The Self-Directed IRA: Reduce Taxes while Investing in Precious Metals

An Individual Retirement Account – commonly called an IRA – is a unique investment vehicle specifically tailored to saving for your retirement.

Looking to their Golden Years, many Americans prefer IRAs because of the countless tax advantages they provide. In simple terms, an IRA allows the account holder to deduct their annual contribution from their taxable income (initially, up to $1500 annually).

Talk about killing two birds with one stone: saving for retirement while lowering your tax bill.

Self-Directed IRAs

Since the inception of the IRA in 1974, it’s use has grown tremendously. Yet despite an increase in contribution limits in the decades since – along with the creation of new varieties – the fundamentals of the retirement savings plan have remained virtually unchanged.

One type of account that has evolved in recent years is the Self-Directed IRA.

Many people associate IRAs with investing in the stock market, which is customarily the case.  Yet while the owner of an IRA enjoys some flexibility to direct their custodian on how to invest, there are a number of assets in which you cannot invest with a traditional IRA.

Enter the Self-Directed IRA.

Essentially, this type of retirement account allows you more investment options. Rather than finding yourself limited to standard or public stocks and mutual funds, the Self-Directed IRA holder can invest in real estate, private stock, LLCs and of course, precious metals.

(There is one minor caveat: a Self-Directed IRA cannot include an asset meant only for personal use. So don’t plan on including that super-swanky vacation home.)

All in all, the differences between a Self-Directed and traditional IRA are relatively small.

For both, contributions are tax-deductible and require a custodian to manage the account. If you invest in gold bullion or other precious metals, they will be stored in the custodian’s safe on your behalf. Also, there may be tax liabilities, depending on the investment.

Precious Metals and the Self-Directed IRA

There is one key advantage to adding precious metals to your Self-Directed (or Precious Metals) IRA: the deductions allowed on your taxable income.

For example, if you put $2000 into your Self-Directed IRA and you are in the 25% tax bracket, your tax liability (or bill) will go down by $500.

Furthermore, up to $1 million in IRA assets are exempt in the event of bankruptcy, and many states have laws prohibiting the payment of legal judgments through the seizure of IRAs.

When you choose to add precious metals to your Self-Directed IRA, there are countless options to choose from: American Gold Eagles, gold, silver and platinum coins and bars, Canadian Maples and more. Likewise, laws relating to IRAs have recently been amended, allowing the addition of foreign and private mint bullion as well.

When all is said and done, Self-Directed IRA holders enjoy a two-for-one: reducing taxable income while investing in something a-heck-of-a-lot more interesting than stocks, bonds and mutual funds.

To find out more about precious metals IRAs, take a peek at our FAQ page here.

*Please note that funds must be in your IRA – through a custodian – prior to placing orders with Provident Metals. We are happy to recommend a custodian or you may utilize any custodian providing Self-Directed IRAs.