While a few financial specialists see precious metals as a transient repeating theory, there are really three imperative purposes behind incorporating precious metals in each venture portfolio. These are:
- Key Resource Allotment,
- Supporting, and
- Strategic Resource Assignment.
Key Asset Allocation
Key resource allotment is a technique used to completely expand venture portfolios by legitimately adjusting resource classes of various connections with the end goal to boost returns and limit chance. While numerous financial specialists trust their portfolios are broadened, they normally contain just three resource classes –
- stocks,
- bonds
- and (fiat) money.
Land, products, precious metals and collectibles once in a while frame some portion of most financial specialists’ portfolios. With just three resource classes (stocks, bonds, and fiat money) out of a sum of seven, such portfolios are unmistakably not sufficiently broadened.
An ongoing report constructed by Ibbotson Associates, Portfolio Diversification with Gold, Silver and Platinum, noticed that, since 1969, stock and bond connections have expanded and, in spite of prevalent thinking, a blend of these won’t result in a differentiated portfolio.
Today, most portfolios come up short on the contrarily associated resource classes – land, items and precious metals – important to accomplish full expansion, and accordingly are presented to hazard and instability.
Ibbotson analysts built a composite record that held equivalent dollar measures of gold, silver and platinum, and analyzed the relationships of that list to the next resource classes regularly held in speculation portfolios (See: Ibbotson Executive Summary)
The investigation, which analyzed the years 1972 to 2004, demonstrated that precious metals are the most contrarily connected advantage for all other resource classes. Therefore, it takes minimal measure of precious metals in a portfolio to accomplish the most extreme negative connection and the proper level of broadening.
The general execution of valuable metals amid the 32-year time span was near settled salary ventures. Indeed, even through the long bear market of 1980 to 2002, precious metals outflanked both money and swelling amid the whole time frame.
From 1973 to 1984, a high expansion period, precious metals were the best performing resource class, and the examination presumed that precious metals give a viable support against swelling. Precious metals were the main resource class with a negative normal relationship to the next resource classes, the reason for broadening.
The Ibbotson examination presumed that, by assigning from 7 to 15 percent of a portfolio to precious metals, returns would increment while chance diminished. These ends did not depend on suspicions of a positively trending business sector in precious metals or a bear advertise in monetary resources; they were just founded on a continuation of the profits and levels of swelling that have been pervasive as of late.
Supporting Resource Assignment
Supporting is a methodology used to balance speculation chance; the ideal fence disposes of the likelihood of future misfortunes. The old Wall Street saying, ‘Put 10% of your cash in gold with the expectation that it doesn’t work’, briefly condenses the supporting traits of precious metals. Furthermore, in the present monetary atmosphere, there are a lot of dangers to fence against: money trade decays, loss of obtaining influence and ‘Fat Tail’ occasions.
Money Exchange Risk
Money emergencies have been happening all the time since 1971 when US President Nixon ‘shut the gold window’, and, all around, monetary standards were never again sponsored by gold. At the point when trust in a money melts away, individuals tend escape to the place of refuge of precious metals. Maybe most broadly, the gold cost detonated from 75 marks for every ounce to 23 trillion imprints for each ounce during the 1920s Weimar Republic of Germany.
Mexico encountered a cash emergency in 1995, and the peso declined by about half against gold in around three months. Amid Indonesia’s cash emergency of 1997, the rupee lost 82 % over a one-year time span. In Russia’s 1998 money emergency, the ruble declined by 60% in only multi month. In Argentina’s 2002 cash emergency, the peso degraded to 22 % of its past level.
A cash emergency is ordinarily activated by over the top development in the cash supply or unsustainable government obligation. Is the world’s savings money, the US dollar, helpless? Add up to US cash supply in 1971, when President Nixon stopped dollars-to-gold convertibility, was around $800 billion. A year ago, the yearly increment in M3 was more than $800 billion, bringing the aggregate US cash supply to $10.2 trillion.
At the end of the day, the US presently has yearly increments in the cash supply equivalent to the whole cash supply of 34 years prior. On the off chance that this proceeds with, the outcome will be hyperinflation and, in the end, a money crumple. In the interim, the rising cost of gold is going about as a main marker for agitated occasions ahead, flagging a developing non-certainty vote in an administration’s financial strategy.
Loss of Purchasing Power
An expanding cash supply prompts the unfaltering disintegration of buying power. In view of distributed CPI figures, both the Canadian and the US dollar have lost about 83% of their buying power since 1970.
To acknowledge how valuable metals protect obtaining power against swelling, think about that in 1971 a reduced Chrysler cost about $2,300; today, the cost is $14,000. A starter home was $24,000; today, it is $236,000. The Dow Jones remained at 890, contrasted with 10,500 at year-end 2005. With respect to gold, it was $35 per ounce, contrasted with $513 at year-end 2005.
In the event that you convert these dollar costs to ounces of gold, you see that they have really declined. For example, the vehicle that used to cost 66 ounces of gold in 1971 presently costs just 30 ounces. The house that cost 703 ounces of gold currently costs 431. Indeed, you can nowpurchase twice the same number of autos or houses with your gold. Notwithstanding putting resources into valuables costs less today in gold terms. In 1971 the Dow Jones was 25 ounces of gold, while today it is 20.
Fat Tail Events
The third supporting advantage given by valuable metals is assurance against a sudden, startling money related emergency – a fat tail occasion. Precedents of fat tail occasions are war, psychological warfare, cataclysmic events, wellbeing pandemics and foundational money related dangers, for example, a subordinates mischance, insolvency of a noteworthy bank or a noteworthy enterprise, defaults on securities, subsidiaries contracts, protection contracts and interruption of oil supply.
At the point when any of these happen, customary money related resources frequently endure while the cost of valuable metals will in general ascent significantly. While most financial specialists respect protecting their homes a flat out need, their speculation portfolios are frequently totally uncovered and ‘uninsured’ – coming up short on any valuable metals assignment.
Strategic Asset Allocation
In spite of the fact that utilizing vital distribution or a supporting system is sufficient to legitimize a 7 to 15 percent assignment to physical precious metals bullion, strategic methodology legitimizes substantially higher designations.
Extensively, strategic resource allotment implies effectively searching out methodologies that will upgrade portfolio execution by moving the advantage blend in a portfolio because of the changing examples of return and hazard. With rising oil costs and expanding expansion, precious metals are probably going to beat customary money related resources in the years ahead. Here are a portion of the reasons why precious metals are a decent strategic resource technique today:
The Precious Metals Bull Market
The buyer showcase in precious metals started in 2002, and entered its second stage in the late spring of 2005. Before that, the rising gold cost essentially mirrored the US dollar decrease. From that point forward, be that as it may, the cost of gold, silver and platinum has been expanding in many monetary forms, including euros, Swiss francs, British pounds and Japanese yen. From a strategic perspective, portfolios should now be rebalanced so they are overweight with precious metals with the end goal to exploit current market patterns.
The principle pointer affirming this pattern is the Dow:Gold proportion, a factor that demonstrates when to be overweight valuable metals and hard resources, and when to be overweight money related resources. In 1999 the Dow:Gold proportion topped at more than 40, preceding declining to its current level of around 20. At the point when the proportion is ascending, as it did from 1945 to 1960 and again from 1980 to 1999, it is reasonable to be all the more intensely apportioned to money related resources with lower distributions to precious metals and hard resources.
At the point when the proportion is declining, as it is today, the contrary venture procedure applies. In our current monetary atmosphere distributions to money related resources ought to be lessened, while portions to valuable metals and hard resources ought to be expanded with the end goal to amplify returns.
A few financial specialists think the precious metals buyer showcase is very much progressed, and they have missed the watercraft. In any case, when we contrast the current market with the positively trending business sector of the 1970s, it ends up evident that we are still in the beginning periods of what could be a 20-year buyer advertise.
Deciding if the pattern will proceed is as straightforward as taking a gander at the key drivers for precious metals cost increments. While product based supply/request essentials are absolutely a factor, there are more: expanding worries about the debilitating US dollar, prospering US obligation and rising oil costs. Since the US dollar goes about as the world’s hold cash, its decrease will at last have a worldwide impact.
US Economic Vulnerabilities
As the world’s hold money, the soundness of the US dollar impacts all economies, monetary forms and speculations. The US economy is at present propped up by a pile of obligation. In 2005, the government obligation expanded by $571 billion, achieving the congressionally set obligation roof of $8.2 trillion. In the event that the present estimation of unfunded Social Security and Medicare commitments is considered, it currently remains at $49.4 trillion – $160,000 for every American.
The expanding exchange shortage has expanded every year since 1975. Today it is around $781 billion, which means the US must obtain over $2 billion every day to support its utilization of imported products and items. The US presently retains over 80% of the whole world’s reserve funds with the end goal to keep up its utilization. Since the US has re-appropriated a lot of its assembling and imports the larger part of its oil, even a noteworthy decrease in the estimation of the dollar won’t turn around this developing pattern. The US exchange shortage has turned out to be foundational.
The US current record shortfall is presently moving toward 7% of GDP. Market analysts trust that 5% is the basic number in light of the fact that, generally, a current record shortage in overabundance of 5% has brought about a money emergency. Amid a cash emergency, interest for elective monetary forms, including gold, silver and platinum, increment drastically.
Add up to US obligation as a proportion of GDP has outperformed the past high set in 1933, when it remained at roughly 255% of GDP. Today, the number is well over 300% of GDP. The way that outsiders hold a developing level of this exacerbates the situation; relatively half of US government Treasury bills and bonds are held by remote elements. In the event that remote speculators, tired of subsidizing US spending plan and exchange shortfalls, lose trust in the dollar, an enormous mass migration from both it and from US budgetary resources will follow. The outcome would be a US money related fiasco. Since the US dollar is broadly seen as the last steady cash, a great part of the cash escaping out of it will have no place to go but to precious metals.
