Most investors stick with ordinary types of investments in their retirement accounts, such as stocks, bonds, mutual funds, and ETFs. But if you want to ratchet your savings potential up a notch, a self-directed IRA may be for you. Self-directed IRA’s unlock a whole universe of exciting investments that you can hold under a tax-advantaged umbrella, like real estate, business ventures, and yes – even physical precious metals.
With spot prices so low nowadays, you may be interested in holding bullion in your IRA – but you don’t know where to start. If so, you probably have some (or many!) questions.
We’re here to lend a hand. Let’s start by answering 5 of the most frequently asked questions our customers ask us about self-directed IRA’s, particularly when it comes to investing in precious metals:
1. What is a self-directed IRA?
A self-directed IRA (SDIRA) is not that different from a Traditional or Roth IRA. What makes a self-directed IRA unique is that:
- You make all of your own investment decisions (hence the name “self-directed”).
- You have the freedom to choose from a wide range of investment options outside of traditional stocks, bonds, and mutual funds. A self-directed IRA allows you to “self-direct” IRA money into nontraditional investments like real estate, commodities, physical precious metals, and a host of other options.
So if you want total control over every aspect of your IRA, and you’d like to leverage your knowledge of business, real estate, or other nontraditional investments (like precious metals) for the potential to earn a higher return, then a self-directed IRA may be for you.
2. What is the benefit of owning precious metals in an IRA?
Precious metals prices generally move in the opposite direction of paper assets. So balancing out a retirement portfolio with gold, silver, platinum, or palladium can smooth out risk and provide insurance against inflation or economic turmoil. Plus, self-directed IRAs allow you to own physical bullion instead of merely precious metals mutual funds or ETFs, which regular IRAs are limited to.
3. How do I open a self-directed IRA and buy precious metals?
To open a self-directed IRA, you need to find a custodian that handles these types of accounts. But there’s a catch: Although there are several companies licensed by the IRS to service self-directed IRAs, you likely won’t find your well-known bank or brokerage firm among them.
The good news is that we’ve done the legwork for you! Provident Metals has found a partner in Preferred Trust Company, one of the most respected custodians in the industry. Since 2007, Preferred Trust has helped thousands of clients diversify hundreds of millions of their retirement dollars. You can open your self-directed IRA account with Preferred Trust and purchase precious metals with Provident Metals in just a few easy steps:
- Obtain a new account packet. Call Preferred Trust Company. Their knowledgeable team of IRA specialists will email you an IRA packet for the type of IRA you need.
- Complete the new account packet and fund your new self-directed IRA Account. Send your completed account packet and contribution (if applicable) to Preferred Trust. If you’re transferring your IRA from a bank or brokerage account, they will start the process and let you know when you can start using the funds in your account.
- Start shopping for IRA-eligible bullion! When you’re ready to buy, call Provident Metals to place your order. We will lock in real-time pricing and send a purchase invoice to both you and Preferred Trust. Preferred Trust will send payment to Provident Metals from your self-directed IRA account.
4. What kinds of precious metals can I buy in my IRA?
Precious metal coins or bars must meet specific IRS fineness standards to qualify for purchase in an IRA. The minimum fineness for Gold is .995, Silver is .999, and Platinum or Palladium is .9995. But don’t worry about hunting down metals that qualify – we make it easy for you to browse the whole list of IRA-eligible bullion. And if you’re not sure if a particular product on our site is IRA-eligible, give us a call, and one of our friendly and knowledgeable specialists will be happy to help!
5. I was told that I need to choose my own depository for the precious metals I buy in an IRA? How do I do THAT?
The Internal Revenue Service states that you can own your own bullion in an IRA, but you can’t actually touch it. The moment it’s in your hands, it’s considered a distribution, which is taxable. So when you buy precious metals with Provident in a self-directed IRA, we bypass you entirely and send the bullion directly to a depository of your choice.
Yes, you heard that correctly, Remember how a self-directed IRA gives you total control over your retirement account in every sense of the word? You get to choose where exactly to store your physical bullion, and you pay the associated fees. You can pick any depository in the US that works with your custodian and meets IRS regulations – even some offshore.
If you’ve never done this before, you may find this to be a confusing and intimidating step.
So we’ll break it down for you:
Think of a depository as your own personal Fort Knox (cool, right?). A depository is a physical, secure building that stores your precious metals for you. Your custodian will give you a list of depositories to choose from, and you can check out Preferred Trust’s list of depositories here. In general, consider the following 3 factors when choosing a depository:
- Storage pricing: Storage fees and structure vary widely between depositories. Do they charge fees annually? Quarterly? Are the fees fixed, or do they adjust based on the type of metals held? Be sure to get an idea of what exactly is being charged out of your self-directed IRA for the service, and when.
- Type of storage: Many depositories give you the option of segregated or unsegregated bullion storage. In a segregated account, your bullion is stored by itself, so that when you sell or make a distribution, you will get the exact bars or coins back that you deposited. Think of segregated storage as your own safe deposit box within the depository. On the other hand, with unsegregated storage, the depository holds bars or coins of the same exact type together. So if you purchased a mint-fresh 2018 Canadian Gold Maple Leaf, you’ll get a mint-fresh 2018 Canadian Gold Maple Leaf back, but not the exact one you deposited. As you can imagine, segregated storage is often more expensive than unsegregated storage.
- Security and insurance. The whole idea of a depository is that once your bullion goes in, it doesn’t come out unless you want it to. So it’s important that a depository protects your assets. Most depositories operate under tight security and are highly insured in the unlikely event that something happens to your bullion.
Here at Provident Metals, we believe that you shouldn’t have to work as hard to diversify your retirement as you did to earn it. We hope this clarified some questions you may have about owning precious metals in a self-directed IRA, but if you’d like to discuss it in more detail, we’re here to help! Give Provident Metals or Preferred Trust a call, and either team of friendly, knowledgeable specialists will answer your questions, explain the process in easy terms you can understand, and work with you every step of the way.