totally tax free. You basically have to determine whether the growth potential is better than the potential tax bill when deciding which account to use.
Most finance professionals recommend using a traditional IRA unless you're dealing with very specific circumstances. For example, some cryptocurrency billionaires used Roth IRAs to pay a fraction in taxes before their crypto blew up and became worth thousands of times its initial value.
If you're not sure whether you need a Roth or traditional setup for your precious metals IRA, you can probably go with a traditional account.
If you want to put money into a new self-directed IRA, the most common way to do so is by rolling over the money in another retirement account. This can be done without IRS penalties in the 60 days following your account creation. After that, though, you will be penalized for early withdrawal, so time is of the essence.
You can also contribute cash to your account from your savings. But there are maximum limits imposed on the amount that you can contribute every year.
If you aren't yet 50 years old, then you can contribute a maximum of $6,000 directly to your IRA each year. If you are 50 or older, then that limit is raised to $7,000.
Sometimes precious metals dealers will require that you have a minimum of $10,000 or more to spend. In these cases, your only choice is to roll over your retirement funds. You can't legally meet the minimum requirement with cash contributions alone.
Precious Metals Products
There are limitations on the products that you can store in your precious metals IRA. In fact, most products are ineligible for a retirement account. You can't store collectible or exclusive coins in the account, nor can you store certain types of foreign currency. Only bullion coins and bars can be used, not jewelry, scrap metal, or existing coin collections.
There are four metals that you can put into an IRA: gold, silver, platinum, and palladium. You cannot put rhodium or copper into these accounts, even though some precious metals dealers do sell these products.
Gold items must be 99.5% pure and can be certified bars, Canadian Maple Leaf coins, American Eagle coins, and Australian Kangaroo coins. There are a handful of other coins from sovereign mints that can be held in the account if they meet the right purity ratings.
Silver bars and coins need to be 99.9% pure and can include Chinese Panda coins, Australian Kookaburra coins, and American Eagle coins. American Eagle coins are an incredibly popular choice for bullion investment. You can even put proof American Eagles into an IRA, as long as you have the authentication paperwork.
Palladium and platinum both need to be 99.95% pure. Some examples of available coins might include American Eagles, Australian Koalas, Canadian Maple Leafs, and Isle of Man Nobles. While these aren't the only IRA-eligible coins, it's difficult to obtain platinum and palladium options from sovereign mints.
After you buy the items, they need to be sent to a depository. Your custodian will open the package, verify the contents, and put them into your account. Home storage is not an option for this type of account, as home access would be the same as taking an early distribution. Home storage is also less safe overall than depository storage, which typically includes full insurance policies and frequent third party audits.
Opening a Precious Metals IRA
The easiest way to open a precious metals IRA is by finding a dealership that specializes in IRAs. They'll help you set up the account in exchange for you purchasing their inventory. You can also do all of the steps by yourself, but that's a bit of a hassle, especially if you don't have a prior background in tax codes.
Self-directed IRAs are more complex than traditional ones. The applications aren't difficult, but the rollover paperwork can be cumbersome. So can communicating with your custodian and your IRA dealer. These are tasks that would ordinarily be taken on by your investment manager.
Some IRA custodians only manage traditional accounts, rather than self-directed ones. Some self-directed IRA custodians have a strong focus on precious metals, while others handle every kind of available asset.
Create the Account
Creating your account is relatively simple, once you have a custodian in mind. In fact, many custodians have their applications available directly on their websites. You can fill out the paperwork and submit it without ever needing to speak to another person directly. Then the custodian will use that information to create the account.
You'll want to make sure that you're working with a reputable custodian. Look up their past customer reviews, as well as their rating with organizations like the Business Consumer Alliance or the Better Business Bureau.
Fund the Account
You can fund your account with a cash contribution or with a rollover. Your new custodian might be able to help you with your rollover paperwork. Before you open your account, you can even contact them to ask about how they manage the rollover process.
If you work with a specialist dealer, you might have a representative who will talk to your custodian as your liaison. They'll make sure that all of the paperwork is filed and that the funds are transferred within the allotted time period.
Buy the Metals
If you haven't yet chosen a dealership, now is the time to do so. You will use your account funds to buy the precious metals. It's best to look for companies that clearly mark their IRA products on their websites, so you don't accidentally make any non-approved purchases.
Instead of mailing the package to you, it will be sent to the depository you've chosen. Your custodian will intercept the package and put the items into the account. They will communicate with you throughout the process, updating you on the exact items and the value of the holdings.
Finish the Transaction
Once you confirm the transaction and receive an invoice, your part in the situation is largely done. You just need to pay your annual fees and receive updates from your custodian. The metals can remain untouched until you decide to take distributions.
When you are ready to take distributions, you can liquidate the assets and remove cash from the account. For this reason, we highly recommend looking for a precious metals dealer that has a buyback program. They'll make you an offer that's higher than what you'd get with a cornerstore pawn shop.
Our Top Three Precious Metals IRA Choices
These are our top industry picks for the best gold dealerships. We recommend working with these companies right from the beginning. They will connect you to a custodian and depository options, as well as explain everything in detail.
Goldco has operated since 2006 and has been serving the consumer market since 2011. The company is frequently named the top best precious metals dealer in the entire US. They serve customers across all 50 states, and their main focus is on precious metals IRAs.
With Goldco's services, you get a one-on-one representative who helps you finalize your purchases. Before you even decide what to buy, they manage your entire account creation setup too.
Augusta Precious Metals is a great company that has gained major accolades for their education and customer service. Like Goldco, they assign every new IRA customer a dedicated representative. You also get ongoing support for life, even if you never make another purchase.
American Hartford Gold has tons of cool policies and promotions available. For example, they don't have any extra fees or minimum investments. They're super transparent about their costs and available products. And they sometimes offer free silver or waived custodian fees for new customers.
AHG also has a price match guarantee for any product with a written pricing offer.
A precious metals backed IRA is a popular choice for people in the US, especially with the economic turbulence of the past few years. Whether you're worried about general inflation, gas prices, illnesses, or political instability, there's a lot of reason to want to secure your savings.
Your retirement account should be diverse and use multiple types of assets. But if you want to hedge against inflation by using tangible assets, then you'll want to open a self-directed IRA. This can be either a traditional or Roth setup, depending on the tax advantages that you want.
For people considering putting their retirement funds into precious metals, we highly recommend working with Goldco. They make it super easy to make your account and buy precious metals at an affordable price.