Bullion Investments
A standout amongst the most imperative interesting points when putting resources into bullion is whether it is completely assigned, isolated and safeguarded. Except if this is the situation, there might be different cases against the bullion, or it may not in any case exist. Numerous precious metals ventures are just guarantees to convey bullion at some future date.
Bullion ventures should accurately track the cost of bullion, and not be affected by the value markets. In the event that the type of venture is reliant on a counter-party and the counter-party defaults, every one of the advantages of holding precious metals could be lost at definitely the time when they are required the most.
In rundown, a portfolio allotment of 7 to 15 percent in valuable metals is supported basically from the key and supporting perspectives.
On the off chance that you consider current vulnerabilities in the worldwide money related framework and the ramifications of pinnacle oil, a substantially higher designation is suitable. The Dow:Gold proportion is a precise marker of the pattern toward precious metals, and obviously affirms the should-be overweight proportion in that division as of now.
Otherwise, feel free to go straight to our list of Top 10 Gold IRA Companies if you are ready to invest in a Gold IRA consisting of physical precious metals today.
Do you have any questions on why you should invest in a precious metals portfolio? Ask below!
If I was going to invest there is no doubt it would be in precious metal. They absolutely seem to come with the lowest amount of risk.
However I have this phobia about investing. Just thinking about losing my money sends me into a very bad panic attack. I wish I could get over it but every time I try the same thing happens.
Thank you for a great article. You have obviously done your home work.
Dale
Hey Dale,
Thanks for the compliment. You should come out of this phobia. This is indeed a good deal that will pay-off real well. Although much less common than a Roth or Traditional IRA or a 401(k) an increasingly large number of investors are turning to Precious Metal IRA for their retirement funds. The Precious Metal IRA offers investors a number of benefits. These are just three benefits you should expect.
While you might think the process for opening a Precious Metal IRA would be difficult it’s actually quite simple. Whether you’re opening a Precious Metal IRA from scratch, rolling over your existing retirement fund, or making a transfer within the Precious Metal IRA, it couldn’t be simpler.
Diversification is the cornerstone of any retirement fund. As we’ve seen in recent years, as soon as stocks can gain value, they can also decrease in value. Investing in precious metals through an IRA will help you safeguard against any sharp decreases in value. You don’t want to be left with a big shock come retirement age—a Precious Metal IRA protects against that.
Irrespective of its value in hedging against inflation, you can rest easy knowing that no matter what your Precious Metal IRA will always have value. There will always be a demand for gold, silver, and platinum. Additionally, because these precious metals are a physical commodity in an unchanging amount, your investment can’t suddenly “disappear.”
Think of it this way: a company is a man-made creation and can go under as has happened often in recent years. As a mineral, precious metals will always be around. And demand for precious metals has maintained for thousands of year. That demand won’t go away before you retire.
Opening a Precious Metal IRA is easy and provides you with an investment vehicle that will always have value and diversifies your retirement fund. If you’re interested in adding a Precious Metal IRA to your investments view our List of Top 10 Gold IRA Companies or feel free to read more about the topic on or page Best Gold IRA Options.
Thank you for sharing this wonderful article about investing in precious metals.Investing in those metal seems beneficial and if i have money i would try it unfortunately I still a newbie in this market I will need much time to study it.
I will come back again to find more information about precious metals investment .
Hey Julienne,
Fans of precious metals say they’re tangible commodities that keep their intrinsic value. Investing in commodities like gold or silver keeps your portfolio balanced, proponents say. So when the value of the Dollar decreases, at least part of your portfolio will retain its value, despite the deflation. Forbes explains: “To many people in this uncertain environment, buying metals represents a safe-haven approach to diversification and a partial hedge against equities.” But some Doomsdayers take it a step further. They believe if the economy collapses, we’ll revert to trading in commodities, so buying them now is a good idea.
Like any investment, you shouldn’t put too much of your money into precious metals—this would be unbalanced. Overinvesting is risky for any asset, but metals are volatile and offer little return. Thus, investing the right amount is the key.
The first step is to open a self-directed IRA with a custodian offering precious metals IRAs. Then, you put money into the account, just as you would with a normal IRA. You can deposit funds from a savings account or roll over an old 401(k) or IRA into your precious metals IRA.
From there, it’s up to you to decide which metal dealer you want to work with. Your custodian may have partners it can recommend to you, or you can find one on your own. Alternatively, if you find a metal dealer that you like, they may be able to recommend a custodian for you. It’s worth noting that the metal must meet certain IRS fineness standards — 0.995 or higher and produced by a government mint or other accredited institution — in order to be included in a precious metals IRA, so be sure the products you’re looking at are up to snuff.
Before opening a precious metals IRA, you need to get your hands on a copy of the company’s fees, so you know exactly how much you’ll be paying. If there’s anything you don’t understand, ask the metal dealer and the custodian questions. Make sure the custodian you choose is licensed and has insurance to protect your precious metals in case it’s stolen.
When you’re ready to begin drawing on your precious metals IRA, you will simply reverse the process and liquidate your precious metals into cash. It’s important to keep in mind those precious metals IRAs are still subject to the early withdrawal penalties that traditional and Roth IRAs are. You will also have to pay taxes when you sell off the precious metals, unless you have a Roth precious metals IRA.
Alternatives to opening a precious metals IRA
If you want to invest in precious metals but don’t want to deal with the extra hurdles associated with a precious metals IRA, you should consider investing indirectly instead. You could buy shares of an exchange-traded fund (ETF) that tracks the value of precious metals. You could also purchase stock in a precious metals mining company instead. This way, you still get some of the same benefits without the extra hassle and expense of opening a precious metals IRA.
Many people choose to invest in precious metals because they know it’s always going to be considered valuable. But that value can fluctuate wildly over time, or worse, it could stay the same. This makes it a bit of a risky investment. If you are considering a precious metals IRA, make sure you understand exactly what you’re signing up for and limit your exposure so that you aren’t hurt too badly if the value of precious metals takes a hit. It is worth the seeds you sow. Look at a few precious metals to invest in. I have consolidated the list of best precious metals to invest in here: http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
I hope this is of some help to you for gaining more clarity.
Great topic I think silver is the next big mover in precious metals. You have been researching this for a few years and if I had any money at this time that you would be the precious metal I would invest in.
Hello Sruffey,
Thanks for the thumbs-up.
Each investment product has pros and cons, and what’s appealing to one investor may not be a good choice for another. Silver is having an underwhelming year again, this time alongside gold, and many investors are now wondering whether silver bullion is worth holding. The white metal can be volatile, and some have concerns about that as well.
However, precious metals like silver and gold are also seen as a safety net — as safe-haven assets they can act as protection for investors in times of uncertainty. With tensions running high around the world, they could be a good choice for those looking to preserve their wealth in these difficult times.
Pros of owning silver bullion
1. Silver can offer protection — As mentioned, investors often flock to precious metals during times of turmoil. When political and economic uncertainty are rife, currencies tend to take a backseat to assets like gold and silver. While silver bullion tends to get overlooked in favor of gold, it has the same role.
2. It’s tangible money — While cash, stocks, bonds and other financial products are accepted forms of wealth, they are essentially still digital promissory notes. For that reason, they are all vulnerable to depreciation due to actions like printing money. Silver bullion, on the other hand, is a tangible asset that is real and finite. That means although it is vulnerable to market fluctuations like other commodities, silver isn’t likely to completely crash because of its inherent and real value.
Chris Duane, an investor and YouTube figure, has said he puts his metal where is mouth is by liquidating his assets and putting the money into silver bullion when prices get low. Duane believes that our money system, and indeed our entire way of life, is built on unsustainable debt. In his opinion, the purpose of investing in silver bullion is to take yourself out of the mathematically inevitable collapse of that system.
3. It’s cheaper than gold — Silver bullion is not only cheaper than gold, and therefore more accessible to buy, but it’s also more versatile to spend. That means if you are wanting to use your coins as currency they’re easier to break than gold because they are lower in value. Just as a $100 bill can be a challenge to break at the shops, divvying up an ounce of gold can be a challenge. As a result, silver bullion is more practical and versatile than physical gold.
4. Silver offers higher returns than gold — Because silver bullion is worth around 1/79th the price of gold, it is affordable and stands to see a much a bigger percentage gain when silver prices go up. In fact, in the past, silver has outperformed gold in bull markets, according to GoldSilver. GoldSilver claims that from 2008 to 2011 silver gained 448 percent, while gold gained just 166 percent in that same time period.
5. History is on silver’s side — Silver and gold have been used for currency for hundreds and hundreds of years, and that lineage lends the metal a sense of stability. Many find comfort in knowing that this metal has been recognized for its value throughout a great deal of mankind’s history, and so there’s an expectation that it will endure while fiat currencies may fall to the wayside.
6. Silver offers anonymity — Whether you value your privacy or not, silver has the same benefit of cash in that it gives users a degree of anonymity with regards to spending. Not everyone wants all of their transactions to be a part of the public record, and privacy is a necessary component of democracy, according to Glenn Greenwald’s TED Talk. That is another benefit of the white metal.
Stocks may also be a better option than silver bullion for some investors. As Randy Smallwood, president and CEO of streaming company Wheaton Precious Metals (TSX:WPM,NYSE:WPM), has said, “streaming companies will always outperform bullion by itself.” He attributes this to organic growth and dividend payouts that bullion doesn’t provide.
