You’ve probably heard about individual retirement accounts (IRAs), and maybe you even have one of your own, but what about self-directed precious metals IRAs? Unlike a regular IRA, which allows you to hold traditional investments like stocks, a precious metals self-directed IRA enables you to own investments like gold, silver, and platinum. The flexibility of self-directed IRAs is very appealing, and precious metals have historically performed well during tumultuous economic periods.
Below, learn how precious metals self-directed IRAs work and find tips on how to open one.
Understanding Self-Directed IRAs
Self-directed IRAs (SDIRAs) are specialized retirement accounts that allow you to own a diverse collection of assets. The account holder manages their own IRA, hence the name.
Unlike regular IRAs, SDIRAs enable you to hold alternative assets like precious metals, cryptocurrency, and real estate. Custodians are not allowed to give financial advice, so the responsibility of asset management lies solely with the account holder. Keep that in mind before setting one up.
Self-directed IRAs are available as both a traditional IRA, which allows tax-deductible contributions, and a Roth IRA, which provides tax advantages when you’re ready to take distributions.
Benefits of Adding Precious Metals to Your IRA
Why add precious metals to your IRA? It’s all about diversification. Relying solely on one type of asset, like stocks, is rarely a good idea. Should the stock market fail, your retirement could be at risk. By adding metals to your IRA, you’ll have some protection from unstable economic conditions.
Precious metals also help maintain your purchasing power during periods of inflation. When inflation strikes, the dollar doesn’t go as far as it once did. The price of precious metals tends to remain fairly stable even during times of inflation, which means assets like gold and silver are unlikely to drop in value. Holding precious metals in an IRA could also help you sleep better at night when it comes to geopolitical events and a hazy economic future.
IRA-Approved Precious Metals
Quite a few fledgling investors think they can put any type of precious metals into an IRA. This is not the case. The IRS has strict rules on the types of IRA-eligible precious metals. Purity standards are as follows:
- Gold: 99.5% (0.995)
- Silver: 99.9% (0.999)
- Platinum and palladium: 99.95% (0.9995)
Many “collectible” coins aren’t eligible for IRAs because they don’t meet these purity standards. Examples of eligible gold products include:
- American Eagle
- Australian Lunar Series
- Chinese Panda
- U.S. Buffalo
Eligible silver products include:
- American Eagle
- America the Beautiful
- British Britannia (2013 and newer)
- Mexican Libertad
Eligible platinum and palladium products include:
- American Eagle
- Australian Koala
- Canadian Maple Leaf
- Isle of Man Noble
Keep in mind that certain variations of these products may vary in purity. Always verify purity and eligibility before purchasing.
IRS Rules and Regulations for Precious Metals IRAs
Before opening a precious metals self-directed IRA, it’s important to understand IRS compliance regulations for these accounts. The first of these regulations is that you’re not allowed to hold IRA-eligible precious metals at home. The IRS says you must put your metals in an approved depository for safekeeping.
The second rule is that the IRA cannot do business or engage in transactions with “disqualified persons.” Should the IRA do business with a disqualified entity, it ceases to become an IRA, and you’ll lose your tax advantages. Disqualified entities include IRA beneficiaries, family members, and IRA service providers that give financial advice for compensation.
You’ll also have to keep annual contribution limits in mind. In 2024 and 2025, the maximum contribution is $7,000, or $8,000 if you’re over the age of 50.
Eligible Accounts for Rollover
Once you’ve opened your precious metals self-directed IRA, you’ll have to fund it. One of the most common ways to do so is with a rollover from a traditional IRA, which involves transferring money directly from your traditional IRA to the new SDIRA. It’s a great choice if you want that IRA up and running quickly.
The simplest option is to ask your traditional IRA account manager to handle the rollover for you. You can also withdraw the funds and deposit them into the new account yourself. You have 60 days to complete the transfer if you go this route. Failure to make the transfer in time and the IRS charges a 10% early withdrawal penalty (if you’re under 59 ½).
If you’re leaving your job or retiring, you could opt to roll over your employer-sponsored 401(k), 403(b), 457(b), or Thrift Savings Plan to the new IRA. However, if you choose a Roth IRA, you’ll owe taxes at the time of rollover. Additionally, rolling over stock from your former employer could cost you when tax season rolls around.
Finding a Custodian for Your Precious Metals IRA
One of the biggest and most important steps in opening a gold IRA is choosing a custodian. The custodian’s job is to help you manage your gold and silver investments and ensure that your IRA stays compliant with IRS regulations.
Not all IRA custodians are alike, and unfortunately, there are plenty of scammers out there. You’ll have to do your due diligence and choose one with a good reputation for integrity and reliability. To pick a suitable custodian, consider:
- How many years has the custodian been in business? If they don’t want to tell you, steer clear.
- What does their website look like? Is the website professional-looking and packed with helpful information, or does it look like the work of a fly-by-night operation?
- What are their fees? Some custodians charge on a sliding scale that goes up as the value of your account increases, while others charge a flat rate. Expect to pay your custodian anywhere from $50 to $100 per transfer.
- What depositories does the custodian partner with and recommend? Reputable ones include International Depository Services and Delaware Depository Services Company.
- What are the custodian’s customer service options? How long does it take them to respond when you ask a question?
Steps To Open a Precious Metals Self-Directed IRA
Once you’ve chosen a precious metals IRA company and a custodian, you’re ready to set up your IRA account. First, you must complete the necessary documentation with your custodian and fund the account. As mentioned above, you could opt for a rollover or transfer. Direct contributions are allowed as well.
Next, choose IRA-approved metals that meet IRS purity requirements, as outlined above. Your custodian will purchase the metals on your behalf and send them to your depository for storage.
Common Mistakes To Avoid
To avoid trouble with your self-directed IRA, watch out for these common mistakes:
- Buying non-approved metals: Coins and bullion must meet strict purity guidelines to qualify for an IRA. Collectible coins are not eligible.
- Storing metals improperly: You cannot store IRA-eligible metals at home or in an unapproved storage facility. You must keep your precious metals in an approved depository.
- Neglecting due diligence: The custodian has a very important role, so do thorough research before choosing yours.
Discover More Benefits of Opening a Precious Metals Self-Directed IRA
Opening a gold or silver IRA could be a sensible choice if you’re interested in diversifying your portfolio. Precious metals tend to perform well during periods of inflation and other economic woes. Even if the dollar takes a nosedive, your wealth may remain protected.
To learn more about opening a precious metals self-directed IRA, reach out to Preserve Gold at (877) 444-0923.
