Precious Metals Roth IRA is a retirement account that differs from a traditional IRA in a few key aspects: The main difference is that Roth IRA distributions are tax-free.
In a self-directed precious metals-backed IRA, your investment enjoys all the benefits and security that holding physical precious metals offer.
A Roth IRA is a tax-advantaged individual retirement account that has a few key differences from their precursor: traditional IRA accounts.
Whereas traditional IRA’s have tax-free contributions and tax-deferred growth, Roth IRA distributions are tax-free and contributions are made with after-tax dollars. You will not be able to deduct contributions to your Roth IRA on your tax return, although those Roth distributions are not taxable when you retire.
If you have a Roth IRA, you can continue to contribute after you reach 70 years of age. You also do not have to take withdrawals, which is required for a traditional IRA at a certain age.
The Roth IRA gets its name from Senator William Roth, although they were initially called an “IRA Plus”, and were introduced through the Taxpayer Relief Act of 1997.
As of 2014, only individuals earning less than $129,000 or couples earning less than $191,000 are eligible to make Roth contributions.
Roth IRA’s do have fairly low contribution limits (relative to other retirement accounts). For 2014, those under age 50 can only contribute $5,500 annually to a Roth, while those over age 50 can add $1,000 to that in a “catch-up provision.”
Like other qualified plans, there is a 10% penalty for withdrawals made too early and a 6% penalty for all income contributed in excess of the annual limit.
What Is a Precious Metals IRA?
An IRA is an individual retirement account. There are different types of IRA accounts available to people based on their goals and objectives.
Some people may invest in an IRA account on a tax-deferred basis while others may invest in a Roth IRA on an after-tax basis. What type of IRA one should use depends on their specific circumstances and goals. This is an issue that is best discussed with one’s CPA or tax advisor.
In addition to the IRA type, there are also differences in what types of investments the IRA can hold. When the majority of people think of an IRA account, they likely think of an account that simply holds stocks, mutual funds, bonds and the like.
It seems that many people out there are not aware of what they can do with a self-directed IRA. A self-directed IRA gives an investor the freedom to decide what to invest in. This is in contrast to most standard IRA accounts in which the investment types are limited.
Many people, for example, are not aware that a self-directed IRA account gives them the ability to invest in alternative asset classes such as precious metals, futures, limited partnerships, commercial paper or real-estate.
Self-directed IRAs have been around since 1975 and are part of the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA.
Since their inception, self-directed IRA accounts have grown in popularity as investors look for additional ways to diversify their portfolios. More and more investors, it seems, are looking to branch out beyond the traditional stocks and bonds portfolio, and a self-directed IRA account can potentially provide them with a vehicle to do so.
The term precious metals IRA simply refers to a self-directed IRA account that holds precious metals in the form of coins and bullion. It is worth noting, however, that savers can also invest in other assets besides precious metals.
How Can I Obtain a Precious Metals Roth IRA?
Setting up a precious metals IRA is a relatively simple process but there are some necessary steps involved. Here we will outline some of the necessary steps as a guide.
1) Are you Setting Up a New Account or Rolling Over an Existing Retirement Account?
This is one of the first issues to take into account. An investor may look to start a new IRA account if he or she does not have one already. An investor may also decide to “rollover” an existing IRA account, 401k or other retirement account.
Obviously, an investor will need to discuss these matters with their CPA or tax adviser. Certain types of accounts can be rolled over while other types cannot. An investor must first determine his or her eligibility prior to considering a rollover.
2) Choose a Precious Metals IRA Dealer
Self-directed Precious metals Roth IRA accounts are held by what is called a precious metals IRA custodian or trust company. These companies act as a fiduciary on behalf of the account. Some of their responsibilities include account setup, producing account statements and accepting allowed contributions.
There are many different Gold IRA custodians to choose from, and one can easily compare these companies from the comfort of their own home or office. Different companies charge differing amounts for their services and may have different fee structures.
Fees are certainly one thing that a potential investor should consider when looking to establish a self-directed IRA account with a custodian. Our most recommended Gold IRA companies also offer the lowest flat fees ($250), while the best company (Regal Assets) will also pay all your first’s year’s fees for free.
When one establishes a self-directed Precious metals Roth IRA account, he or she can still buy precious metals from the dealer of their choice.
Investors can decide from the best Gold IRA custodians to compare prices and products. (View Page: Top 10 Gold IRA Companies)
3) Decide What Bullion Products to Buy
There are only certain bullion products that are eligible to be held in an IRA account. Some of these products include gold and silver American Eagles (including proof sets), Philharmonics and Canadian Maple Leafs.
In addition, one can buy gold Australian Kangaroos, gold American Buffaloes, silver Australian Kookaburras and Mexican Libertad coins.
Also, various gold rounds and bars of .995 percent minimum fineness may be eligible as well as various silver rounds and bars of 0.999 minimum fineness.