With all of these factors in mind, investors may want to reflect on the pros and cons from their own personal lens before deciding whether to build up their stockpile of silver bullion. Timing is also an important factor for those who want to reap the benefits of the white metal. Here,
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals/ira-approved-silver
I have collated IRA approved silver options which will help you further to know the best one to invest in.
Nice article. This was very Informative and educative for me. I’ll be bookmarking this site and I’ll do more research on precious metal investment. it seems like a profitable venture. However, do I really need a ton of money to start or is there a fair amount I need to have before considering investment?
Hi Eohia,
Thanks for all the appreciation. There are two types of IRAs: Roth and traditional. Roth IRA contributions are not tax deductible, but are tax-free when you withdraw them. If you will have a high income when the time comes to withdraw the funds, a Roth is a good choice. The traditional IRA is good for people who need to deduct the contributions they make now, but are not concerned about paying the taxes later because their income will be less. The contribution limit is $5,000 a year for both IRAs unless you are 50 or older. People 50 and older can contribute $6,000 a year.
How Much Money Do You Need to Open an IRA?
There are three options when considering an IRA. You can open an account with a bank, a mutual fund company or brokerage firm. It’s fairly easy to open an IRA at any bank. Some will open the account for as little as $25 while others may want $100, but you certainly do not need a lot of money to open a bank IRA account. Most banks will let you invest in CDs or money market accounts. Some will also let you invest in stocks. Mutual funds usually require an investment of $1,000 or more. Some companies will let you open an account online and you can have automatic deductions from your paycheck. The brokerage firm is for more experienced investors who want to invest in stocks, bonds, or mutual funds.
Decisions
When you open your IRA, there are two decisions you must make. You must decide between a Roth and a traditional IRA. You also must decide whether to invest in CDs and money market savings, or invest in mutual funds, stocks, and bonds. CDs and money markets are bank products, a choice you can make if you decide to open an account with a bank.
CDs are guaranteed fixed rates for a specific amount of time, usually a minimum of six months. A money market account is a savings account with variable rates. Investing in funds, stocks, and bonds allows you to spread your money out into different investment avenues. This can be risky if you are not familiar with investment choices.
Many people stay away from the stock market because it seems erratic, but according to kiplinger.com, the return is about 10 percent. With any type of investment, the further away from retirement, the more diversified you can be because you are looking at the long term. As you near retirement, it is wise to consider more stable investments. If you can only contribute $50 or $100, or even $5 per month, that’s OK! Start there. “Even if you’re thinking, ‘I don’t have a lot of money right now,’ you need to save for future you,” Krawcheck says.
Here are few low-stress ways to get started:
• Sign up for your employer’s 401(k) plan and take full advantage of any company match, which essentially gives you free money
• Contribute to an individual retirement account that offers tax benefits, like a Roth IRA, SEP IRA or traditional IRA
• Use a micro-investing app like Acorns, which helps you begin by investing small amounts of your “spare change” by rounding up your purchases to the nearest dollar and automatically putting your coins to work
• Consider automated investing services known as robo-advisors that can help you out no matter how much you have in the bank
• Research low-cost index funds, which Warren Buffett recommends
A recent survey from financial services app Twine found that 46 percent of millennials believe they need at least $1,000 to start investing. Another 17 percent believe they need at least $10,000 before they’re able to invest. Overall, 56 percent assume they don’t have enough money to become investors themselves.
It’s simply not true. There are plenty of ways to get into the market with as little as $1, including contributing to an employer-sponsored 401(k) plan, opening a Roth IRA or using a robo-advisor such as Betterment, Wealthsimple or Ellevest, which offer $0 account minimums. The earlier you’re able to start investing, the better, even if you can’t contribute a lot just yet. That’s because compound interest allows any interest earned to then accrue interest on itself, so over time a small amount of money invested earlier will earn more than a large amount of money invested later.
Here are a few best Gold IRA options for you to check-out.
http://bestiraoptions.com/best-gold-ira-options
Hello there Uriah,
thanks for such detailed and informative article, I’ve really enjoyed it and found it to be very helpful and insightful. Going into this article I had very limited knowledge when it comes to investing in all sorts of metal, however I’ve always wondered what are the benefits of doing so and what a person can expect in short-term and long-term by investing in them. Thankfuly, Your article done a great job of explaining this whole process and what comes with it. One of the greatest benefits of investing in precious metals is that in a case of a ”fat tail occasion” You are always assured to have a financial backup plan and support. It’s always good to think one step ahead and be ready for any kind of money related emergency situation. Another great reason is of course that ”hustling” part- investing and then later selling it for much bigger price when the worth goes up! Which s a very good way to earn great money, but it’s quite a long process and requires a lot of time I think. All in all, thanks for an awesome article and keep up the good work 😉
Hi Evald,
Indeed there are a lot of short term and long term gains in this game.
One of the most important benefits of an IRA is the ability to grow your money tax-deferred. With IRAs, you won’t pay current income tax on any investment gains, until those earnings are withdrawn. The money that would otherwise go to pay taxes can stay in your account and continue to compound, giving you the opportunity to accumulate more wealth over time. Some IRAs even allow investors the ability to take tax-free income at retirement.
A Tax-Deferred IRA Can Grow Faster Than a Comparable Taxable Account
Let’s consider the case of Mike and Judy. Suppose Mike invests $5,000 each year in a tax-deferred Traditional IRA, while Judy contributes the same amount to a currently taxable investment. Both are in the 25% tax bracket and earn an annual return of 8%.
Since Judy has to pay taxes each year on her earnings, her investment only grows to $419,008 after 30 years, In contrast, Mikes’ retirement savings increases to a total of $611,729 over the same amount of time. That’s a difference of more than $192,700!
Additional Benefits of Investing in IRAs
Depending on which type of IRA you choose, you may also benefit from:
• Tax deductions
• A broad range of investment choices
• Professional asset management
• Tax-free income if you invest in a Roth IRA and meet certain requirements
• Flexible withdrawals
• Stretch capabilities
In general, those who are looking for the best option for their own personal retirement plan should always remember these two things:
A 401(k) plan’s employer-matched contributions and higher contribution allowances can help your tax-deferred retirement savings grow more quickly.
An IRA’s variety of investment offerings can better provide the flexibility to diversify your portfolio.
Additionally, borrowing against an IRA is not permitted except in rare circumstances, but a 401(k) plan does allow for this. A 401(k) can even help to provide “emergency assistance” to help policyholders withdrawal as quickly and easily as possible when there are imperative needs for a household, such as a car or home repairs, or in case of a financial crisis.
In today’s economy, this may be an all-important decision-making element that could possibly sway prospective policyholders in the direction of the 401(k). If your employer offers a 401(k), sign up for it. You can also open a traditional IRA on the side to maximize your retirement savings. Whenever possible, contribute as much as you can to the 401(k) first (which hopefully your employer will match) and then to the IRA. If you don’t have access to a 401(k), a traditional IRA is an excellent choice for retirement savings, offering tax-deferred growth.
Do read out more about the best IRA options here.
http://bestiraoptions.com/best-gold-ira-options
Good afternoon Uriah,
This is a great article with a lot of details some of which are a tic too technical for me. I do get the big picture. Gold has always been a sure investment. When the world would go through a crisis like what happened some years ago it would rise in value to then go back to its previous value while the economy recuperated. At the moment it does not look good so the value of gold will rise again. Probably now is the moment to buy it. I will pass on your post to my better half who has been talking these days about investing in gold. Thank you for this information.
Regards, Taetske
Hey Taetske,
Individual Retirement Accounts (IRAs) are the perfect investment vehicle for building a retirement nest egg. However, most IRA accounts concentrate the overwhelming majority of their assets in stocks and bonds. While these are great choices in equity and fixed income bull markets, they expose traders to considerable risk in market downturns. One of the best ways to remedy this risk is to have a portion of assets in an IRA that invests in physical gold. To qualify as a gold IRA, an account must meet certain standards. The metal held in the account has to meet Internal Revenue Service (IRS) purity standards, and the account must be held by an outside IRA trustee, not the individual. We examine five compelling reasons why every trader should have a gold IRA.
1 – Gold Provides Diversification
2 – Gold Provides Inflation Hedge
3 – Gold Provides Deflation Hedge
4 – Gold Provides Protection from Global Instability
5 – Gold Demand Likely to Grow
#1 – Gold Provides Diversification – Individual stocks have historically enjoyed high correlations with one another. In fact, the correlation between individual stocks almost always increases during severe market downturns. In other words, when the stock market makes big corrections, generally all classes of equities lose value. Having your assets in a basket of stocks does little to buffer a portfolio from losses. On the other hand, physical gold and stock prices have historically enjoyed a low and sometimes negative correlation with one another. True diversification is the best insurance in the event of a stock market crash. History shows that investing in gold provides such diversification, whereas simply investing in stock indices does not.
#2 – Gold Provides Inflation Hedge – One of the best reasons for owning a gold IRA is to protect a portfolio’s purchasing power against the ravages of inflation. Gold offers an excellent way to insulate a portfolio from a serious flaw in fiat currencies (e.g., the US dollar, euro and yen). Central banks have unlimited powers to print money and devalue their currencies. The US and other large economies rely increasingly on exports and consumer spending to bolster GDP. By keeping rates very low and expanding the money supply, the Federal Reserve ensures that US exports can remain competitive globally and US consumers can continue to borrow and spend. In fact, hyper-inflation could create a large downturn in stocks, whereas gold will likely benefit. Investors who want to protect their purchasing power when they retire may benefit from investing in a gold IRA.
