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Are you thinking about diving into alternative investments with a precious metals IRA? Then you’ve come to the right place!
In this comprehensive guide you will learn everything you need to know about precious metals IRAs. We’ll explain everything from what they are to how they work to why you should have one.
Aside from that, this guide will also have some extra tips on exactly how to get started and open a precious metals IRA.
Whether you’re just starting out learning about gold IRAs or if you’ve already done your fair share of research, this guide will have something for you!
With the introduction out of the way, let’s start off with the basics.
Precious Metals Historic Pricing Chart
Before we get too deep into precious metals IRAs, take a look at the historic prices of gold, silver, platinum, and palladiums below.
You can toggle up to 10 years or even further to get a sense of long term ROI for investing in gold.
Now let's dive deep into gold IRAs and see if they are right for you.
What Is a Precious Metals IRA (AKA Gold IRA)?
Let’s start from the top. IRA is an abbreviation of “individual retirement account”. Individual retirement accounts (IRAs) allow you to hold assets and save money in a tax-advantaged way for your retirement years.
A precious metals IRA is an individual retirement account where you purchase and hold investments in various kinds of precious metals such as gold, silver as well as platinum.
You invest in things like physical gold assets such as gold coins or gold bullions using a precious metals IRA is a great way to invest in precious metals while getting the unique tax advantages of using an IRA.
What’s The Difference Between a Gold IRA and a Precious Metals IRA?
Nowadays, the terms “precious metals IRA” and “gold IRA” are used interchangeably.
This can be confusing because it might lead you to believe that a gold IRA only invests in gold, however, that’s not typically the case.
Technically speaking, a gold IRA is the same as a precious metals IRA, but since gold is the most common precious metal purchased by these types of retirement accounts, they all get stuck with the term “gold IRA”.
Precious metals IRAs can have investments in any precious metals, however that doesn’t mean that the company you work with can source any kind of precious metal for you.
So for simplicity's sake, if you see gold IRAs come up in a discussion, just assume that they mean precious metals IRAs too.
Gold IRA History
Precious metal IRAs and gold IRAs have been around for quite awhile but can still be considered a relatively recent creation.
People have been able to hold gold and other precious metals in IRAs since all the way back to 1997. If that sounds very recent, please be reminded that 1997 was 25 years ago as of the writing of this article.
In 1997, “The Taxpayer Relief Act Of 1997” (Section 304) basically let you have many more different types of investments in your IRA. In 1997, you were allowed to hold gold and silver in your IRA. In 1998, you were allowed to hold other precious metals such as platinum and palladium.
While you’ve been allowed to hold precious metals in your IRA for a while, fully dedicated gold IRAs only started being a thing in the early 2000s.
Gold IRAs as they are now were made in response to the stock market crash of 2001. They’re goal was to give investors an alternative to regular retirement accounts since many people lost faith in the stock market after the market crash of 2001.
Gold was about $255 per ounce in 1999. The price of an ounce of gold in 2021 is about $1737. That’s a good amount of growth and more than enough to fight off inflation.
What is a Self-Directed Precious Metals IRA (SDIRA)?
An SDIRA is a retirement account that lets you invest in a much wider range of assets compared to a traditional IRA.
A self-directed IRA account gives you much more freedom to choose what investments work best for you. You can choose to invest in assets such as precious metals, real estate or even private companies. This gives you much more personalization options compared to regular IRAs.
You can learn more about self-directed gold IRAs here.
How Does a Precious Metals IRA Work?
The setup process for precious metals IRAs is more straightforward than most people expect.
To open your gold IRA:
Either fund with cash, or transfer your funds from your current retirement account into your new precious metals account.
Your precious metals dealer will then buy precious metals on your behalf and then store them in a secure location.
List of Steps
Usually you’d buy your choice of precious metals in the form of coins, bars or bullions. You can only hold a maximum amount of $100,000 worth of precious metals in your IRA.
Why Should You Invest In Physical Gold & Precious Metals For Retirement?
There are a lot of reasons why you should invest in gold and precious metals for your retirement. To keep this section at a decent length, we’ll narrow it down to four main points.
- Gold and precious metals are a safe haven asset which means that they have a proven track record of holding their value during times of economic volatility.
- Precious metals in general have been shown to outperform other investment options over long stretches of time.
- Precious metals, gold in particular, has a proven track record of beating inflation even taking into account market fluctuations on the price of gold.
- Precious metals are called precious metals for a reason. They’re almost always highly desirable which means they’re very easy to sell off which makes them a versatile asset to have.
There are many other benefits to investing in precious metals but those four are the main ones.
Benefits of Precious Metals IRAs
We went over the benefits of investing in gold for your retirement above.
