Precious metal prices have been holding steady over the last several years, remaining near all-time highs as market volatility and economic instability continue as the norm in the global economy. As more investors look at gold, silver, platinum, and palladium as an investment options, there are questions that remain for some when it comes to a Precious Metals IRA. In the following paragraphs, you’ll find a brief overview of the ins and outs of a Precious Metals IRA.
Major Differences
Individual Retirement Accounts, or IRAs, are an excellent option for adding to your investments for retirement beyond any offerings from an employer. Standard IRA options include the tax-deferred traditional IRA or the tax-free (later in life) Roth IRA. These accounts have you investing your hard-earned money in a wide range of assets, such as stocks, bonds, mutual funds, and exchange-traded funds.
A Precious Metals IRA gives you the freedom to invest in the physical metals, including gold, silver, platinum, and palladium. However, while there are few restrictions on the stocks, bonds, and mutual funds of a traditional or Roth IRA, there are standards for Precious Metals IRA accounts you need to be aware of when purchasing and investing in metals.
Metal Standards
The Precious Metals IRA account was established in 1997 with the help of Edmond C. Moy, the former director of the United States Mint. The IRS has set purity standards for the metals in your Precious Metals IRA. For gold products, the fineness must be a minimum of 99.9% purity and certified by an assayer that is already approved by COMEX or the New York Mercantile Exchange. Silver must meet the same standards of purity and certification.
Examples of popular, common coins include the American Silver Eagle, American Gold Eagle, Canadian Gold Maple Leaf, Canadian Silver Maple Leaf, and Austrian Silver Philharmonic.
Account Standards
Just because a precious metal coin or bar is purchased by you as an individual doesn’t mean it qualifies as part of a Precious Metals IRA. The IRS does not allow individuals to count gold or silver in their physical possession at home as part of a Precious Metals IRA. In order to purchase precious metals as part of a Precious Metals IRA, you need to find a depository and/or custodian to manage your self-directed Precious Metals IRA. You will work through this qualified dealer to purchase precious metals, and store them securely at a third-party, qualified depository.
Not only does this option get around the IRS limitation on owning physical gold as part of an IRA, but it also removes the concerns on your end. The custodian of your account handles all the transportation and storage of your assets, and even insures them in that physical location against loss.
One of the greatest advantages of a self-directed Precious Metals IRA is that you can more easily trade the physical assets in your account. If you want to redistribute your holdings between gold, silver, platinum, and palladium, your custodian can help facilitate all of that. If you really want to take physical possession of your precious metals, you can start taking regular distributions in accordance with IRS guidelines, with any withdrawals before age 59 ½ subject to a 10% penalty, as well as income tax on capital gains.
What’s the Difference Between IRAs?
You can invest in gold and silver via your traditional IRA or Roth IRA, but there is a stark difference between that type of metal investment and that of a self-direct Precious Metals IRA. When you invest through a traditional or Roth IRA, you are investing in so-called “paper gold.” What does this mean? Well, in short you are investing your money in companies that mine gold, produce precious metal products, or explore for gold ore. This can be done through individual stocks, bonds, options, mutual fund shares, and other options attached to the gold industry.
If you want to invest in physical gold or silver, coins or bars that exist as a physical asset you own in a depository somewhere, you need to establish a self-directed Precious Metals IRA. In this case, the value of your gold and silver is linked directly to the value of those physical assets, not the companies mining, producing, or exploring for them.
Why Use Precious Metals IRAs?
In a May 2016 interview with Investopedia, former US Mint Director Edmond Moy points out that precious metals IRAs containing gold offer good diversification in an overall retirement portfolio. As he states, “because gold prices generally move in the opposite direction of paper assets, adding a gold IRA to a retirement portfolio provides an insurance policy against inflation. This balanced approach smooths out risk, especially over the long term, which makes it a smart choice for retirement investments.”
More Questions? Just Click
If you have more questions or just want to read more about the ins and outs of precious metals IRA, please feel free to visit our JM Bullion IRA page. You can even learn about the self-directed precious metals IRA provider we work with.