#3 – Gold Provides Deflation Hedge – It may seem counterintuitive, but gold is an excellent hedge against deflation as well as inflation. In the 21st century economy, there are strong reasons to fear deflation. Despite very accommodating monetary policy from the Fed and other central banks, wages and consumer prices show no signs of rising significantly. Globalization and technology may be keeping a lid on prices and rendering monetary policy less effective as a tool to combat economic slowdowns. In addition, the retirement of baby boomers and a low population replacement rate are reasons for concern. Putting a portion of assets into a gold IRA might be a great way to protect a portfolio during extreme periods of deflation.
#4 – Gold Provides Protection from Global Instability – Gold may offer one of the best ways to hedge against the many unquantifiable systemic risks of investing in the global economy:
• Financial Systemic Risk: Corporations, banks and consumers have enormous levels of debt on their balance sheets. Changes in interest rates or market perceptions of the sustainability of this debt load could create real panic in markets. Furthermore, world economies are increasingly interdependent on one another, so a currency or debt crisis in one country or region is unlikely to remain localized. Unlike stocks, debt and other financial instruments, gold cannot lose all its value and is a viable way to hedge against financial calamities.
• Terrorism and War: Markets faces constant and tangible risks from terrorists and rogue nations that seek and have access to chemical, biological and nuclear weapons. While the chance is small that any individual act of terror will create systemic risk to the global economy, the economic fallout from a large-scale attack could be cataclysmic.
• Collapse of Fiat Money: A global collapse in fiat currencies may lead to a huge rise in gold prices. As implausible as this scenario may seem, there are nascent signs that confidence in fiat money is eroding. The rise of cryptocurrencies and their growing mainstream acceptance suggest that global citizens may be losing faith in central banks.
#5 – Gold Demand Likely to Grow There are many reasons to be optimistic about growing global demand for gold irrespective of its role as an alternative to fiat currencies. Gold is a precious metal that has enormous emotional, cultural and monetary value to societies worldwide. As emerging economies, particularly in Asia, continue to prosper, demand for gold will likely increase.
To maintain the credibility of their currencies, central banks are likely to continue to be net buyers of gold. The limited supply of gold above the ground and competing demand from industry and private citizens may hasten this demand. Owning gold in a gold IRA is a great way to capitalize on this long-term trend.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for opening up a Gold IRA
Thank you for your great article.
As some one who has invested quite heavily in property over the last decade, I have never really considered precious metals as a viable investment opportunity. Your article indicates that investing in precious metals could be a reliable and fruitful investment opportunity however what percentage of your portfolio would in precious metals in the current global climate.
Hey hi,
Thanks for the compliment.
Precious metals are precious because they are rare. There is a limited amount of these minerals produced each year, and scarcity is the reason for their value. The three major precious metals that trade on futures exchanges around the world are gold, silver, and platinum.
Gold
Gold is the most popular precious metal in the world as individuals and governments, over thousands of years, ascribe tremendous value to the metal that reflects light like no other. Gold has a dual role — it has industrial uses as well as financial applications. Gold has a high resistance to heat, it is malleable, and it conducts electricity. Therefore, industrial users consume 10 percent of the mine supply of gold each year, including the electronics, dentistry, and medical sectors. Gold has a long history as an ornamental metal and fabricated, or jewelry demand accounts for 50 percent of annual production. Finally, gold is money and many investors around the world hold gold rather than other investment assets.
While gold production is primary, meaning that companies explore for and extract gold from the crust of the earth as their main business, over 70 percent of the silver produced in the world is a secondary output. Silver is a byproduct of copper, zinc, lead and other metal production. Meanwhile, silver is also a metal that attracts investment demand. Silver has industrial uses as well; solar panels, phones, computers and other electronic devices all require silver components.
Platinum
Platinum is a rare metal, while there are approximately 2,800 tons of annual gold production, there is around 250 tons of platinum output each year. Platinum has many industrial applications because of its high resistance to heat. The metal also has a role as a precious metal that many investors hold as an asset.
As investment assets, the three precious metals are different than other commodities. While the prices of other raw materials move higher and lower in currency terms, precious metals often compete against currencies as assets. Currencies around the world are the paper notes and coins printed and minted by governments for use as legal tender.
Precious metals can be a great addition or a hedge in portfolios for savers. They tend to offset the devastating effects that inflation can have when it comes to nest eggs. There are four main reasons that precious metals should be part of any savings or investment program:
When investors lose faith in paper currencies and other asset markets, gold and other precious metals have traditionally retained their values. Therefore, precious metals are a store of wealth during times of uncertainty or economic turmoil and often have a negative correlation with other asset classes.
During periods of hyperinflation or government upheaval, precious metals have traditionally been assets that serve as flight capital. During the exodus from Nazi Germany in the 1930s, many people bribed their way out of the country or paid for passage with gold and other precious metals. There are many other examples throughout history where precious metals replaced paper currency as the only acceptable means of exchange.
Precious metals have been currencies for thousands of years while most paper money has only been around for a much shorter time. The long tradition of value for these metals is a testament to their staying power.
Physical Bars and Coins
The purest way to invest in precious metals is to buy the actual metals. Bars and coins made of gold, silver, platinum and palladium, another precious metal, are available from coin dealers around the world. Gold bars are available in sizes from 400 ounces all the way down to one gram.
Silver, platinum, and palladium bars also are available in a wide range of sizes and weights. When it comes to coins, many governments around the world mint coins, generally ranging in sizes from one-tenth of an ounce to one ounce that is legal tender in the nation that produces them.
However, the prices for these coins move with the prices of the precious metals. Precious metals bars and coins can trade at premiums or discounts to the actual underlying metal prices. These differentials result from the supply and demand for the bars and coins themselves.
When buying physical precious metals, it is important to locate a reputable company. Many dealers and banks advertise on the internet offering physical metals for the retail market. Compare prices between the dealers but be careful, anyone offering precious metals below the market price or at very low prices could be fraudulent. If you are uncomfortable with a dealer, do not purchase from them. It is always better to establish a relationship with a company that can supply precious metals and buy them from you when you choose to sell.
Futures and Options
Futures and options on futures precious metals are derivatives. These vehicles are the next step down on the pyramid. Futures contracts trade on exchanges, and they have a delivery mechanism for buyers and sellers. Therefore, a futures position can become a physical position in the metals during the delivery period. A buyer or seller can control a precious metals position for a small down payment or margin.
Options on futures are also derivatives that give purchasers the right but not the obligation to buy or sell precious metals. Options are like insurance policies on price. Sellers of options act the insurance company while buyers are the insured party.
ETF and ETN Products
ETF and ETN products trade on stock exchanges and seek to replicate the price action in a precious metal. The most popular ETF products for this asset class are the GLD and IAU that replicate the price action in gold. The SLV is an ETF which tracks the price of silver and PPLT correlates with the price of platinum. Additionally, there are many ETN products in the world of precious metals.
Some will rise when the prices of specific metals rise and others will rise when the prices of those metals fall. Leveraged ETN products magnify the price action in the underlying precious metals. These vehicles are lower down on the pyramid as they are derivative instruments based on other derivatives such as futures and options contracts in precious metals.
Mining Equities
Another way to invest in the precious metals markets is to purchase shares of companies engaged in the mining for and production of the physical metals. These stocks tend to rise when metal prices move higher and fall when they depreciate. However, those buying mining equities assume additional risks aside from the prices of the metals.
The purchase of a precious metal mining stock is a bet on the management and specific producing properties of a company. If there is a problem with either, the price of the stock could diverge from the action in the underlying metals. Sometimes mining equities outperform the price action in precious metals, and at times they underperform.
When selecting an instrument in the world of precious metals, it is important to do your homework. The most direct route for investment is through the physical market, but the other vehicles offer varying degrees of ease and liquidity when it comes to entry and exit from positions. The thing to remember is to understand what you are buying and selling and the risk of your counterpart.
I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for opening up a Gold and Precious Metals IRA
Investment is a fascinating topic to me. I have hover around to research and learn about the best and secure form of investments. I event tried with cryptocurrency lending. I even ventured toward cryptocurrency lending.
While I am still learning, I absolutely agree that precious metals are the best and most secured option against inflation and loss of money. Unfortunately, I have been in business for quite sometimes, and I am still working on getting enough saved to be able to invest in precious metal.
Your post provides me enough information to make it a priority for me at this moment. Great analysis.
Hello Antoinette,
Thanks for praising the article. Just to give you a deeper insight into the topic, I will detail a few things. Long before we had wallets full of credit cards, even before we had the old ‘paper’ money, the most common way to buy things was with gold.
The amount of gold someone owned was a measure of their status in society.
The power of the precious metal led to gold rushes around the world — including the 1851 gold rush in America where people flocked to the Victorian town of Ballarat. Fast forward a couple of hundred years and it’s pretty rare to own anything other than a small amount of gold jewellery. Since we all now use paper money as currency, gold has been transitioned to an investment tool, and unfortunately, mainly only by the wealthy. But let me give you six good reasons why you should be considering investing in gold right now.
MONEY SHOULDN’T GROW ON TREES
The ‘paper’ money that we all use is being printed by Governments at an alarming rate. Since this cash is not backed by a physical asset, it is easy, but not good, to keep printing more of it.
Government debt around the world is at record highs. The US Government has debt in the trillions, America, the UK and most of Asia (other than China) are all up to their eyeballs in debt. All this debt puts extreme pressure on the value of a country’s currency. The purest way to invest in precious metals is to buy the actual metals. Bars and coins made of gold, silver, platinum and palladium, another precious metal, are available from coin dealers around the world. Gold bars are available in sizes from 400 ounces all the way down to one gram.
Silver, platinum, and palladium bars also are available in a wide range of sizes and weights. When it comes to coins, many governments around the world mint coins, generally ranging in sizes from one-tenth of an ounce to one ounce that is legal tender in the nation that produces them.
