Precious metals like silver, gold, and platinum, when purchased with forethought, can make for smart investments. If the stock market were to ever be negatively affected by another recession, or if the value of the U.S. Dollar were to decrease even more than it steadily has, precious metals would offer investors a safety net against financial disruption. While many people think that you need to make large investments from the start to get involved in precious metals investing, that isn’t true.
To get started, all you need to do is open a precious metals IRA, which only requires you to have an existing IRA or a 401(k) that stems from your employer. The benefits of opening and funding a precious metals IRA are noteworthy, but you might not know where to even start when opening one. For this reason, we’re going to take a closer look into how you can set up your very own precious metals IRA, preparing yourself for the future while doing so.
What Is a Precious Metals IRA?
For people seeking a retirement plan that works for them, the individual retirement account (IRA) is a commonly sought-after account. While there are a number of varieties, the traditional IRA is an account to which a person makes tax-deductible contributions, meaning that all contributions and future earnings will not face any taxes until they are withdrawn from the account at retirement. At the time of retirement, they will be taxed as if they were income.
As mentioned, there are various types of IRAs that have their own unique qualities, but one that is clearly unique is the self-directed IRA. Although IRAs are still self-directed, the term self-directed is used because the types of investments—real estate, mortgages, intellectual property, and precious metals—that are normally controlled within a self-directed IRA are held in the custody of an IRA custodian.
IRA custodians act to ensure that your alternative investments are properly held and secured, and it is imperative that you find one who knows the ins and outs of the alternative investment you are investing in. A precious metals IRA is a type of self-directed IRA account in which approved precious metals—gold, silver, platinum, and palladium—are held by a custodian for the IRA account owner. The purchased precious metals, whether in the form of bullion coins or bars, are held by the custodian, commonly in third-party metal depositories or in-house facilities.
Why a Precious Metals IRA?
A precious metals IRA is a great option for investors considering self-directed IRAs because of the diversity these accounts offer. The primary benefits of these accounts, besides investing in an asset that is physical and has a rich history both in the U.S. and nationally, are their two particular powers: They act as a long-term hedge against the inflation of the U.S. dollar. The precious metal markets also act independently of other alternative investments, also making them a hedge against market fluctuations of other assets that might be part of your IRA. With this in mind, knowing that a precious metals IRA can benefit you both against traditional financial disruptions and as a solitary asset, we should discuss how, step by step, you can open your very own precious metals IRA.
Opening a Precious Metals IRA
First, you should ask yourself, are you setting up a new IRA account or are you planning on having your self-directed IRA attached to an already existing IRA? If you do not have an IRA at this time, you will have to open a new one to consider opening a self-directed IRA account.
If you already have an existing IRA account or an employer 401(k), you can look into merging these accounts, sometimes referred to as a “rollover.” Some existing IRA accounts allow for rollovers, but others are considered ineligible to do so. To better understand which option works best for you, especially if you already have an existing IRA, you should consider talking to your tax advisor or CPA.
Your self-directed IRA account is held by an IRA custodian. This custodian, which is often a company or trust, acts as a fiduciary for your account, taking care of your assets through overseeing your precious metals portfolio. Once you have found a company you trust, you can contact them to set up an account, wherein they will oversee your account, produce account statements for you, and accept transactions they personally allow. Different custodial companies have unique services, custodial fees, structures, and contributions they allow.
It is worth remembering that not all IRA custodians are the same, and you should make sure to do your research prior to seeking management of your account with one. In particular, you should take the time to research precious metal sellers while also looking up IRA custodians and trustees, as some companies will have direct relationships with sellers. In some cases, precious metal sellers might offer recommendations to precious metals IRA custodians they believe are reliable, agreeable, and affordable.
Once your self-directed IRA account has been opened and merged with an IRA custodian, it is time to fund your account. As mentioned in Step 1, certain accounts will allow you to roll over existing IRAs or 401(k)s into your new self-directed IRA account, allowing you to manage all of your retirement accounts and their assets at once. Some might not allow this, so it is worthwhile to check with a professional beforehand, ensuring you make the right financial choices along the way.
Just as you’ll have to undertake significant research before settling on a self-directed IRA custodian, you’ll also want to perform in-depth research when looking for your precious metals dealer. First off, you’ll want to find a dealer who offers products that are accepted by your precious metals IRA custodian. Second, you’ll want to find a precious metals dealer who is reputable, one who is trusted within the field and who sells IRA-certified gold, silver, platinum, and palladium.
Finally, you’ll want to consider pricing and products between companies: Which company sells the same product for less? Which has a cheaper product or lesser “fine” quality than another company? These are questions you’ll want to deeply consider to ensure you get certified products at a good price that will benefit your account. Don’t rely on eBay.
Once you have settled on your precious metals dealer, you’ll want to consider what assets you plan on adding to your portfolio. Metals such as silver, gold, platinum, and palladium are allowed, and they must usually consist of bullion coins, rounds, and bars. Rare, graded coins are not often allowed in a precious metals IRA, as they tend to be (1) poor investments and (2) will not be as “fine” as precious metal bullion. The usual rules are that you should seek out gold coins, rounds, and bars that have a minimum fineness of .995, and you should only settle for similar silver products with a minimum fineness of .999.
Products allowed in your self-directed precious metals IRA are gold bars and Canadian silver Maple Leaf coins. Other products are available to investors, from silver rounds to gold American Eagles. If physical bullion is not interesting to you, know that there is a newer type of IRA-approved precious metals investment available: DGGold. Handled in a similar fashion as above, this gold can be easily bought, traded, and sold through the Provident Metals website, and it is available to be added to your IRA, dependent upon approval by your custodian. The benefit this digital gold offers is that its value is the same as physical gold bullion, but you can buy it in quantities as small as 1/100th of an ounce.
You might have your self-directed precious metals IRA, and you might have hired your IRA custodian, but you’ll need to add one more company in the mix. A depository is the last step to ensuring that your portfolio is looked after and properly secured. Your hired custodian might have a recommendation when it comes to your precious metals depository, so make sure to ask for their opinion. However, in the end, it is your choice as the IRA owner where your precious metals investments are stored.
Once you have settled all of the above and have finally chosen the precious metals dealer that you both trust and want to buy from, you can choose which products you’d like to invest in. The process from here is quite simple, as you will simply purchase the items.
Purchases are often completed through your precious metals IRA custodian, who will lock in your prices once you have signed all of the required paperwork. With all of the paperwork aligned, your custodian will issue the payment off to the seller, and your precious metals investments will be shipped to the depository that you have chosen.
Once you have settled on the types of assets you would like to have included in your precious metals IRA, and once you have completed your purchase, your precious metals IRA custodian will provide you with regular statements, allowing you to properly monitor the value of your investments with time. These statements will not only include the value of your holdings, but will also include the current wholesale value of your assets and the estimated bidding price that would be offered by the market.
It should be noted that although you have set up a precious metals IRA account and have purchased precious metals assets, you are not forced to hold onto them forever. You are free to sell your assets whenever you’d like, either trading them in for cash or trading them to purchase other quantities of precious metals. Currently, it is easy to set up a precious metals IRA and begin investing, all with little hassle and red tape. If you have considered investing in a self-directed IRA—investing in non-traditional assets—you should consider the long-term benefits from having a precious metals IRA in your name.
If you have any questions about the process of setting up your self-directed IRA, need a recommendation for an IRA custodian, would like information regarding the precious metals market at this time, or want to know of reputable precious metal depositories around the world, contact our team for help. We at Provident Metals want to ensure that you get the most out of your investments, and we want to be sure you have the knowledge and materials to be successful at doing so.
