How to Open a Precious Metals IRA
Investing in physical gold, silver, platinum or palladium can provide unique benefits for retirement savers looking to diversify and hedge against uncertainty. By holding these precious metals within an Individual Retirement Account (IRA), individuals can build an alternative asset portfolio designed to preserve wealth over the long run. This 2600+ word guide will explore what a Precious Metals IRA is, why it may be advantageous, and provide a step-by-step process for opening your own account.
Overview of a Precious Metals IRA
A Precious Metals IRA functions similarly to a traditional or Roth IRA – it is a personal retirement account that provides tax advantages for long-term investing. The key difference is that along with stocks, bonds and funds, these specialized IRAs allow the inclusion of IRS-approved physical precious metals products.
Owning gold, silver, platinum and palladium coins and bullion bars allows savers to diversify beyond paper assets. Precious metals have intrinsic value and a track record over thousands of years of holding their worth over time. In fact, gold and silver prices often rise when financial markets experience volatility, providing a hedge against inflation or economic crises.
For example, during the stock market crash of 2008, gold prices rose over 25% while the S&P 500 declined sharply. Silver also saw a similar surge in value as investors transitioned into safe haven assets. This historical data demonstrates why adding precious metals can hedge savings in turbulent times:
| Year | Gold Returns | Silver Returns | S&P 500 Returns |
|---|---|---|---|
| 2008 | +26% | +24% | -38% |
| 2020 | +25% | +47% | +16% |
While not entirely recession-proof, precious metals tend to be much less correlated to stocks and real estate over decades. This makes them powerful portfolio diversifiers for stability. See the asset class comparisons over 20 years:
| Asset Class | Annualized Returns | Standard Deviation | Sharpe Ratio |
|---|---|---|---|
| Gold | 8.6% | 16.4% | 0.49 |
| Silver | 9.3% | 32.6% | 0.28 |
| S&P 500 | 6.1% | 14.9% | 0.34 |
| REITs | 11.4% | 21.3% | 0.45 |
| Agg Bonds | 5.0% | 3.6% | 1.29 |
Adding precious metals as 5-10% of total IRA savings balances portfolios.
Benefits of a Precious Metals IRA
Here are 5 key reasons why opening a Precious Metals IRA can pay off:
1. Protection Against Market Volatility
Precious metals have historically moved independently from stocks and bonds. When markets crash or recessions hit, gold and silver prices instead tend to rise as investors flock to safe haven assets. For example, during Black Monday in 1987 stocks plunged while gold spiked over 5% in a single day. Owning physical metals provides a hedge for retirement savings in turbulent times.
2. True Diversification for Retirement Accounts
Most IRA portfolios focus heavily on paper assets like stocks, mutual funds and bonds. Adding precious metals diversifies into an entirely different asset class – tangible, physical items with inherent value – which behaves differently over decades. This can reduce overall risk and volatility.
Across portfolios, target a 5-15% allocation into gold and silver for enhanced returns, reduced risk and greater balance.
3. Tax Advantages
IRAs provide either tax-deferred growth (Traditional IRAs) or tax-free growth (Roth IRAs), allowing savings to accumulate faster over time. Precious metals IRAs deliver these same advantages on any returns from a rise in metal values, supporting faster wealth building.
4. Long-Term Wealth Preservation
Gold and silver maintain their intrinsic value over the long run, helping savers preserve purchasing power regardless of inflation or currency devaluation. For example, an ounce of gold today buys a quality men‘s suit just as it did in the era of the Gold Rush. This makes precious metals ideal for passing on lasting wealth as an inheritance for children or grandchildren.
5. Additional Investment Options
Along with physical precious metals, many custodians allow IRA account holders to also invest in mining stocks, precious metal ETFs, and even newer alternative assets like cryptocurrencies. For example, investors can buy stock in gold mining firms like Barrick Gold and Newmont or gain exposure to silver prices through the iShares Silver Trust ETF (SLV).
Later in retirement, account owners could even move a portion of their holdings into Bitcoin or Ethereum. Having access to this diverse range of alternative holdings within one tax-advantaged account saves on fees and makes optimizing a portfolio simpler for the non-expert.
Comparing Major Precious Metals ETFs
For those looking to diversify their Precious Metals IRA without directly owning physical coins or bars, exchanging-traded funds offer compelling options:
| Fund | Description | Assets | Expense Ratio |
|---|---|---|---|
| GLD | SPDR Gold Trust ETF | $65 billion | 0.40% |
| SLV | iShares Silver Trust ETF | $9 billion | 0.50% |
| PALL | Aberdeen Standard Physical Palladium ETF | $350 million | 0.60% |
These ETFs directly hold bullion in independent vaults, tracking metal spot prices. GLD and SLV are ideal one-stop shops for gold and silver exposure. PALL provides access to much rarer palladium.
Steps to Open a Precious Metals IRA
Ready to add physical gold or silver to your own retirement savings? Follow these key steps:
Choose a Precious Metals IRA Company
A Precious Metals IRA custodian handles administrative tasks, reporting and IRS compliance on your behalf. They provide access to storage facilities and metal dealers while keeping your account within regulations.
When selecting from the best companies in 2023, focus on:
- Trusted Reputation & Longevity – Well regarded in precious metals communities with 10+ years in business
- Specialization in Gold & Silver – Core focus on physical coins and bullion investing
- Available Assets – Offer both physical metals and alternatives (stocks, funds)
- Low All-In Fees – Storage fees, transaction charges and account fees
- Superior Client Service – Responsive support and metal purchase guidance
Comparison of Top 5 Gold & Silver IRA Companies
| Company | Rating | Min. Investment | Fees | Assets Offered |
|---|---|---|---|---|
| Goldco | 4.8/5 | $5k | $80 admin, $100 account setup | $150 annual storage |
| Augusta | 4.7/5 | $50k | $95 admin, $50 account setup | $150 annual storage |
| Orion | 4.5/5 | $10k | $99 admin, $0 account setup | $130 annual storage |
This table compares offerings from the highest rated Precious Metals IRA leaders. Focus on reasonable minimums and all-in costs.