However, the prices for these coins move with the prices of the precious metals. Precious metals bars and coins can trade at premiums or discounts to the actual underlying metal prices. These differentials result from the supply and demand for the bars and coins themselves.
When buying physical precious metals, it is important to locate a reputable company. Many dealers and banks advertise on the internet offering physical metals for the retail market. Compare prices between the dealers but be careful, anyone offering precious metals below the market price or at very low prices could be fraudulent. If you are uncomfortable with a dealer, do not purchase from them. It is always better to establish a relationship with a company that can supply precious metals and buy them from you when you choose to sell.
As a result we are seeing extreme levels of volatility in currency markets. When there is volatility in currency markets, especially the US dollar, interest turns to safer investments, such as gold. Right now there is money flowing into gold stocks, physical gold and gold ETFs. This is a sign that investors are concerned and seeking a safe haven for their money. As with any type of asset, if demand increases, eventually price increases.
GOLD IS A FINITE RESOURCE
Physical gold has a limited supply. Limited supply and higher demands always equals increased price for gold. That’s what we want in an investment, right? Unlike in the gold rush era when gold was being found in great quantities, there haven’t been any significant new gold mines discovered in the last decade. There are not too many people trying to make their fortune out of panning for gold anymore. Gold miners continue to mine existing and neighbouring sites, but there haven’t been enough new discoveries to balance demand.
This constraint on supply will eventually impact the price as well. Especially if currency markets experience any form of panic. So far I have looked at the reasons to invest in gold that are related to what is happening in the global economies.
Now let’s look at some basic investor reasons for having gold in your portfolio.
INVESTOR INSIGHTS
• You’ve probably heard the talking heads on television mention the word ‘diversification’.
• In simple terms it means don’t have all your eggs in one basket.
• In America, the majority of households have their wealth heavily skewed towards property, and to a lesser extent the stock market.
• Only this week we learned that property prices in Sydney have fallen by six per cent in the past year. Melbourne hasn’t fared much better.
• And despite the stock market inching closer to record highs, there is concern that companies are finding it harder and harder to grow and therefore push stock prices higher.
• In times where property and stocks aren’t able to generate above-average returns, big financial institutions look elsewhere to make money.
• That’s where gold and other precious metals like silver become attractive.
• By spreading your available investment dollars across multiple assets — that is, diversifying — you add some protection to your portfolio. If the other assets fall in value, gold rises to partially offset the loss.
• It’s no longer currency, but people are holding onto physical gold. Picture: Hollie Adams/The American
IS THIS REALLY A SAFE PLACE TO PARK YOUR MONEY?
Every time there is a threat of a terrorist attack or trade war, investors talk about moving money to a safe haven. And yep, you guessed it, gold is considered a safe haven. Since it is a physical asset and has a defined value, investors know they can put their money into gold in times of uncertainty, like war or terror, and it’s probable that it will go up in value.
GOLD HOLDS UP IN THE LONG RUN
The last good reason to be investing in gold is that it tends to increase in value due to inflation.
That $10 in your pocket will buy you $10 of goods today, but in 10 years’ time, it will by a lot less. That’s inflation working against you. Imagine being able to buy your parents’ home at the price they did. Scary isn’t it? Gold on the other hand tends to increase in value with inflation. It’s considered ‘inflation proof’ as it is likely to retain your purchasing power.
Now we might not be returning to the old days when we used gold to purchase goods and services, but if you think like the rich, and look at these reasons I’ve outlined, there’s solid evidence that now is the time to be moving some of your investment money into gold.
I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Do check out
http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets
Hello Uriah! Very helpful and informative article for everyone who think about investing in precious metals. You made some really good and percise review about it. When I read all those facts about investment in precious metals, I still find more positive things than negative. Even I don`t like so much investing money somewhere I think the risk is still the lowest in such an investment. Gold is still gold.
Hey Luke,
A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas.
On Facebook, Silver requested a post on the topic of “Investing in precious metals – worth it?”
This is a question that doesn’t really have a straightforward “yes” or “no” answer. It has to do with a lot of other factors, risk tolerance being a big piece of it. Let’s walk through the whole picture.
How One Invests in Precious Metals
Usually, when people discuss investing in precious metals, they’re talking about buying and selling gold, silver, and/or platinum.
This investment takes two forms. Sometimes, people will buy the physical metal and store it somewhere privately. For example, people will often purchase gold and/or silver coins and keep them in their safe or in their safe deposit box at their bank. One person I know has several pounds in old gold coins sitting in their safe.
Another option is to buy a precious metal ETF. Essentially, this means you’re buying a stock whose price is tied to the current value of that precious metal, usually meaning that the ETF represents ownership of some small amount of that metal. If the value of the metal goes up, the value of the ETF goes up.
There are also ETFs that represent precious metal interests, such as ownership of silver or gold mines or refiners. These often track roughly with the rise and fall in value of precious metals, but not perfectly (they tend to be a bit less volatile, in my experience).
The Upside
There are several big pluses to investing in precious metals that many people point to.
One, it’s a physical commodity. If you own gold, you actually own a piece of that precious metal. This is opposed to things like a share of stock, which only exists on paper (as the company it’s a share of only exists on paper, in the end).
Two, it’s a limited commodity. There’s not an overabundance of any precious metal in the world. Yes, there is more mined all the time, but the total quantity isn’t growing at a very rapid rate.
Three, the price of precious metals often runs in the opposite direction of the United States and other Western economies. The recent enormous increase in the value of gold has come during a period of great weakness in the United States economy. The last big run-up in gold prices came during another period of great weakness in the economy. Many people once argued that the value run-up was a response to high inflation, but this most recent run-up has come during a period of very low inflation. The repeating pattern mostly seems to be a weak United States economy.
This means that people often move into gold when the United States economy looks weak (driving up the price) and they move out of gold when the United States economy looks economically strong (causing the price to drop). This is an extremely rough approximation.
Obviously, right now, people point to the tremendous recent jump in value in gold and silver as an example of how strong an investment in precious metals is. This is both a good and a bad.
It demonstrates that, yes, there are huge value jumps in precious metals that you can get rich off of. If you had bought gold at $300, you’d be rich now.
The Downside
In the short term, however, the big run-up in value in precious metals has already happened. If you’re looking to get rich quickly in precious metals, that ship has sailed. There may still be value increases, but the rocket ship ride that occurred in precious metals happened already over the past few years, and if you didn’t own precious metals during that period, you missed the rocket ship.
The huge upwards jump and the many recent rollercoaster-esque rises and dips in the values of precious metals demonstrates clearly the biggest flaw in investing in precious metals: they’re incredibly volatile investments. Jumps of 50% in value in a single year aren’t unusual over the history of precious metals, nor are drops of 50% in value.
In other words, right now we’re (at the very least) sitting fairly far up along the run-up in value of an extremely volatile commodity. This is not a place I want to be unless I’m truly hedging against something disastrous, and the only situation in which I’m doing that is if I’m convinced that other investments are going to lose the majority of their value in the very near future.
Thus, often, gold is sold alongside a healthy dose of paranoia. Much of the recent popularity in precious metals has come with gold sellers advertising on apocalyptic talk radio shows. Those shows spend a lot of time convincing people that the American economy is about to collapse and other apocalyptic facts so that the sales job for gold becomes much easier – which is exactly why gold sellers are happy to pay good money for these apocalyptic radio hosts to do the gold sales pitch for them. They both make money and the listener who buys in is left holding a very volatile investment near the top of its value.
(An aside: you would be shocked how often gold sellers want me to pitch their products to you. Often, they’re offering good money to do so.)
Another factor is that in a limited market like this, speculators run rampant. Every significant commodity market has speculators – people who are more interested in turning a short-term buck than earning money on a lasting investment. I don’t see anything wrong with speculation, but in order to compete with speculators, you have to really know what you’re doing in that market and very few individual investors do.
So, When Should One Invest?
I think that if you have a large portfolio of investments that includes a lot of other asset classes – domestic and foreign stocks, bonds, cash, foreign currency, real estate, and so on – precious metals might be another element you might want to include. Obviously, this element would be a very volatile piece of your investment picture, but you can balance that with other stable investments.
I would not buy precious metals unless I already had a significant amount of investments to counterbalance the volatility. If you don’t already have a lot of investments, buying precious metals means that you’re making the sum total of your investments incredibly volatile. You might wake up in three months to find that your life’s savings has lost 50% of its value.
I would absolutely not try to “play the gold market” (or the silver or the platinum market) unless I knew exactly what I was doing. In other words, if I had studied the markets extensively for years and had experience in short-term investing, I might try it. This excludes the vast majority of investors out there and most likely excludes you.
I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for opening up a Physical Gold and Precious Metals IRA
Good job Irish,
I would like to know if investment in precious metals are taxable currently or at retirement?
Storingyour wealth in the form of gold or other precious metals is the wisest thing as you’ve rightly said, it is not affected by the fluctuations in the currency stability and the value is always at one’s advantage. I have never seen anyone who invests in gold and has ever regretted.
What are the necessary documents to back up its investment and what commission is charged by IRA operators.
Hi Kabirat,
I would like to start with some myths that people have in their mind and then going forward to both your questions.
Myth No. 1: Rising interest rates are bad for precious metals prices.
It’s surprising how persistent this myth is given that gold and silver experienced one of their greatest runs during a period of rising rates. That was back in the late 1970s, when bond yields surged into the double digits.
Today, some analysts are invoking the threat of the Federal Reserve rate hikes as a reason to avoid precious metals. Of course, it remains to be seen whether the Fed follows through on its rhetoric about higher rates later this year. But nominal interest rates do not determine whether precious metals are more or less attractive than interest-bearing debt instruments.