Finally, certain platinum and palladium products are also eligible. One can choose any of the IRA eligible products they like.
4) Decide on a Depository
Precious metals held in a Precious metals Roth IRA account cannot be delivered to the account holder. The metals must be stored in an approved depository, such as the Delaware depository (employed by our #1 company, Regal Assets).
IRA custodians may recommend an approved depository, but investors do have the ability to choose where their metals are stored from approved depositories.
5) Make the Purchase
When all of the pieces are in place, an investor can make their precious metals purchase. The IRA custodian will handle the payment and the dealer will ship the metals to the chosen depository.
Once an investor’s account is established and their metals have been purchased, the custodian will provide them with periodic account statements detailing their holdings and the bid or wholesale value of those holdings.
A Precious metals Roth IRA owner may liquidate his or her metals at any time.
A precious metals IRA account also gives the account holder the option of taking required minimum distributions in the form of bullion.
Setting up a precious metals IRA account has never been easier. The process is streamlined and an investor can have precious metals within their self-directed IRA account in a matter of days or weeks.
Why Precious Metals?
As the national debt ceiling rises, as it inevitably does, the dollar devaluates and the price of precious metals rises. Today, our government’s debt is the highest it’s ever been. The reality is that the dollar can no longer be considered the storage of wealth it once was.
Precious metals, on the other hand, have been a safe haven for wealth for over five thousand years. Precious metals are your best investment friend during times of crisis.
Because precious metals isn’t a paper asset, precious metals are not subject to the kinds of dilution of other investments. Precious metals are a tangible and finite resource. Precious metals can be easily stored, accessed, and hidden by the person who owns it.
Unlike other investments, precious metals are also liquid. Taken altogether, no other investment affords you the same benefits as precious metals.
Precious Metals Roth IRA Rules
Investors ask, Can I buy precious metals in a Roth IRA? Most IRAs force the owner to select their investments from stocks, bonds, and mutual funds – not so with a self-directed precious metals-backed Roth IRA.
With a Self-directed Roth IRA consisting of physical precious metals such as gold and silver, you’re able to hold approved kinds of coins and bullion (.995 purity for bars, 0.999 purity for coins). Your designated administrator will buy the precious metals and store it on your behalf in a depository.
Roth IRA vs. Traditional IRA
Holding your Roth IRA physical precious metals in a depository not only insures the security of your metals but also confers all of the tax advantages you would otherwise be entitled to as an IRA owner.
Also, with your Roth IRA precious metals investment you can continue to contribute after you reach the age of 70 (limited to $5,500 dollars per year).
You also don’t have to take withdrawals. Conversely, a traditional IRA requires that you to start taking regular withdrawals at a certain age.
Why Rollover to a Precious Metals Roth IRA
A Roth IRA allows earnings and deductible contributions to grow tax-free. All of the tax benefits associated with a Roth IRA happen when withdrawals are made: withdrawals, subject to certain rules, aren’t taxed at all – this is because all contributions to a Roth IRA are made with after-tax monies.
To convert your existing retirement plan to a Precious Metals Roth IRA is the best way for you to get a hedge against inflation, to protect your wealth and purchasing power as the dollar declines, and gain all the profits and growth associated with precious metals valuation.
Best of all, be it a Roth IRA consisting of gold or silver, choosing a precious metals IRA is no more complicated than any IRA investing.
Benefits of Investing 5-20% of Your Retirement Portfolio in a Precious Metals Roth IRA
Owning a Physical Precious Metals Roth IRA is a simple, safe way to diversify your retirement portfolio. Gold (along with other investment metals: silver, platinum and palladium) will help to protect your assets against stock market volatility and inflation.
Not only is gold a great hedge, but gold offers plenty of growth potential. In fact, many investors purchase gold for its growth prospects, and many analysts predict gold to continue to see gains in the future.
The total amount of precious metals in your retirement portfolio will depend on your own risk tolerance and retirement horizon. One of the best ways to set up a diversified retirement portfolio (and receive tax benefits) is to open a self-directed IRA.
At the end of the day, many people are going to find that a Precious Metals Roth IRA is one of the best options available for planning for retirement. It allows you to hold numerous types of investments without suffering tax penalties for making withdrawals throughout retirement.
Plus, you can continue to make contributions for as long as you live, even if you’re simply making residual income in one way or another.
Though perhaps not the most advisable option for high-income individuals, this type of IRA is certainly worth taking a closer look at.
Our visitors often ask us about which companies we recommend for Precious Metals IRA rollovers and bullion purchases.
For best results, work with a trusted Gold IRA custodian who can walk you through the steps of setting up or rolling over an IRA account, and getting the most out of this incredibly versatile individual retirement account. View our List of Top 10 Gold IRA Companies and choose the best company to rollover your IRA.
Do you have any questions on what is a Precious Metals Roth IRA? Ask below!