Fund Your Account
Transfer existing IRA funds via a direct rollover or make new annual contributions up to IRS limits ($6,500 catch-up at 50+ years old). This "funds" your account with cash so you can purchase physical precious metals and other assets.
For example, rolling over an old 401(k) into precious metals involves contacting both your existing and new IRA custodians to facilitate the process seamlessly:
- Choose new Precious Metals IRA Custodian and open account
- Initiate paperwork from new Custodian to transfer 401(k) funds
- Existing 401(k) provider sends tax-free direct rollover of funds to new IRA
- Use funds to purchase approved gold/silver coins or bullion
This allows consolidating multiple retirement accounts into a centralized Precious Metals IRA without any penalties or realizing capital gains taxes.
Select Your Metals
After funding your account, now choose physical precious metals products to invest in. Consult your custodian‘s approved products list and select coins, bars and bullion that align with your goals. Focus on the most popular .999 fine silver and .995+ fine gold coins and bars from government mints like the U.S., Canada, Australia along with established private mints.
The minimum investment varies based on the metal and product selected. Some common examples:
| Gold Product | Weight | Approx. Price | Min. Investment |
|---|---|---|---|
| American Eagle | 1 oz | $1,800+ | $1,800 |
| Maple Leaf | 1 oz | $1,850+ | $1,850 |
| Gold Bar | 1 oz | $1,750+ | $1,750 |
| Silver Product | Weight | Approx. Price | Min. Investment |
|---|---|---|---|
| Silver Eagle | 1 oz | $21+ | $21 |
| Maple Leaf | 1 oz | $22+ | $22 |
| Silver Bar | 5 oz | $100+ | $100 |
Consider investing in a mix of limited-run collector coins along with bullion bars/rounds to balance scarcity value with lowest premiums over spot prices.
Purchase Approved Precious Metals
Your custodian will provide a list of authorized precious metal dealers to make purchases from. This dealer will then coordinate professional, insured storage on your behalf with an IRS-approved facility. Leading options include Brinks, Delaware Depository, and IDS of Delaware.
Pricing from dealers is competitive, with buy/sell spreads around 10-15% on smaller gold/silver coins. Always confirm upfront: delivery timelines, shipping and insurance coverage.
Once purchased, expect for metals to ship from the dealer directly to your segregated account in an independent, third-party storage facility for safety rather than taking personal possession.
Store in a Secure IRS-Approved Depository
Industry leading custodians work hand-in-hand with specialized depositories that offer segregated, insured precious metal storage facilities across North America to protect IRA assets. Safety and security are top priorities when safeguarding physical gold and silver.
Use an evaluation checklist when researching facilities or relying on your custodian’s selections:
Location & Access
- [ ] Located in stable U.S. state like TX, UT, DE etc
- [ ] Airport proximity for client inspections
- [ ] 7 day a week availability
Safety & Security
- [ ] Class 3 vault facility
- [ ] $1 billion+ all-risk insurance
- [ ] Climate controlled
- [ ] 24/7 monitoring & alarms
- [ ] Fully segregated storage
Infrastructure
- [ ] State-of-the-art vaults
- [ ] Real-time audit trail
- [ ] Secure account online access
- [ ] Long history & reputation
Verification
- [ ] Published third-party audits
- [ ] Inspections welcomed
Costs
- [ ] Competitive storage fees ($100-250/yr)
- [ ] No hidden charges
Compare storage partners across this criteria to identify optimal locations and protection at low costs.
Maintaining Your Precious Metals IRA
Once your Precious Metals IRA is established, perform ongoing maintenance and optimization:
Monitor Market Trends
Pay attention to macroeconomic events impacting precious metals pricing along with supply and demand fundamentals. Watch for inflation upticks, geopolitical conflicts, and central bank policy shifts which can influence gold and silver prices.
Rebalance Periodically
Rebalance your precious metals holdings against other assets in your IRA portfolio every year or two. Increase allocation if gold/silver remain underrepresented. Trim if they exceed targets. Rebalancing drives optimal asset allocation over time.
Comply with Reporting Rules
Ensure proper fair market valuations for physical precious metals holdings within your IRA, which must be formally appraised each year. File mandatory IRS forms like IRS Form 5498 tracking required minimum distributions and withdrawals coming in retirement.
Stay in close contact with your custodian for handling this documentation to avoid any tax penalties or compliance issues with the IRA.
Taking Distributions at Retirement
Once at retirement age (59.5+), investors can start taking distributions from Precious Metals IRAs by selling down assets over time, or even taking direct physical possession of gold/silver coins and bullion bars.
Traditional IRA – Pay ordinary income taxes as you liquidate holdings in cash over years.
Roth IRA – Take fully tax-free distributions since contributions were after-tax!
One strategy is converting a portion of Precious Metals IRA assets back into cash/stocks while leaving the remaining 20-30% in physical metals for passing onto heirs, taking advantage of tax-free stepped-up basis. Work closely with your custodian to execute disbursements.
Conclusion
A Precious Metals IRA can provide savers with an important method for diversifying retirement accounts into real, tangible assets that tend to maintain intrinsic value regardless of stock market volatility. Opening an account is straightforward once you select reputable Precious IRA custodians to handle account administration, gold/silver investing, compliant reporting and secure storage on your behalf. If seeking to hedge against uncertainty while aiming to preserve long-term purchasing power, then converting a portion of IRA savings into physical gold and silver can make sense for investors interested in alternatives.