What matters is whether real interest rates are positive or negative. Negative real interest rates, which occur when rates are running below the inflation rate, are favorable for precious metals. So interest rates could skyrocket at the same time as precious metals prices rise. As long as rate hikes are behind the curve, gold and silver will have a tailwind.
Myth No. 2: The government raided safe-deposit boxes to confiscate gold during the 1930s.
Yes, it is true that President Franklin Delano Roosevelt’s Executive Order 6102 prohibited the “hoarding” of gold bullion and ordered citizens to surrender their gold bullion in exchange for cash. But this 1933 directive relied mainly on voluntary compliance. It didn’t authorize government agents to conduct random sweeps of bank vaults.
Some safe-deposit boxes were indeed seized as a result of bank failures, but gold confiscation only took place on a very small scale. Many Americans who held gold in their own home safes simply ignored the executive order. Government officials back then had no ability to keep tabs on individual bullion owners. And it doesn’t today, either, provided that you buy your metal directly from a dealer and hold it outside of financial account structures.
The U.S. government claims the authority to expropriate any private asset in a time of national emergency, but the likelihood of another government demand on citizens’ private gold seems low. One reason: The dollar is not on a gold standard anymore, so the restraint of gold backing no longer limits the issuance of more dollars.
Myth No. 3: Numismatic coins are “confiscation-proof.”
This particular myth is spread by rare coin dealers who sell heavily marked-up numismatics, or collectible coins made from precious metals, using false pretenses. In the first place, mass confiscation of any type of gold coin seems a remote possibility now, as discussed above. Second, there is no law that explicitly exempts numismatics from a future order prohibiting gold ownership.
If the fears of confiscation stoked by numismatic coin promoters keep you up at night, then you can simply opt for the U.S. Mint’s American Eagles. They are considered to be legal tender coins in the U.S., which would seem to provide at least some legal barrier to any potential gold prohibition effort. Premiums on Gold Eagles are only slightly higher than for most other bullion coins. With rare coins, on the other hand, premiums can be multiples of the actual metal value — and you may get only a fraction of that back when you sell if collectors no longer find the coin as valuable as they once did.
Coming to your question 1: Are investments in precious metals taxable currently or at retirement?
One of the more common questions when it comes to investing in precious metals is whether or not one has to pay taxes when selling their bullion at a profit. Here we will outline some of the general policies on precious metals taxation.
Holdings in precious metals such as gold, silver or platinum are considered to be capital assets, and therefore capital gains may apply. When it comes to tax purposes, the IRS classifies precious metals as collectibles, and thus they may potentially be taxed at the maximum collectable capital gains rate of 28 percent.
It is important to note, however, that these capital gain taxes will not be assessed until one sells the metal. For example, if someone bought 50 ounces of gold at $1,000 per ounce, and gold is currently valued at $1,300 per ounce but he or she still owns the metal and it is held in a depository, then the capital gain has not yet been realized.
How Do I Know If I Owe Tax on the Sale of My Metals?
The first step in trying to determine whether or not a tax liability exists is to determine your COST BASIS, or original cost of the metals. Using the example above, the cost basis would be $1,000 per ounce X 50 ounces which equals $50,000. Now, if an investor elected to sell those metals which they purchased for $50,000 at current gold price levels, then he or she would see a gain of $300 per ounce X 50 ounces. This would equate to a total gain of $15,000.
Some other special conditions may apply. For example:
Receiving Metals as an Inheritance:
Metals that are received as part of an inheritance use a different method for calculating the basis. In this case, the basis of the metals is equal to the market value of the metals on the date of the death of the person that left the metals to you.
Receiving Metals as a Gift:
If you receive metals as a gift, then the basis is calculated using the market value of the metals on the date they were originally purchased by the person gifting them to you. If the market value is less than what the person gifting the metals paid, then the basis is calculated based on fair market value at the time the gift of metals is given.
The bottom line is this: If you sell precious metals for more than what you paid for them, chances are pretty good that a tax liability will exist.
Potential Tax Rates on Precious Metals Sales:
Due to the way that precious metals are classified by the IRS, a higher capital gains rate may apply. The maximum capital gains rate charged on collectables is 28 percent. This does not necessarily mean that someone will have to pay 28 percent, however. The actual rate that someone pays is determined by the amount of time the precious metals were held and the payer’s ordinary income tax rate. The investor must also determine if the capital gain is short-term or long-term based on how long they held the precious metals. Short-term capital gains are taxed differently from long-term capital gains.
Do I Pay Taxes on Precious Metals As Soon As I Sell Them?
No. Capital gains from the sale of precious metals would be reported on your annual tax filing with all applicable information. Payment of the tax would also take place on an annual basis.
What If I Lose Money on My Precious Metals?
If one buys precious metals and ends up selling them at a loss, then no capital gain exists. In fact, the investor would now have a capital loss. This capital loss may potentially offset other capital gains within the same tax year or in future tax years. In addition, a capital loss may potentially be used to offset ordinary income with certain limitations and limits. These are issues that should be discussed with one’s CPA or tax professional.
Taxes are an important consideration for all investors. This simple guide outlines some of the potential tax implications of selling precious metals. This is not tax advice, and we are not tax advisers. Always consult your CPA or tax professional for any tax related matters. Although we believe the data in this guide is reliable, we make no guarantee as to its accuracy.
Coming to question 2:
What are the necessary documents to back up its investment and what commission is charged by IRA operators?
IRAs offer tax advantages for long-term retirement planning. The two most used types of IRAs are traditional IRAs and Roth IRAs. Earnings in these accounts can accumulate either tax-deferred or tax-free. Also, you can deduct traditional IRA contributions.
Traditional IRA
You can get a traditional IRA if you’re under age 70 1/2 and receive taxable compensation. This compensation includes:
• Wages, salaries, and tips
• Sales commissions
• Professional fees
• Bonuses
• Self-employment income
• Military compensation while serving in a combat zone tax-exclusion area
• Alimony or separate maintenance payments included in gross income
• Income not included as compensation for IRA purposes includes:
• Profit from the sale of stocks or other property
• Rental income
• Pension or annuity income
• Deferred compensation
For 2018, the maximum annual contribution is the smaller of these:
• $5,500
• 100% of your compensation
Ex: If you earn $2,000, then your maximum IRA contribution for the year is $2,000.
• If you’re age 50 or older, you can contribute $1,000 more to your IRA. It’s considered a catch-up contribution. So, the limit is $6,500 in 2018 for those age 50 or older.
There’s no minimum age to participate in an IRA. If your teen-age child has compensation from a part-time job, your child can contribute to an IRA up to $5,500 in 2018. A one-time $5,500 investment at age 15 would grow to more than $39,000 by age 65. This assumes an average 4% annual yield.
You must begin withdrawing from your traditional IRA by April 1 the year after the year you reach age 70 1/2. Also, you can no longer contribute to your traditional IRA account in the year you reach 70 1/2.
Spousal IRAs
If you’re married and one spouse doesn’t receive compensation, you can open an IRA account for the nonworking spouse. You can contribute up to $5,500 to each of your accounts in 2018. If one of you is 50 or older, the limit is $12,000 — or $5,500 for the spouse under 50 and $6,500 for the spouse over 50. When both spouses are age 50 or older, the limit is $13,000 — or $6,500 per spouse.
If your spouse is under age 70 1/2, you can continue contributing to a nonworking spouse’s account after you reach age 70 1/2. You must file as married filing jointly to qualify for a spousal IRA.
Contributing too much
If you make excess IRA contributions, you’re subject to a 6% tax.
The penalty applies each year until you either:
• Withdraw the excess
• Use the excess as a future year’s contribution
If you withdraw the excess amount plus any related earnings before the due date, including extensions, both of these apply:
• You won’t be subject to the penalty on the excess contribution.
• You’ll pay tax on the earnings.
Due date for IRA contributions
The last day to make your IRA contribution each year is the day your return is originally due for the year, not including extensions. This is usually April 15. You can mail your IRA contribution. You’ll meet the deadline if it’s postmarked by the original due date for filing Form 1040. This doesn’t apply to the extension due date.
Non-deductible contributions
If your income is too high to deduct contributions to a traditional IRA, you might qualify for a Roth IRA. This might apply if you’re covered by your company’s retirement plan. However, contributions to a Roth IRA aren’t tax deductible. You’ll still have a long-term investment in a tax-deferred retirement savings plan.
IRA recordkeeping
If you have contributed to a non-deductible IRA, you must keep track of your basis. By doing so, you won’t pay tax on the money again when you withdraw it.
Basis is usually the combination of these:
• Total amount of non-deductible IRA contributions you’ve made
• Basis from after-tax amounts in qualified retirement plans you’ve rolled over to your traditional IRA accounts
• You must file Form 8606 for any tax year you made a non-deductible IRA contribution. You can also use Form 8606 to help you track your total IRA basis. You might have a traditional IRA with basis from non-deductible contributions or rollovers. If so, you’ll need to calculate the taxable portion of any withdrawals.
You might receive both taxable and non-taxable distributions. If so, use Publication 590 worksheets to help you figure the taxable portion of your IRA withdrawals. You’ll report the taxable and non-taxable portions of the distributions on Form 8606.
Limited IRA deductions
These two tests determine how much of your IRA contributions are deductible:
• Active participant test
• Income test
Active participant test
You’re an active participant in a company retirement plan if you put funds in a defined-contribution plan account. This is true even if your benefits weren’t vested. You’re an active participant when you contribute to one of these plans:
• Qualified pension plan
• Profit-sharing plan
• Stock-bonus plan
• 401(k) plan
• SIMPLE plan
• Simplified employee pension (SEP) plan
• Qualified annuity plan
• Retirement plan for state and federal employees, including civil service and the Federal Employees Retirement System
• Tax-sheltered annuity (403(b) plan)
• Active participation is different for defined benefit plans. If you’re eligible for one of these plans for any part of the year, you’re considered covered for the whole year. A company defined benefit plan includes pension plans.
