If you’ve been looking into retirement, or work full time, you’ve probably heard of at least one type of IRA. IRA accounts help ensure your money lasts you long enough in retirement, but there are a few catches.
Any IRA, precious metals included, are only fully liquid at age 59 ½, and forced distributions are mandated at age 70 ½. If you don’t adhere to these rules, there can be quite a few penalties.
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Now that you’re a bit more familiar with IRA, as the title suggests, you might be wondering what a precious metal IRA is. A precious IRA, compared to other IRA accounts, works in a similar way. The restrictions are similar, but with precious metal IRA you’re holding physical bullion coins or bars instead of paper investments.
Now this may sound confusing, and might take a little more work, but precious metal IRAs can really enhance and protect your retirement portfolio. It’s definitely important to take a look at the different types, and determine whether or not your portfolio could see improvements.
So without wasting anymore of your precious time, let’s dive right in, and take a look at some of the rules and regulations tied to precious metal IRAs. Also, if you’re curious about what metals are allowed in the United States by the IRS, please pay close attention.
What are the regulations?
When it comes to precious metal IRAs, there are some additional levels of regulation involved. This applies to a gold IRA, silver IRA, and any other precious metal allowed by the IRS. Luckily, regardless of the precious metal you choose, the rules and regulations are essentially the same.
The first order of business is ownership. According to the IRS, you’re not technically allowed to be the direct owner of a precious metal IRA. This is due to the fact that all precious metals IRA accounts are required to be self directed IRAs. To put this simply, it means that you’ll need to do more of the investing hands on. Also, for a precious metals IRA account, you’ll want to designate or establish a trust. The trust will own the IRA, and a custodian will manage the account.
While it might sound like you don’t own it, that’s not necessarily the case. This is do the fact that you can create and own your own trust or have an institution like a bank own it or take on the role of designated trustee. This rule also applies to business trusts as well, so there are ways around the lack of direct ownership. Unfortunately, the topic of trusts is a topic for another day. For precious metals IRA accounts, just keep in mind that you’ll be needing a trust to get started.
The IRS also has two other rules you need to be aware of. The first rule is that the physical metal you own must be approved bullion coins, bars, or other forms of metal that the IRS approves of. Once you have approval, you’ll also need to designate a location where the physical metals will be held. IRS approved locations are not too hard to work with, just keep in mind that you won’t be able to store your metal in places like a safety deposit box.
Also, you should keep in mind that you’ll be needing to have an amount of cash on hand or from a rollover to begin. This is due to the fact that you’ll need to have cash to physically purchase the metals (this is because they’re physical assets).
So what metals are allowed?
When it comes to precious metals IRA accounts, there are four main metals that you should be aware of. While they’re not all identical in value, they’re all still precious metals. At the end of the day, any precious metals IRA account is a smart move if you’re looking to diversify your portfolio.
The four precious metals that the IRS allows in the United States for IRA accounts are:
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- Gold IRA
- Silver IRA
- Platinum IRA
- Palladium IRA
All of these metals have different properties that make them desirable, but some are a better option than others. If you’re curious about each metal, don’t go anywhere, because we’re about to dive right in.
A Gold IRA
The gold IRA is a great IRA to invest in, because the price of gold has historically beaten the rate of inflation. This means that your buying power will remain intact for retirement, and more often than not, your buying power will actually grow. Gold is a precious metal for obvious reasons, and has been throughout history. Since the dawn of time people have used gold as a symbol of wealth, and that’s not going to change. Investing 10-15% of your portfolio in a gold IRA can help you beat inflation, diversify your portfolio, and mitigate market risk.
A silver IRA
A silver IRA is also a great metal to invest in. Like gold, silver has been a desirable metal throughout history. Plus, if you don’t have the cash on hand to buy into a gold IRA, a silver IRA is a worthy second place. The price of silver tends to keep on par with inflation, and while it’s not as expensive as gold, it’s doubtful that you would end up worse than when you started with a silver IRA. If you don’t want to go all in with a gold, silver is truly an excellent choice.
A Platinum IRA
A platinum IRA is also something you should definitely know about. While it’s not as shiny as some of the other metals on the list, it’s just as valuable. Platinum is a great IRA to invest in, because unlike gold or silver, there is some practical use behind it. This means that the price may fluctuate a bit more, but the investment could be a bit more lucrative if risk tolerance isn’t a factor.
A Palladium IRA
The last of the precious metals IRA accounts is the palladium IRA. This metal is a bit less well known, but that doesn’t mean it’s any less valuable. Palladium may not be worth as much as the other bullion coins, but it’s definitely a great way to add further diversity to your portfolio.
You should also know that with any precious metals IRA account, you’re not able to mix and match. This means that you can’t mix with gold and silver in the same IRA, and would need to make any precious metal investment separately.
Why should you invest in a precious metals IRA account?
If you want to make sure your retirement plan is bulletproof, you can’t have too much market exposure. You’ll definitely want to make sure you spread your wealth out properly, because you only get one shot at retirement. Plus, at the end of the day, the value of a precious metal like gold definitely isn’t going anywhere.
If the recession of 2008 taught us one thing, it’s that having all of your eggs in one basket is a horrible idea. Whether you’re invested in real estate, mutual funds, 401k, Roth IRA, or any other investments, placing 10-15% of your portfolio into a gold IRA can be the difference between retiring at 65 or 70. Not only can they mitigate risk, but they can also help you maximize your other retirement accounts for better longevity in retirement.
Did you know that more than half of all Americans retire below the poverty line? In some cases, people retire with as little as 5k in assets. One bad turn of the market, or one poor decision, can cripple your retirement plans. Therefore, investing in a precious metals IRA account can be the safety net you need when retirement comes knocking on the door.
Recap
While not all precious metals are allowed to be used as an IRA, there are definitely plenty of options out there. Plus, believe it or not, investing in physical wealth could be a great way to diversify your portfolio. At the end of the day, you can never go wrong with a metal people have viewed as valuable all throughout history.
Not all precious metal IRAs are as effective as a gold IRA, but that doesn’t mean you have to miss out on any retirement benefits a precious metal IRA brings to the table.
Any precious metal is going to be a tax effective investment, and while it’s not exactly going to be receiving dividends, you’ll be exposed to much less risk in the market.
It’s important to make sure your portfolio is diverse, and at the end of the day, a precious metals IRA account can be a great tool to ensure your retirement is never in jeopardy.
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