Precious Metals IRA

HOW A PRECIOUS METALS IRA INVESTMENT WORKS

If you are a savvy investor, then you understand just how important it is to diversify your investment portfolio. Of course, the traditional stocks and shares are great. However, thanks to the current level of volatility in the economy, more and more investors are securing their futures with precious metals IRAs. Metals like gold and silver have over time proved to be great for investment. Thanks to a self-directed IRA, you can make your decision to invest in such metals. However, the thing to remember is that you will not physically hold onto your metals, but rather the equivalent amount that you are investing in them.

How Does a Precious Metals IRA Investment Work?

The metals that you can invest in include platinum, gold, palladium and silver. You may make your investment in the form of coins or bullion. Once you have made your investment, the metal will be held by the custodian. The metals are required to have a certain level of purity, therefore their quality is thoroughly checked beforehand.

Eligibility for Investing in IRA

In order to be eligible for an Individual Retirement Account, you need to receive compensation from your job, alimony or self-employment. Currently, income made from pensions, investments and annuities do not quality for this investment. Since the amount required to fund a retirement account is modest, just about everyone can participate in this type of investment. In order to contribute to the traditional IRA, you must be no older than 70½ years. However, you can contribute to a Roth IRA at any age. Keep in mind there are other regulations that dictate the choice of retirement plan in which you may invest. Your financial advisor should advise you on the best plan for your needs.

Opening Your Precious Metals IRA Account

Unlike 401k plans that can only be rolled over in separation from your employer, Individual Retirement Accounts are never linked to employment situations. Therefore, you may transfer them at any time. This means that you can reassign and liquidate securities in your existing retirement account to fund your metals account. In order to open a metals investment account, you need to start off by finding a reputable custodian to hold your bullion. Keep in mind that you will need to pay custodial fees toward the storage and maintenance of your account, hence you may want to look for a custodian that charges minimal fees.

Once you have opened an account with the trust company, the physical metal will be shipped to its vault for storage during the term. Once your 401k is eligible for a rollover, you may then transfer and use the invested funds in your account. Upon distribution of the IRA, the custodian will either deliver the physical bullion or send a check for its equivalent value. This is usually treated as a taxable income for the fiscal year. However, if you choose to make your withdrawal before turning 59½ years old, then you will be required to pay a penalty of 10 percent.

Selecting Bullion for Your Investment

Up until 1997, only Gold and Silver Eagles were used in precious metals IRAs. These were coins 10 oz or less minted by the U.S. government. After an amendment to the law, heavier bars with recognized assay marks were accepted. This was particularly helpful for silver investment which has less value per ounce. It also allowed non-U.S. bullion, such as those minted by the Australian and Canadian governments, to be used in precious metals IRA investment. However, in order to be eligible for investment, the bullion must attain a purity of 99.5 percent. The 1997 change in law also allowed inclusion of metals such as palladium and platinum onto the list of approved bullion.

Rollover into Precious Metals IRA Investment

You can convert most employer pension and profit sharing plans, existing retirement account holdings and 403(b) plans into a precious metal IRA investment. All you have to do is issue a transfer request to the custodian of the existing account, or simply collect the proceeds of these accounts into new accounts for reinvestment. As long as you reinvest your funds within 60 days, you will enjoy the same rollover as you do with a transfer request without having to pay any taxes or IRS penalties. Most people prefer this method to issuing and processing transfer requests. From here, you can continue funding your account annually until you reach the maximum allowed limit. You can also make this investment part of your Simplified Employee Pension (SEP) plan with yearly contributions of up to $30,000 on top of other eligible contributions.

Funding Your Account

When selecting rare metal assets to be added to your portfolio, you need to work with your custodian just the same way you would when acquiring any other investment holding. It will be upon yourself to decide what kinds of coins you want to invest in and at what time. You will be under no obligation to fund your account at any given time. Once you have made your decision, you will need to fund your account with cash, transfers or rollover assets, and direct your custodian to acquire the metals on the terms that you have established with your account manager. It must be noted that you cannot fund your account using coins that you already own.

Managing Your IRA Account

Self-directed retirement accounts usually come with unmatched flexibility as well as confidence. You can order changes in your fund by contacting your custodian via phone or fax. In addition, your custodian will issue to you regular, easy to read account statements that include an estimate of your assets’ market valuation. These estimates are usually based on your coins’ value rather than potential numismatic value. The custodian also handles any necessary IRS reporting.

Benefits of Investing in Precious Metals IRAs

There are several benefits that come with this investment option. Generally, opening a retirement account that handles gold or silver is a sure way of safeguarding yourself from various global market risks such as inflation, that is often associated with paper investments. Due to the poor performance of some currencies, especially the volatility of the U.S. Dollar, using these metals as your primary form of investment can help safeguard the value of your assets.

Keeping gold in your home does not come without various risks such as theft or natural disasters. However, you can avoid these risks by investing in a Gold Individual Retirement Account and having a custodian monitor the safety of your investments.

Precious metals, unlike other investment options, tend to gradually increase in value. These metals rarely or almost never become affected by prevailing economic conditions and related external factors. This makes them a secure investment when compared to other options like investing in stocks. Thus, choosing this investment option is a sure way of growing your wealth.

Individual Retirement Accounts – IRAs, are a popular way of setting aside money for your eventual retirement. These accounts allow you to deter or avoid paying tax on income and capital gains. Precious metals IRAs allow you to store your money in the form of gold or silver bullion which is a safe hedge against inflation and other financial risks.