Now we’re going to go over some of the benefits of doing that with a precious metals IRA in particular.
- Compared to other IRAs, precious metals IRAs let you own a physical asset. You own the precious metals that you invest in. You own the gold that you buy.
- Using a gold IRA is more tax-advantageous compared to other forms of precious metals investment.
- You can do rollovers with a precious metals IRA. That means you can use your readily available funds in your other retirement funds to start investing in precious metals. You can use these funds with minimal taxes and penalties using rollovers.
Precious Metals IRA Pricing
This section will go over some of the common expenses you can expect with a precious metals IRA. You’re going to have to deal with:
Seller’s markup: This is exactly what it sounds like. You’re going to have to pay the markup when you’re buying something like a gold bullion or gold bar.
Retirement account setup fee: This is a one-time setup fee to make your precious metals IRA. The fee for gold IRAs is usually higher than regular IRAs since not many companies offer them.
Storage fees: This is the price you pay to hold your precious metals at a safe storage facility.
Custodian fees: Custodian fees are common among all IRAs but gold IRAs tend to have noticeably higher custodian fees compared to regular IRAs. Once again, this is mostly because not many companies offer precious metals IRAs.
Cash-out costs: Closing out your precious metals IRA by selling your precious metals to a third-party dealer will incur fees. The third party dealer pays much less than what your precious metals go for on the open market.
Closing fees: Closing your precious metals IRA comes with closing fees that are unique to precious metals IRAs and gold IRAs.
Take a look at fees from Augusta Precious Metals as an example:
IRS-Approved Precious Metals For Retirement Accounts
You need to be discerning and cautious when you purchase precious metals for your precious metals IRA.
The IRS is pretty strict when it comes to you buying precious metals for your retirement accounts and retirement savings.
Here’s a detailed rundown of IRA approved precious metals, including gold and silver coins, that you can hold:
- American Gold Eagle bullion coins
- American Gold Eagle proof coins
- British Gold Britannia coins (from 2013)
- British The Queen's Beasts (coin)
- British gold Shēngxiào Lunar Series (British coin)
- Canadian Gold Maple Leaf coins
- Austrian Gold Philharmonic coins
- Australian Kangaroo/Nugget coins
- Chinese Gold Panda coins
- American Gold Buffalo uncirculated coins (proofs not allowed)
- Gold bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements.
- American Silver Eagle bullion coins
- American Silver Eagle proof coins
- British Silver Britannia coins (from 2013)
- British The Queen's Beasts (coin)
- British silver Shēngxiào Lunar Series (British coin)
- Canadian Silver Maple Leaf coins
- Austrian Silver Philharmonic coins
- Australian Silver Kookaburra coins
- Chinese Silver Panda coins
- Mexican Libertad coins
- Silver bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
- American Platinum Eagle coins
- American Platinum Eagle proof coins
- British The Queen's Beasts (coin)
- British Britannia (coin) (from 2018)
- Canadian Platinum Maple Leaf coins
- Isle of Man Noble coins
- Australian Platinum Koala coins
- Platinum bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
- American Palladium Eagle bullion coins
- Canadian Palladium Maple Leaf coins
- Palladium bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements
Precious Metals IRA Rollovers
You have two main options when it comes to precious metals IRA rollovers. You need to choose what's the best option for you when it comes to gold IRA rollovers but either option works.
The first is to transfer over an existing retirement account to your gold IRA. This is the more straightforward option.
You won’t need to liquidate any of your assets but you need to make sure that everything checks out with the IRS first. This is simplest if you're doing a rollover from an existing IRA.
The second option is to rollover your assets from other types of retirement accounts.
This is more complicated because you need to liquidate your assets to purchase your precious metals.
This is the more complicated option but sometimes you don’t have a choice. On the bright side, this is a great way for you to get started in investing in precious metals if you don’t currently have a retirement account.
Precious Metals IRA Storage
When you invest in physical precious metals or other physical assets, you need to consider that they're not paper assets. You have two options when it comes to storing your precious metals:
The first is using an IRS approved depository to store precious metals. Your precious metals will be stored in a secure facility that’s guarded by professionals year round. This is the more popular option since it saves you a lot of headaches and stress.
The second option is storing your precious metals yourself, AKA a home storage gold IRA. People opt for this because they prefer holding onto their precious metals themselves and they save costs on using a depository. However, holding any significant amount of precious metals is risky because if it gets stolen or destroyed on your watch, it’s completely on you.
Precious Metals IRA Scams
The most common precious metals IRA scam is when people offer to sell you precious metal products that don’t meet the IRS requirements.
Make sure what you’re buying is cool with Uncle Sam and the taxman!
