For investors who are seeking ways to diversify their investment holdings, a gold and silver IRA account may provide the ideal answer. Today, basic bonds and equities just aren’t providing the returns that many investors are seeking.
Given the exceptionally volatile stock market of the past several years, those who are approaching retirement simply can’t afford to take any type of risky chances with their long term savings. Yet, the historically low interest rate environment of the past several years has provided investors safety with returns that are far too low to live on.
Placing gold, silver, and other types of precious metals into an Individual Retirement Account (IRA) can offer the diversity that a retirement account needs to protect assets from market downturns, while at the same time providing nice growth opportunities.
Is Silver Allowed in an IRA Account?
Although most investors may not be aware, certain types of gold, silver, and other metals are allowed to be placed inside of self directed IRA accounts. This fact is not well known because the majority of IRA accounts are opened through banks and brokerage firms – institutions that don’t typically offer precious metals as a part of their financial product inventory.
Truly self directed IRA accounts, however, allow the investor to be in charge of the investments that go into the account. With this freedom, investors are allowed to place traditional stocks, bonds, CDs, and mutual funds inside of their IRA accounts. But, they can also include other financial vehicles as well, such as:
What Not to Include
There are some types of investments that are not allowed in a self directed IRA account, such as life insurance policies. In addition, investors are also not allowed to use certain investments in a self directed IRA account for personal use.
For example, an investor may not purchase a personal residence with IRA funds. Nor may they purchase a vacation home and own it for any type of personal use. Therefore, it is very important to understand and abide by the IRS rules as they pertain to self directed IRA investing.
How to Open a Silver IRA Account
Most traditional banks and financial institutions do not offer gold and silver IRA accounts. Therefore, investors will need to find an IRA custodian that specializes in these types of accounts in order to open their precious metals IRA.
Today, there are a growing number of gold and precious metals dealers that also offer self directed IRA accounts. These dealers have highly educated customer services representatives that will assist investors with the opening of their accounts, the account funding, and the selecting of the proper metals based on the investors’ specific short and long term financial goals.
Types of Gold and Silver IRAs
A gold and silver backed IRA can be either a traditional or a Roth IRA. The type of IRA that an investor chooses will depend upon the type of tax benefits that the investor desires and / or is eligible for.
Traditional IRA Account
With a traditional IRA account, an investor may be able, depending on IRS income guidelines, to deduct some or all of their annual IRA contribution. The funds inside of a traditional IRA account are allowed to grow on a tax deferred basis.
Upon withdrawal, the account owner will be taxed at his or her then-current ordinary income tax rate. If the account owner waits until retirement time to withdraw the IRA funds, then it is possible that they may be in a lower tax bracket than they were in at the time of contribution.
Roth IRA Account
The owner of a Roth IRA account will not be able to deduct his or her annual IRA contributions. However, the gains on the funds inside of the account will be allowed to grow tax free. Likewise, the withdrawals from the account will also be allowed to be taken on a tax free basis.
Placing Funds into an IRA Account
When ready to invest, funds must already be inside of the precious metals IRA account. This can be done in a number of different ways. Precious metals IRA funding methods can include:
- Cash Deposit – Investors can deposit cash each year into their IRA account, up to a certain maximum. In 2014, that amount is $5,500 for investors who are age 49 and younger. Investors who are age 50 and over may invest up to $6,500 into an IRA account.
- IRA Transfer – Investors may also transfer funds from an existing IRA account into their precious metals IRA. This way, funds will be ready to invest. There is no dollar limitation on how much may be transferred between one IRA account and another.
- Rollover – Funds may also be rolled over from a retirement account into an investor’s personal IRA. As an example, if an individual has funds sitting in a 401(k) plan of a former employer, those funds may be rolled over into a precious metals IRA account. There is also no dollar amount limit on how much may be rolled over into an IRA account from an employer sponsored retirement account.
How to Purchase Precious Metals for IRA Investing
Prior to purchasing any gold, silver, or other precious metals for IRA investment, it is important to first determine specific financial goals. That way, it will be easier to narrow down the type of metal (or metals) to choose, as well as the percentage of the overall portfolio to allocate to precious metals overall.
In most cases, top rated precious metals dealers such as Regal Assets will offer education to their investors on how to get started with precious metals investing, as well as how to allocate metals into an IRA portfolio.
Contacting a customer service representative and having them walk through various investment scenarios can oftentimes help with better understanding how and where to place gold, silver, and other metals into one’s overall asset allocation.