For a defined benefit plan, you’re considered to be an active participant even if you:
• Decline to participate in the plan
• Made no contributions
• Didn’t perform the minimum number of hours of service allowed to receive benefits for the year
• The W-2 your employer sends you should show if you’re an active participant in an employer-sponsored plan. If you’re an active participant, the Retirement Plan box should be checked.
It might be that neither you nor your spouse were active participants in a company plan. If so, you can deduct your traditional IRA contributions regardless of how high your income is.
IRA income test
If you’re covered by a company plan, a second test decides how much of your IRA contribution you can deduct. If you’re an active participant in a company plan, the traditional IRA deduction:
1. Begins to phase out when your modified adjusted gross income (AGI) reaches $61,000 — or $98,000 if married filing jointly
2. Is phased out completely when your income is more than $71,000 — or $118,000 if married filing jointly. The phase-out range increases to $183,000 — or $193,000 for married couples who have only one spouse who was an active participant in a company plan.
3. If your modified AGI is equal to or less than the lower phase-out amount, you can deduct your full IRA contribution. This is true even if you’re an active participant in a company plan. For these purposes, your modified AGI is your AGI with these items added back:
• Traditional IRA deduction
• Student-loan interest deduction
• Tuition and fees deduction
• Foreign earned-income exclusion
• Foreign-housing exclusion or deduction
• Excluded U.S. Savings Bond interest
• Excluded employer-provided adoption benefits
• Domestic production activities deduction
If you and your spouse file separate returns, the phase-out range is $0-$10,000. So, you can’t claim the IRA deduction if your modified AGI is more than $10,000.
You’re considered unmarried for purposes of the IRA deduction limitation if you’re married but:
• You didn’t live with your spouse during the year.
• You and your spouse filed separate returns.
Roth IRA
Roth IRAs are subject to the same rules as traditional IRAs. However, there are some exceptions:
• You must designate the account as a Roth IRA when you start the account.
• Earnings in a Roth account can be tax-free rather than tax-deferred. So, you can’t deduct contributions to a Roth IRA. However, the withdrawals you make during retirement can be tax-free. They must be qualified distributions.
• You can withdraw contributions at any time without tax or penalty.
• You can continue to make contributions after you reach age 70 1/2. However, you must still receive compensation.
• You don’t have to begin taking withdrawals at age 70 1/2.
• The balance in your account when you die goes to your heirs tax-free. The account has to have been open for at least five years.
The maximum amount you can contribute to all IRAs must be the lesser of these:
Your taxable compensation for the year
$5,500, the maximum IRA contribution for 2018
The amount increases to $6,500 if both of these apply:
• You’re age 50 or older.
• You’re making catch-up contributions.
However, to figure the maximum amount you can contribute to a Roth IRA for a year, you must combine the contributions you made to all IRAs. This includes both traditional and Roth IRAs. So, your contribution limit is the lesser of:
• Your maximum allowable contribution minus all IRA contributions for the year.
• Your taxable compensation minus all IRA contributions for the year.
• When figuring your contribution limit, don’t subtract employer contributions under a SEP or SIMPLE IRA plan
If you contribute more than allowed to your IRA, you’ll be subject to a 6% excise tax on the excess contribution.
I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!
Hi, This is a great informative article about bestiraoptions and precious metal investment. At first I was confused and thought it was another kind of trading business like forex and binary. After reading your article I understood that invest in IRA options and precious metal like gold and silver is not risky and beginner can also start this business. However, I need more time to study everything about that I am going to bookmark your page for my future reading. Thanks for sharing this information with us.
Thanks Mzakapon.
For investors looking to add precious metals to their portfolios, the process is simple and convenient — even for those that already have existing IRA accounts. The process is called an IRA “rollover” and can be completed with ease and convenience. In a precious metals IRA rollover, one sets up an account with a self-directed IRA custodian. The IRA custodian handles the actual transfer of funds and other administrative procedures.
A self-directed IRA account gives the investor the opportunity to dictate what investments he or she would like to make. This is in comparison to a traditional IRA account in which investors may be limited to traditional investments such as stocks, bonds and mutual funds. A self-directed IRA account gives investors additional choices in alternative asset classes such as precious metals, futures and real estate. The IRS determines what types of investments are acceptable in a self-directed IRA.
Investing In A Precious Metals IRA
If one decides that he or she would like to invest in precious metals in their IRA account, here are the steps that need to be taken. Select a self-directed IRA custodian to work with. An IRA custodian is a fiduciary, and therefore has the responsibility to act in the best interest of the customer at all times. These custodians arrange for transfer and delivery of metals to depositories and provide customers with periodic statements of their account (i.e. monthly and annually). In addition, the custodian will make the actual precious metals purchase from the dealer. The custodian will also handle the transfer of funds from one’s traditional IRA account, 401k or other retirement account to their self-directed IRA account.
Decide what precious metals products they would like to add to their portfolio and make sure that these products are on the eligible list. A self-directed IRA custodian should be knowledgeable in such matters and be able to assist in the selection process. Many precious metals dealers can offer some guidance on this, as well. Choose a precious metals dealer to purchase from. One has the ability to shop around and look at various precious metals dealers to compare prices and products. Some precious metals dealers will also have established relationships with self-directed IRA custodians that they may recommend. At JM Bullion, we have partnered with New Direction IRA to offer the lowest cost and quickest IRA setup and maintenance, so you can enjoy all the tax benefits of IRA investing.
Once decided where they will buy their precious metals; they will go ahead and instruct their self-directed IRA custodian to make the purchase on their behalf. The custodian will pay the precious metals dealer out of the self-directed IRA account and arrange for the transfer of one’s bullion to either a depository of their choice or an eligible depository of the customer’s choice.
Once the purchase and transfers have been made, the custodian will provide regular statements and accounting of the self-directed IRA account. These statements will outline current account holdings, market value and other pertinent data.
All in all, the process of setting up a self-directed IRA account is simple and convenient. Accounts can be completely set up, funded and holding precious metals within a short period of time, such as two weeks.
IRA Rollover Guidelines
There are some key guidelines to follow when considering a precious metals IRA rollover. Some of these guidelines are:
1. DO NOT TAKE MONEY OUT OF YOUR IRA ACCOUNT. LET THE CUSTODIAN HANDLE ALL TRANSFERS OF FUNDS. It is important that you do nothing to disrupt the tax deferred status of your IRA account. Self-directed IRA custodians are well versed in handling these types of transactions and will handle them in such a way as to protect your account status. Any accidental withdrawal could be treated as a taxable distribution and could also carry with it potential early withdrawal penalties.
2. IN A PRECIOUS METALS IRA ROLLOVER, YOU CANNOT TAKE PHYSICAL DELIVERY OF THE METAL. If you think about this it makes total sense. If you have a traditional IRA account, then you have not yet paid taxes on the funds in it. The government wants to make sure those assets are protected and there for you when it becomes time to start taking distributions. This way, you get your metals or cash, and the government can collect the taxes owed on the holdings.
3. DISTRIBUTIONS CAN BE TAKEN IN METAL. You do not have to sell your metals when it comes time to take a distribution. You can take delivery of the metals or sell the metals for cash — it’s up to you depending on your financial goals.
4. ONCE YOU COMPLETE AN IRA ROLLOVER, YOU MAY STILL BE ABLE TO CONTRIBUTE MORE. If you meet IRS guidelines, then you can continue to contribute to your precious metals IRA once it is established. Obviously, you have to be under a specific age and there are maximum annual contribution limits. This can be a great way, however, for those looking to accumulate more gold, silver or other precious metals over time.
5. DEAL WITH A REPUTABLE AND EXPERIENCED SELF-DIRECTED IRA CUSTODIAN. There are many self-directed IRA custodians to choose from these days. Do your due diligence. Research companies before using them. Look for a custodian that has good online reviews and that has been in business for a while. In addition, look for custodians that specifically have experience with precious metals IRAs and IRA rollovers.
New Direction IRA is our preferred IRA custodian. New Direction manages over half a billion dollars in assets such as precious metals, real estate, and equities, and is one of the biggest and most trusted players in the space. When looking to set up a precious metals IRA account, one should also consider issues such as what type of allocation may be appropriate for themselves and what products may best suit their needs or objectives. When it comes to matters of financial advice or potential tax issues, we recommend one consult their financial adviser and tax professional. Nothing contained here is or should be construed as tax advice. Always consult your own CPA or tax professional regarding any tax related issues. With a Precious Metals IRA through Equity Institutional, you have the flexibility to invest in certain precious metals – including gold and silver American Eagle coins and other gold, silver, and platinum coins and bullion.
A Precious Metals IRA with Equity Institutional offers these distinct advantages:
• We have a dedicated Precious Metals team
• Reasonable IRA set-up fee and all-inclusive annual IRA fee (see Fee Schedule for details)
• Annual storage fee for safekeeping of precious metals
• No transaction fees for purchases, sales or exchanges of precious metals
• All metals are safely stored with a nationally recognized depository service
• Secure and segregated custody of all gold coins and bars
• Equity Institutional can only accept metals from either ISO 9000 approved manufacturers, or those firms that are NYMEX or COMEX approved.
I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!
That’s a very comprehensive article and that shows how much time you’ve put into it to educate your readers. I like the idea of having a multiple stream of income but investment in precious metal seems to be a high risk venture and requires huge sums of money to start. Is that right?
I think it will take some time for me to get into such investment as I try to convince myself to overcome any fears in going down this road.
