Precious metals such as palladium, silver, and gold have been used to protect investments when there is inflation, or the stock market is volatile. Individuals who have an IRA (Individual Retirement Account) might have wondered if they can hold these precious metals in an IRA. If you are among this group of people, the answer is you can’t hold precious metals in an IRA.
Before you give up on investing in these commodities, read on this first. All you need is a Gold IRA (also known as a precious metal IRA). This article will discuss the important things you need to know about this kind of account and how you can invest in it.
What is a Gold IRA?
A gold individual retirement account allows individuals to invest in precious metals, cryptocurrency, and even real estate. In other words, it’s different from the traditional individual retirement account where only conventional assets are invested. The only similarity between both types of IRAs is their contribution limits are the same.
With this sort of investment, you can invest in these precious metals for your retirement. According to experts, with precious metals IRA, you can protect your assets. You can protect it against volatility, economic downturn, etc.
How it Works
Even though this account allows you to hold precious metals, you can’t hold them physically. You need to hire the services of a custodian who’ll manage this special account. The custodian will also store the physical commodities in a storage facility.
Bear in mind that not all gold IRA companies function as custodians. Some just deal with the buying and shipping of these items to IRAs and designated storage facilities. A good example is Orion Metal Exchange , although picked as the nation’s best gold IRA service by the Chicago Tribune, they do not function as a custodian. Therefore, if you choose such a company, you’ll still need to get a custodian.
Many of such companies that aren’t custodians might also serve as middlemen to get a reputable custodian and depository facility for you. So, if you choose a company that isn’t a custodian, make sure they offer this additional service. This will prevent you from going through the stress yourself.
The custodian you choose will then receive the precious metal (you are not allowed to hold it at any time), and then they store it in the depository. These commodities are stored in what is known as a segregated account.
Precious Metals that Can Be Stored in Gold IRAs
Although gold, silver, palladium, and platinum are all acceptable, there are still standards they must meet. These standards are regulated by the IRS. The purity standard requirements must be:
- Gold – 99.5% pure
- Silver – 99.9% pure
- Palladium – 99.95% pure
- Platinum – 99.95% pure
With this standard, PAMP Suisse bars, Australian Koala bullion coins, and Canadian Maple leaf coins are all acceptable. Although American Eagle coins don’t meet this purity standard, the IRS allows them to be stored as precious metals IRA. Furthermore, collectible, and rare coins are not acceptable. Therefore, German Marks, British Sovereigns, and Swiss Francs cannot be used.
How to Open an Account
Opening a gold IRA is not the same as a Roth or traditional IRA. You can read this to discover the difference between Roth and traditional IRAs. Therefore, you need to be careful to ensure you don’t make a mistake. Here are the steps included:
Choose a Custodian
As we’ve said so far, you’ll need a custodian for this investment. These custodians must be IRS-approved and it includes trust companies, banks, etc. Ensure that you do due diligence when making your selection.
Select the Dealer
The dealer refers to the gold IRA company that sells and ships precious metals. Although you can approach the dealer yourself, it is advisable to instruct the custodian to do so on your behalf. Whichever way you choose, ensure that the dealer is reliable. Ensure that they belong to trade groups such as the Professional Numismatists Guild (PNG), Industry Council for Tangible Assets (ICTA), American Numismatic Association (ANA), etc.
Decide What to Purchase
Now that you’ve gotten the dealer, the next thing is to choose the precious metal you’ll be purchasing. Remember you need to follow the IRS purity standard requirements. A product you can’t go wrong with is the American Eagle Bullion Coins. The U.S. Mint issues this product and it is backed by the IRS as an accepted gold IRA commodity.
Select a Depository
With a good custodian, you don’t need to bother about this process as they’ll handle it for you. Nevertheless, you must know the depository where your investment will be stored. You also need to do your research on whatever depository your custodian suggests. Ensure that the depository is approved and compliant with the requirements of the Internal Revenue Code.
Complete the Investment
After doing all of the above, you can then make the purchase. Your custodian will make the payments to the dealer. The dealer then transports the commodities to the selected depository. You can now watch your investment grow.
Should You Choose this Investment Option?
Although a gold individual retirement account is a worthwhile investment, it might not be the best option for everyone. So, in this section, we’ll help you determine if this is something you need to pursue. This will save you from issues in the future.
One thing you need to bear in mind is that precious metal individual retirement accounts are quite expensive. In addition, they are riskier compared to regular IRAs. As a result, this option is usually best for individuals with a strong and huge portfolio.
Furthermore, it is not advisable to put a large chunk of your assets in these accounts. Therefore, if you don’t have a lot of assets to invest in, it is not the best option for you. Even if you do have a lot of assets, only invest a small portion of it; a gold IRA should not be your only retirement investment plan.
In this article, we answered the question “can you hold precious metals in an IRA?” by revealing that this is not possible. However, these metals can be invested in special gold (or precious metals) IRA. We went ahead to guide you on how to go about the process of investing in this unique account.