Want Out of the Stock Market? Consider Precious Metals in a Self-Directed IRA
Buckle up, investors—the stock market is taking millions of people for a very uncomfortable ride during the Covid-19 pandemic. Individuals who maintain retirement portfolios with traditional assets like stocks, bonds, and mutual funds have seen precipitous declines in their retirement accounts this month as the markets, businesses, and the world deal with the virus.
Advisors will say that diversification is always the key to a healthy portfolio—something self-directed investors know and practice. One way to hedge against the volatility of the stock market and reduce risk is to include alternative assets within a self-directed IRA. Along with real estate, precious metals are among some of the most popular nontraditional investment options that can be held in a self-directed IRA. In fact, there has been a recent spike in demand from investors who wish to diversify their retirement accounts with metals like gold, silver, platinum, and palladium. You can read the particulars of including precious metals in a self-directed IRA in this blog post.
Why include precious metals in a self-directed IRA?
Long before there was paper currency, there were gold and silver, traded around the world. Key benefits to including precious metals in a self-directed IRA is that these assets have no credit risk, serve as a hedge against market volatility, and also do so vis-à-vis political instability, currency weakness, and economic collapse. As Goldman Sachs was quoted this week, “gold is the currency of last resort.” Given the news swirling around us right now, it’s no wonder precious metals are in higher demand as a long-term investment.
In a move to stabilize the U.S. economy and ward off a credit crunch, the U.S. Federal Reserve has committed to purchasing an unlimited number of Treasuries and securities tied to residential and commercial mortgages. This process, called “quantitative easing,” is meant to enhance liquidity of financial markets. Pushing more money into the market affects gold prices inversely; as more money is available, interest rates go down and the value of gold goes up. This article on MarketWatch explains further and predicts gold will increase sharply in value in the coming weeks.
If you’re already knowledgeable about investing in precious metals or want to include this alternative asset in your retirement plan, check out our helpful Precious Metals Guide to learn more. If you have questions about self-direction and the other kinds of nontraditional investments these plans allow, register for a complimentary educational session with one of our knowledgeable representatives. Alternatively, you can call us directly at 888.857.8058 or send an email to NewAccounts@NextGenerationTrust.com.
All That Glitters Could be Gold: Investing in Precious Metals in a Self-Directed IRA
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.