Precious metals IRAs (sometimes referred to as self-directed) allow you to purchase gold bars and coins, provided that you comply with IRS regulations which stipulate only purchasing certain types of metals and storing them at depository facilities approved by them.
Precious metals IRAs require additional work and fees than regular IRAs, but can give you access to alternative investments. In order to open one, it’s necessary to find both a custodian and depository.
Decide What You Want to Buy
Investing in precious metals has become an increasingly popular strategy to protect retirement savings against economic uncertainty. But it is crucial that investors first gain an understanding of how these investments work before proceeding.
As the first step of precious metal investments, selecting your desired precious metal is of utmost importance. While most people opt for gold as it offers significant long-term returns while protecting against inflation. Silver or platinum may offer lower price points than gold as well as easier storage solutions.
Your dealer of choice should be reliable and offer IRS-approved products. Many IRA providers already have relationships with certain dealers; however, it is wise to do your own research as some products such as rare coins may not meet IRS guidelines and therefore cannot be included in an IRA account. Furthermore, your account must be stored at an IRS approved depository facility.
Select a Depository
Precious metals have long been seen as an appealing investment choice, often being perceived as safe havens in uncertain markets and helping diversify an investor’s portfolio.
As part of setting up a self-directed IRA (precious metals IRA), the initial step in creating one must be finding an IRA custodian who specializes in this form of account and has established relationships with dealers who sell IRS-approved gold bullion coins and bars. Furthermore, selecting an institution with global distribution services and fulfillment capabilities should also be prioritized.
Once you have identified an IRA custodian, dealer, and depository, funds from your existing or employer-sponsored retirement account can be moved over into it to buy metals you want to invest in. Gold is often the go-to choice; other precious metals like silver and platinum can also be added if desired. Just be wary of companies offering “IRA approved gold certificates”, as the IRS considers these distributions and could assess tax or penalty fees accordingly.
Choose a Dealer
Precious metals IRAs offer an effective means of diversifying an investment portfolio. Over the long-term, precious metals have historically seen value appreciation and are an effective hedge against inflation – but remember, precious metals should only make up part of your overall strategy and should never replace all your assets in one go.
Your custodian may already know several metal dealers, but ultimately it’s your decision who to work with. Select one with experience as well as all necessary licenses and insurances in place so as to protect you as the client.
Be aware that IRS rules require physical metals be sent directly to a depository and cannot be kept at home (unless you qualify for special exemptions such as becoming disabled or buying your first home). Be wary of companies offering “loopholes” that allow self-storing gold.
Complete the Transaction
Precious Metals IRAs allow investors to hold physical precious metals such as gold in their retirement accounts as an added form of diversification and are an attractive form of asset allocation; investors tend to believe that gold will provide less volatility than stocks for their retirement portfolio and therefore offer a solid base.
Establishing a precious metals IRA differs slightly from opening traditional IRAs. First, you will need to open a self-directed individual retirement account with an accredited custodian – typically a bank or trust company that allows investing in alternative assets such as precious metals IRA eligible bullion products with two-way buy/sell markets – before opening an individual retirement account in your name with them.
After you have selected your custodian, dealer and depository it’s time to complete your transaction. Your IRA custodian will contact the dealer on your behalf and arrange for them to purchase metal on your behalf; after which it will be sent off to be stored safely by depository.
