When the stock market gets rough, some investors seek out safe-haven investments like precious metals. While gold, silver and palladium are subject to their own forms of volatility, many believe them to be superior long-term investment choices.
You can’t hold physical precious metal in a regular individual retirement account (IRA). However, there are specially designed precious metals IRAs that let you invest for retirement using gold, palladium, silver and other valuable metals.
A precious metals IRA is a special form of self-directed individual retirement account. Self-directed IRAs allow you to invest in a broad variety of unconventional assets, including precious metals, real estate and art, beyond the usual options available in a conventional IRA.
Jim Garofalo, President and CEO of Professional Coin Galleries (PCG) says “Adding gold or precious metals to your retirement account may help protect your wealth in several ways, including reducing your potential investment volatility and risk, serving as a hedge in the event of an economic downtown and providing a tax-efficient shelter for potential gains,” he says.
With precious metals IRAs, you can invest in gold, silver, platinum or palladium. That said, you can’t invest in just any gold, silver, platinum or palladium. The IRS has specific standards your precious metals have to meet:
Acceptable products that the IRS allows include American Eagle coins in both Gold and Silver, despite the fact that they do not meet the 99.5% purity standard for gold.
Once you have a custodian, dealer and depository, you can complete your purchase. The IRA custodian will handle the payments, and the dealer will ship your precious metals to the depository.
When you take a withdrawal, you have two options:
In either situation, you will contact your custodian to start the transaction. Remember, though, that precious metals IRAs are subject to the same rules as normal IRAs. Your investments can appreciate in value without taxation while they’re in the account, but when you withdraw them, you may owe taxes and penalties, depending on your account type and how old you are.
By that same token, you’re required to start taking required minimum distributions (RMDs) when you turn 72.
Precious metals IRAs may be a viable option for investors concerned about inflation and market volatility. They are an excellent alternative to traditional investment type IRA’s and are best when a client has more than one IRA and/or 401K. This can create some protection for one’s retirement nest egg.