Investing

Does a Precious Metals-Backed IRA Make Sense For You?

table of common precious metals

When the value of things starts coming into question, people tend to grasp for what they know or what they’re familiar with. That’s as true when it comes to saving and investing as it is in any other area. And when it comes to savings and investments, what people tend to know is physical and tangible assets.

For most of us, our wealth isn’t physical. Our bank accounts, our 401(k), IRA, and other retirement accounts, and even our paychecks aren’t physical entities. We don’t get paid cash for our work, let alone a physical check, everything is done electronically or online today.

While that makes our lives easier in many senses, it also can leave us panicked when our normal everyday experience is threatened. When you look at your bank account, your retirement account, or your brokerage account and see the sums dwindling, how do you feel? How do you react, and how do you go about protecting yourself and your finances?

For many Americans, they try to protect themselves with the security of tangible physical assets like precious metals. Precious metals may be denigrated by some big name investors as dumb rocks, but if you own these “dumb rocks” you won’t have to worry about the company whose stocks or bonds you (don’t) own going bankrupt. Nor do you have to worry about the value of your dollars being devalued by inflation, because some precious metals have an impressive track record of helping to hedge against inflation.

These characteristics of precious metals are making them an increasingly popular investment option for more Americans. Many are investing in precious metals through precious metals-backed IRA accounts, which you may see referred to as a precious metals IRA, gold IRA, gold-backed IRA, silver IRA, or silver-backed IRA. These retirement accounts can help you harness the power of precious metals to protect and defend you through difficult times.

What Is a Precious Metals IRA?

A precious metals IRA is just an IRA account that holds physical precious metals coins or bars. Many people have never heard of precious metals IRAs before because most IRA custodians don’t manage precious metals assets. As a result, many IRA owners may not be aware that they can own gold, silver, and other precious metals in an IRA retirement account with all the same tax advantages as any other retirement account.

What Precious Metals Can I Invest In?

While most people think of gold and silver when they hear the term precious metals, there are over a dozen metals that have been described as precious metals. But only four of those precious metals are eligible for investment through a precious metals IRA.

Gold

When you hear the term precious metals, you probably think of gold first and foremost. Fort Knox. Mr. T’s jewelry. Scrooge McDuck’s money bin. Throughout history, gold has been synonymous with wealth.

Precious metals IRAs that invest in gold are known as a gold IRA. They can hold physical gold coins or bars, which are managed by an IRA custodian and stored at a bullion depository.

Silver

Silver often plays second fiddle to gold, but it can provide additional asset growth and portfolio diversification. In some cases silver can even outperform gold.

Silver’s use as an industrial metal makes it slightly different than gold in its price movements, as demand from various sectors of industry can influence the price of silver.

Platinum

Platinum’s best known use is in catalytic converters in the automotive industry. It’s also used in jewelry. Numerous mints produce IRA-eligible platinum coin and bar products.

Palladium

Palladium is also used in catalytic converters, and its price has really taken off in recent years. At one point its price was even higher than gold’s all-time high. While palladium coins and bars are less common even than platinum, there are still some IRA-eligible palladium coins and bars available.

The Benefits of Investing in Precious Metals

There are numerous benefits to investing in precious metals. Here are four benefits of investing in precious metals through a precious metals IRA.

Wealth Protection

One of the most important potential benefits of investing in precious metals is the opportunity to protect your wealth. Gold and silver in particular have been favored as wealth protecting metals throughout history.

As soon as the first hint of a crisis occurs, investors start rushing to buy gold and silver. We saw this in 2008, as prices rose in response to increased investor demand, again in 2020, and once again today.

Inflation Hedge

Precious metals can also serve as a hedge against inflation. This is especially true for gold, which over the long run has maintained its purchasing power while the US dollar has become increasingly devalued.

During the stagflation of the 1970s, gold and silver both made annualized gains of over 30% over the course of the decade, far outpacing both markets and inflation. Many investors today are hoping that precious metals can help them retain the value of their portfolios in the face of the highest inflation we’ve seen in 40 years.

Diversify Your Portfolio

Diversifying your investment portfolio with precious metals is something that even the most ardent critics of precious metals sometimes grudgingly acknowledge can be beneficial. While gold and silver are perhaps the more popular precious metals when it comes to diversification, platinum and palladium can’t be forgotten. Because of their industrial uses, they will play a different role in diversifying your portfolio than gold and silver will.

Tax-Free Growth With a Precious Metals IRA

Finally, if you choose to invest in precious metals through a precious metals IRA, you gain the benefit of tax-free investment growth and favorable tax treatment. Many investors like to hold physical precious metals coins themselves. But holding precious metals coins in an IRA can be beneficial.