Other scams include local scammers selling poor quality metals via sites like Craigslist and Facebook Marketplace, excessively high fees that weren’t mentioned anywhere and guaranteeing investment returns that are much higher than reality.
There’s a fine line between using scumbag marketing tactics and being an outright scam. You need to do your own research to protect yourself from both of these things.
How To Open a Precious Metals IRA Account
Here’s a section dedicated to what you need to get and what you need to do in order to open a precious metals IRA.
Bookmark this one because it’ll stop you from a lot of running around and save you a bunch of headaches later on.
Please remember that these steps will vary from provider to provider. However, they’re all pretty similar for the most part.
Gather Your Documents and Information
Get all your personal documents ready beforehand to save yourself some stress. Get ready your ID, driver’s licence and any other relevant documents that your chosen IRA provider wants. Some providers just need some form of identification and cash while others need more complete documentation as well as information.
Choose Your Precious Metals IRA Company & Select a SDIRA Custodian
After choosing your precious metals IRA provider, you now need to choose your SDIRA custodian. Your precious metals will be kept safe by this custodian. Most gold IRA companies will suggest a trusted custodian to you, but it’s up to you.
You’ll also need to choose your precious metals dealer. You will be directing your chosen custodian to send money to your chosen dealer to purchase your precious metals.
Decide What Products To Purchase
You now need to choose your precious metal asset and work with your dealer to sort out your purchase. You can buy bullions, coins or bars. You can buy gold, silver, platinum or maybe even palladium. You decide!
Fund Your Account
After all of the above, you’ll need funds to start purchasing precious metals. You can choose to fund your account using a rollover, a transfer or with cash contributions. Most people like to do cash contributions since it’s the simplest option but you need to figure out what’s best for you.
Precious Metals IRA Companies
# 1 - Augusta Precious Metals (Most Trusted)
Augusta Precious Metals is our top gold IRA company recommendation. They have a great reputation, are great for high networth individuals, and have been around since 2012. They are almost completely focused on precious metals as their name suggests. Augusta Precious Metals is extremely well rated by both the Better Business Bureau as well as the Business Consumer Alliance.
# 2 - Birch Gold Group (Best Choice For New Investors)
Birch Gold Group is a company with almost two decades of history. They’re gold IRA specialists with a great reputation that charges low fees and has an excellent as well as easy buyback program. Birch Gold Group is recommended for new investors since they’re easy and efficient to work with, have low fees and you can start a gold IRA with them for as low as $10,000.
# 3 - Advantage Gold (Best For IRA Rollovers)
Advantage Gold is a relatively young company that’s been in business since 2014 and an awesome gold IRA company to work with for a rollover. They specialize in converting eligible accounts into precious metals IRAs and deal with both precious metals IRAs as well as cash sales of precious metals.
# 4 - Goldco Precious Metals (Best Gold Selection)
Goldco Precious Metals has been around since 2006 and they handle both IRA as well as non-IRA transactions. Goldco Precious Metals is highly rated on multiple sites such as TrustLink, Google Reviews and most importantly the Better Business Bureau.
# 5 - American Hartford Gold (Best Customer Service)
American Hartford Gold is easily one of the most trustworthy gold IRA dealers, with near pristine ratings and reviews online, great product inventory, and super a super helpful team with great customer service. It's obvious they care about their customers. On the other hand, if you're looking for platinum or palladium, you're out of luck. We gave AHG 5 out of 5 stars.
FAQs About Gold IRAs
This depends on your individual needs but for most people, precious metals IRAs are a relatively safe investment option that provides good growth. Take a good look at what you need. Maybe it's mutual funds, gold ETFs or a gold IRA. It all depends on you.
Yes, you can take possession of your gold. It’s your gold in your IRA after all. Part of this investment strategy is that you own physical gold.
Yes, you can take possession of the precious metals in your IRA. The metals you invested in are available as physical assets that you can collect after your retirement.
Gold in an IRA is taxed like any other asset in a traditional IRA. This is one of the main advantages of investing in gold with an IRA. Just make sure you or your accountant always follows all the set IRS guidelines!
Final Thoughts - Should You Invest In Precious Metals For Retirement?
A precious metals IRA is a great investment vehicle to help fund your retirement.
Using alternative assets to build a healthy retirement portfolio might be exactly what you need. Steady growth isn’t always exciting or quick but sometimes that’s the best bet.
Slow but consistent growth is exactly what precious metals IRAs offer you while you build up your retirement savings.
A precious metals IRA is a great way for you to start investing in precious metals and if there are plenty of options available for you depending on your needs.
If you want to make an investment that prioritises safety, affordability or maximised returns, there’s a precious metals IRA that’s perfect for you.
Hopefully this article answered any questions that you had about precious metals IRAs.