All That Glitters Could be Gold: Investing in Precious Metals in a Self-Directed IRA
Published on December 24, 2019
Gold, silver and platinum figure big in holiday gift giving. But did you know that not all precious metals are destined to become jewelry? For many investors with self-directed IRAs, precious metals are part of their retirement portfolios.
You may have heard the terms “gold IRA” or “silver IRA.” They refer to the self-directed retirement plans that include these precious metals. In these cases, physical gold, silver or other approved precious metals are held in custody for the benefit of the IRA account owner. Instead of paper assets, there are physical coins or bullion bars, referred to as hard assets.
These alternative assets are easy to own and to manage for savvy investors who already know and understand the precious metals markets. And, precious metals have historically been an excellent way to diversify investment holdings and preserve capital. Gold and silver provide a hedge against inflation and precious metals’ value usually move independently of the stock market, which can make a precious metals IRA a good hedge against market volatility.
Precious metal assets allowed in self-directed IRAs
There are three categories of precious metal assets investors can include in their self-directed retirement plans:
- Investment-grade gold and silver bars and rounds, including Credit Suisse-Pamp Suisse bars. Gold must be .995 percent minimum fineness and silver .999 minimum fineness.
- Gold, silver, platinum and palladium bullion – these assets must meet applicable purity or fineness standards. For platinum and palladium this is .9995 percent minimum fineness.
- Investment-grade gold and silver coins as well as some platinum coins. These include gold and silver American Eagles (including proof sets) and Buffalo Bullion coins, as well as foreign coins: gold or silver Austrian Philharmonics and gold, silver or platinum Canadian Maple Leafs, gold Australian Kangaroos, silver Australian Kookaburras and Mexican Libertad coins, and platinum Australian Koalas. Note that certain IRS restrictions apply, so be sure to thoroughly research the investment beforehand.
As with other nontraditional investments that are prohibited from self-directed IRAs, rare and collectible coins are NOT acceptable precious metals for this investment purpose.
Setting up a precious metals IRA
- Open a new precious metals IRA with a custodian, a neutral third party that will act as an administrator on behalf of your account and provide account administration services.
- Fund the account in one of three ways:
- A transfer from an existing like account to your new self-directed IRA (NOTE: your current custodian may request a medallion stamp guarantee to process the transfer form);
- A rollover from your current custodian or a former employer 401(k) into your new self-directed IRA;
- Make a contribution by check.
- Choose a precious metals dealer. This is part of the research that a self-directed investor performs as part of his/her due diligence about investing in this alternative asset.
- Select a depository. You will not hold the coins, bullion or bars on your premises. These assets are stored in an off-site depository that specializes in holding precious metals. You can choose segregated or non-segregated storage. Ask about the depository’s security measures, inventory audits, and reporting.
- Decide what precious metal products to buy.
- Send purchase instructions to the custodian, who will execute the transaction.
Liquidating your assets
You can liquidate precious metals assets any time you wish and your IRA custodian can advise you on the process. Proceeds from the sale of the assets go back into your self-directed IRA as they do with any self-directed asset, so they remain tax-advantaged. You also have the option of taking required minimum distributions in the form of bullion.
Do you have questions about opening a new self-directed IRA or how to execute a transaction concerning a precious metals investment? You may schedule a complimentary educational session or contact our team about self-directed IRAs and the many types of nontraditional investments these plans allow. We’re available via phone at 1-888-857-8058 or by email at NewAccounts@NextGenerationTrust.com.Back to Blog