With a Traditional precious metals IRA, you would purchase your precious metals with pre-tax dollars, grow your assets tax-free, and then only pay taxes when you take a distribution. With a Roth precious metals IRA, you would invest with post-tax dollars, grow your assets tax-free, and pay no taxes when you take a distribution. And you can take your distribution either in cash or in physical precious metals.

Precious Metals IRA Rules & Regulations

Like all tax-advantaged retirement accounts, precious metals-backed IRAs are subject to IRA rules and regulations. Familiarizing yourself with those rules and regulations can help you avoid unintended and unwanted tax consequences.

Ban on Collectibles

All IRA accounts are forbidden from investing in collectibles. Attempting to use IRA assets to purchase collectibles is considered a distribution of assets and could trigger taxes and penalties.

The tax code lists certain items that are considered collectibles, although the list is not exclusive. And it includes any coin or metal.

For the purposes of that definition, however, certain coins are excluded from consideration as collectibles. This includes a handful of coins produced by the US Mint, such as Silver American Eagle and Gold American Eagle coins, as well as any coin or bullion of gold, silver, platinum, or palladium produced to a minimum fineness that would be accepted for futures contracts.

What this means is that in order to be eligible for investment through a precious metals IRA, any gold coin or bar needs to be at least 99.5% pure, any silver coin or bar needs to be at least 99.9% pure, and any platinum or palladium coin or bar needs to be at least 99.95% pure.

If you’re looking to invest in precious metals coins through an IRA, there are numerous choices out there for you. You won’t be able to choose classic coins such as South African Krugerrands, British Sovereigns, Morgan silver dollars, or Swiss 20 Franc coins, as their metal contents aren’t high enough to make them IRA-eligible. But mints around the world today produce millions of coins that are eligible for IRA investment, and Goldco works directly with many of those mints to get you those coins.

No Home Storage

If you’ve done enough reading about precious metals IRAs and self-directed IRAs, you’ve probably come across something known as a home storage IRA. These are purported to be precious metals IRAs that allow you to own precious metals within an IRA and store those metals at home.

If that sounds like it’s too good to be true, it’s because it is. All IRA assets in any IRA account are required to be managed by an IRA custodian. And precious metals are required to be stored in a bullion depository.

While it is theoretically possible for an individual person to satisfy the IRS custodial requirements, the bar is set so high that no one has ever done it. So if you try to set up a home storage IRA and use IRA assets to buy precious metals coins and bars that you store at home, it would likely be treated as a distribution of assets and end up costing you in taxes and penalties.

This is why it’s important not to get seduced by stories that make it sound like you can have your cake and eat it too. Stick with trusted partners like Goldco who have years of experience helping our customers set up precious metals IRAs and purchase precious metals.

Custodians And Storage

All IRA assets are required to be managed by a custodian. If you already have an IRA account, say with a brokerage, you’re probably already familiar with the process of working with an IRA custodian, even if you don’t fully realize it.

Most IRA custodians don’t offer precious metals as an investment option because they don’t want to have to manage precious metals assets. So you’ll have to find a custodian who offers precious metals management services, or partner with someone like Goldco who works with precious metals IRA custodians.

Once you fund your precious metals IRA and buy your coins or bars, your assets will be stored at a bullion depository. Goldco partners with secure depositories to ensure that our customers’ assets remain safe and sound.

Required Minimum Distributions

As with any other IRA, your precious metals IRA will be subject to requirement minimum distributions (RMDs). While the current RMD age is 72, Congress is in the process of raising that to 73, and will eventually raise it to 75 over the next decade. This should help many Americans continue to grow their retirement savings longer, ensuring that their retirement savings helps them as long as possible. For Roth precious metals IRA accounts there are no RMDs.

All IRA Rules Apply

All the other IRA rules and regulations apply to a precious metals IRA, including those about early distributions and associated penalties. Whether your precious metals IRA is a Roth IRA or a Traditional IRA, the same rules and regulations apply as they would to any other IRA. So if you’re already familiar with the IRA rules and regulations, you won’t have much to learn. But if you don’t already know the IRA rules and regulations, you’ll want to start learning them.

Want to Learn More About a Precious Metals IRA?

If you think that a precious metals IRA might be the right choice for you, give the experts at Goldco a call today. Ultimately the decision about whether or not to start a precious metals IRA is yours to make. But it can help to be as educated as you can before you make a decision.

Whether you have an orphaned 401(k) that you want to start performing better or a current retirement account that you want to protect, learning more about a precious metals IRA can help you get on the path to safeguarding your retirement savings. Don’t let your hard-earned money fall victim to recession, inflation, or any other calamity. Call Goldco today to start your precious metals IRA journey.

 

Request Your Free Guide

Free Precious Metals Guide

Complete the Form Below

Request Your Free Guide

Free Precious Metals Guide

Complete the Form Below

Ready to protect your retirement savings?

Request Free Kit