Ready to learn about a precious metals IRA?
A precious metals IRA is a self-directed IRA (SDIRA) that allows account owners to purchase alternative assets like gold, silver, platinum, and palladium. Precious metals IRAs can be a great way to protect your current retirement savings by purchasing precious metal coins, bars, and rounds.
In this article, we’ll explore what precious metals IRAs are, the different types of precious metals IRAs. You’ll also learn how to open a precious metals IRA and find answers to many frequently asked questions to determine whether an SDIRA aligns with your retirement goals. So, if you are curious to know why people are turning to a precious metals IRA to secure their retirement, be sure to bookmark this page.
So What is a Precious Metal IRA?
A precious metals IRA is a type of self-directed IRA, which is a retirement account that allows account holders to make investment decisions, specifically where to invest and how much. With a precious metals IRA, account holders are allowed to purchase eligible alternative assets, such as precious metals like gold, silver, platinum, and palladium. A precious metals IRA can be a great diversification tool to safeguard and preserve your wealth by leveraging the benefits of these tangible assets with intrinsic value.
The biggest difference from a conventional IRA is in who makes the calls: with an SDIRA, you have much more control of your investment decisions.
How does a Precious Metal IRA work?
A precious metal IRA works by allowing you to buy physical precious metals like gold, silver, platinum, or palladium as part of your retirement savings. To start, you will select a precious metals IRA custodian, which is a financial institution that manages your account. Then you will be able to open your precious metals IRA account.
From there, you will fund your account, either through a direct contribution, which is subject to annual IRA contribution limits, or through an IRA transfer or 401(k) rollover by transferring eligible funds from an existing retirement account to your new precious metals IRA account.
With your account funded, you’ll be able to purchase your preferred precious metals from a reputable dealer like Birch Gold Group. The metals you choose will then be stored in an IRS-approved depository to ensure their safety and compliance with IRS regulations. When you reach the IRS’s retirement age of 59 ½, you will be able to make penalty-free withdrawals. Continue reading through this guide to learn more about the fine details of a precious metal IRA, including eligibility requirements, benefits, and more.
What are the different types of Precious Metals IRAs?
Similar to conventional IRAs, there are four different types of precious metal IRAs to choose from: a traditional precious metals IRA, a Roth precious metals IRA, a SEP precious metals IRA and a SIMPLE precious metals IRA. Here’s a quick breakdown of the four options:
- Traditional Precious Metals IRA: With a traditional precious metal IRA, the contributions you make are with pre-tax dollars, allowing you to deduct those taxes from your tax liability for the year they were made. From there, your assets grow tax-deferred until you withdraw them during retirement, which are then taxed as ordinary income.
- Roth Precious Metals IRA: With a Roth precious metal IRA, such as a Gold Roth IRA, you pay taxes on contributions as you make them. Because contributions are made with after-tax dollars, they are not tax deductible for the year they were made. However, they grow tax-free and are not subject to taxes when they are withdrawn during retirement.
- SEP Precious Metals IRA: A SEP (Simplified Employee Pension) precious metal IRA allows employers to make contributions for themselves and their employees up to a certain percentage of their salary. It’s important to note employers make contributions directly on behalf of their employees.
- SIMPLE Precious Metals IRA: A Savings Incentive Match Plan for Employees (SIMPLE) precious metals IRA is available to companies with 100 or fewer employees that allows employees to contribute to their own individual retirement accounts. SIMPLE IRAs allows both employers and employees to make contributions.
What are IRA-approved precious metals?
The precious metals eligible for placement within an IRA, such as a gold Roth IRA or similar IRA, have proven track records over thousands of years. These are the metals that transcend government influence — they are tangible and cannot be printed like paper money or stored as a number on a computer file.
The IRS allows four different types of precious metals in a precious metals IRA. IRA-approved precious metals include gold, silver, platinum, and palladium. However, only certain types of these precious metals are eligible for placement in an IRA. The primary requirement is for these precious metals to contain certain purity requirements outlined in 26 U.S. Code § 408(m) of the Internal Revenue Code (IRC),1 known as minimum fineness requirements. These minimum fineness requirements are as follows:
- IRA-eligible gold purity requirements: If you’re interested in a gold investment, opening a Gold IRA or Gold Roth IRA can be a great way to diversify your retirement savings and leverage gold’s many benefits, such as its use as a safe haven asset and hedge against inflation. However, IRA-eligible gold must meet the minimum fineness requirements of being 99.5% pure, except for the American Gold Eagle.*
- IRA-eligible silver purity requirements: SDIRA account holders can also buy silver to place in their Silver IRA as long as the silver meets the minimum fineness requirements of 99.9% pure. Like gold, eligible silver comes with several key benefits, such as its ability to maintain its purchasing power during times of economic instability and growth potential.
- IRA-eligible platinum purity requirements: While gold and silver are the most popular IRA-approved precious metals, precious metals IRA account holders can also purchase alternative assets like platinum, which is known for its catalytic properties. IRA-approved platinum must be 99.95% pure.
- IRA-eligible palladium purity requirements: Similar to platinum, palladium is known for its catalytic properties and shares a history similar to that of gold and silver, serving as a hedge against inflation and maintaining its purchasing power during turbulent economic times. IRA-approved palladium must be 99.95% pure.
Relevant Article: What Are The Benefits of a Precious Metals IRA?
*Note: The only exception to these requirements is the American Gold Eagle Bullion and Proof Coin — at 91.67% purity — as its weight, content, and purity are guaranteed by the U.S. government.
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