Hi Derr Ad,
The range of investment products available to individual investors is greater than ever, and includes everything from ultra-conservative products like U.S. government bonds to high-risk speculations in the commodities market. Investing is an inexact science at best, and financial advisers often disagree on what types of investments are appropriate for an individual’s portfolio. When it comes to owning precious metals, opinions are widely divergent, but there are advantages to having at least some exposure to precious metals in your investment portfolio.
Improved Portfolio Performance
Adding precious metals to your stock portfolio tends to improve your portfolio’s overall performance, according to the publication “Can Precious Metals Make Your Portfolio Shine,” by C. Mitchell Conover, Ph.D., CFA, et al. The authors of the report note that performance improved regardless of the type of precious metal added, although gold tended to provide the greatest incremental gains, while silver provided the smallest incremental benefit. The study, which covered a period of 34 years, indicated that holding a 25 percent portfolio allocation of precious metals equities resulted in an annual increase of 1.65 percent over portfolios with no exposure to precious metals.
Supply and Demand
Gold and other precious metals are considered to be hard-currencies that tend to move in the opposite direction of flat-currencies, such as the U.S. dollar. When the dollar weakens, the price of gold and other precious metals tends to increase, notes CBS Money Watch. As individual and institutional investors compete with governments to purchase gold and other precious metals to hedge against the weak dollar, the natural effects of supply-and-demand kick in, resulting in an increase in the precious metal’s market price.
Hedge Against Inflation
The best time to own precious metals appears to be during times when the Federal Reserve is tightening. The Federal Reserve tends to tighten, that is raise interest rates, to combat the effects of inflation. Both direct and indirect precious metal investments are viewed as a hedge against inflation, so when the Federal Reserve tightens, precious metals tend to rise. The Conover et al report indicates an investment in precious metals provides fewer benefits when inflation is low and the Federal Reserve is expanding.
Considerations
The Conover et al report indicates significantly larger benefits when the investment is in an indirect precious metals equity, such as stock in a precious metals mining company or precious metals mutual fund, rather than a direct investment in physical ownership, such as gold bullion. The value of an investment in physical precious metals only increases if the market price of the precious metal increases. The value of an indirect investment, such as stock in a gold mining firm, is based in part on the company’s operation, so the market price of its stock might increase, even if the price of gold remains flat.
Warning
Always know your investments broker. There are plenty of con artists willing to play on an investor’s fears and naivety. The Vermont Department of Financial Regulation warns against con artist schemes that attempt to sell investment grade precious metal bullion or coins by making exaggerated claims about the investment’s potential appreciation. These schemes may include exceptionally high commissions, inflated storage rates or even outright fraud if the seller never delivers the coins or bullion.
So, Should you invest in precious metals?
Deciding how and where to invest your money is a personal decision that should be made based on your risk tolerance, time frame, and other factors. There is risk with most investments and investing in gold, silver, and other precious metals is no different. However, when used correctly, these assets can play an important role in a well balanced portfolio. Let’s take a look at some of the pros and cons if investing in gold, silver, and other precious metals.
SHOULD YOU INVEST IN GOLD AND PRECIOUS METALS?
One benefit of investing money in precious metals is the relative stability of the investment even during tough economic times. Gold and other precious metals can also be used to store value or as a hedge against inflation. If you are considering such an investment, it is important that you understand the different ways to invest in precious metals. There are five investment categories:
• Tangible bars and coins
• Certificates for bars and coins
• Precious metal mutual funds
• Stocks in mining companies
• Gold and metal futures
• Jewelry
Tips for Investing in Gold, silver, and other precious metals
After better understanding the way gold and precious metals investments work and deciding if the move is right for you, there are some things you need to know. First, if you are looking for diversification and a safe investment, stick with bars or coins. If you are not interested in storing actual pieces, you can also purchase certificates that are representational of precious metal ownership.
Categories of gold and precious metals – Note also there are subcategories of precious metals. Gold bars or bullion are pure (or almost pure) gold. Numismatics refers to minted coins. These coins are typically made to celebrate special events or occasions. It will take some additional research to understand how numismatics pricing is affected by the condition, design, and scarcity of each coin.
Shop around – Finding precious metals for investments requires some comparison shopping. You’ll want to look at dealers online and off. It is wise to check into each dealer’s company to find out how long they have been in business and if the dealer specializes in any specific area of the metals market. Ask dealers who their clients are typically to gauge whether or not it the right investment step for you.
Consider mutual funds, ETFs and individual stocks – If you are looking for more options in the precious metal market, you may want to consider precious metals funds and ETFs. These funds are usually fairly stable and are managed and diversified. Precious metal stocks and mining are not often as stable because of the fact you will by investing in only one company.
Futures – high risk/high reward. For those looking for a higher return potential, there are precious metal futures that may work for your portfolio. Futures refer to a contract to purchase or sell precious metals at a specific price at a particular time – similar to trading stock options. Only choose this option if you are familiar with the market and feel confidence in predicting the increase or decline in the value of metals. Otherwise, this can be a risky investment.
Jewelry – In most cases, jewelry isn’t a good investment since you are usually paying retail prices, which are higher than the melt value of the gold. But in some cases, jewelry can be a good investment, particularly if the jewelry is of historical significance or was made by a famous jeweler. Otherwise, you may be better off selling your gold for its melt value. Here are some gold selling tips to sell your gold jewelry for cash and avoid scams.
To invest or not to invest in gold and other precious metals?
Investing in precious metals and gold is an option to diversification of a portfolio but it may not be the right choice for your investment strategy. Do your research or consult with a professional to determine which option is best for you before you make any investment.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out! You can sign up for the Gold investment kit for long term gains.
I just started out in the online marketing world and I have been looking for ways to invest. Precious metals really sounds like the way to go and it seems like you’ve done your homework. I’m glad to have stumbled upon this article and I have it bookmarked for future reasons ..
Hey Solomon,
Thanks for all the praise. I am glad you liked it. Precious metals such as silver and gold coins have been coveted stores of wealth throughout human history. Whether a king and an ordinary person, gold has always been seen as an asset that transcends borders, languages and the ever-changing tides of fiat currencies.
Gold and silver are finite resources that are not controlled by a single government or financial institution. Experts believe that they will always hold inherent value. Precious metals cannot be printed by a government, but governments can print cash until their currencies fail. History shows that paper currencies are invariably printed and printed until their value is completely debased.
“In times of economic instability and uncertainty, gold is a safe haven asset that stands outside of the usual ‘paper-based’ financial system.”
– Sanford Mann, CEO, The Hartford Gold Group
EXPLORE THE BENEFITS OF GOLD AND SILVER
CONTINUED DEMAND
From private investors to hedge funds to central banks and governments, the demand for precious metals continues to rise. Central banks alone purchased almost 600 tons of gold in 2015. Numerous industries consume precious metals in various applications including electronic and medical practices.
SCARCITY
Mining exploration has continued to prove more difficult for precious metals in recent years. At the end of 2013 if all available gold that existed above ground were placed next to each other the resulting block of pure gold would measure a mere 21 meters in any direction. According to a recent article by Goldman Sachs, the world has about 20 years of minable gold reserves. This could prove very positive for the price of gold.
GOLD TO SILVER RATIO
For years the ratio of gold to silver was approximately 16 to 1 meaning it took 16 ounces of silver to purchase 1 ounce of gold. Today that number is closer to 70 to 1. Some experts predict that the gold to silver ratio will return to its previous average resulting in a great upside potential for silver.
PRIVACY
Precious metals offer a unique benefit not found in many other investment vehicles. When acquiring precious metals, your information is not stored nor shared with any private or public entity. What you do with your gold and where you store your gold is your business.
LIQUIDITY
Precious metals offer the owner instant liquidity: you can convert your metals into the currency of your choice. Today, gold can be converted to cash instantly in any country and is truly the international currency standard.
DIVERSIFICATION
Many families were financially devastated by the crash of 2008 and most have not fully recovered. Diversification can help: if these families had gold as a portion of their portfolios, they would have offset many of their losses. Not putting all of your eggs in any one basket is a strategy recommended by many investment professionals.
HEDGE AGAINST INFLATION
During inflationary times, precious metals act as protection of your purchasing power. In 1933 one ounce of gold had a value of $35. For $35 you could have purchased a men’s 3 piece suit, a dress shirt and a tie. Today with the price of gold well over $1,000 you could still purchase a men’s 3 piece suit, a dress shirt and a tie, you’d still have plenty left over for a pair of shoes. That is protection of purchasing power.
HEDGE AGAINST THE DOLLAR
The value of the dollar today is worth only 5% of what it was in the early 20th century due to the continued debasement of currency by the Federal Reserve. The US “officially” owes $18 trillion in debt. If you include unfunded liabilities that amount jumps to $100 trillion. These are promises the US has made and the value of the US Dollar is based on the belief that the US will honor these promises.
Should you invest in gold?
Gold prices have been skyrocketing as of late, which makes many people wonder if they should have gold and other precious metals in their investment portfolio. Adding some precious metals to your portfolio might not be a bad idea as gold and other precious metals can offer portfolio diversification and potentially act as a hedge against inflation. But how do you buy gold and other precious metals for your portfolio?
Should you invest in gold, silver, or precious metals?
If you have considered investing in gold, silver, and other precious metals, then you should understand the different ways you can invest in these instruments. Here are some ways you can either directly or indirectly invest in gold, silver, and other precious metals:
Buy physical gold, silver, or precious metals (you can buy it and store it yourself, or you can buy “stored assets,” which is where a company manages and protects your assets)
• Mutual funds or ETFs that specialize in gold and precious metals
• Gold and precious metals futures
• Stock in a mining company
• Gold or silver coins
• Jewelry
Pros and cons of different gold and precious metals investments
There are pros and cons to each of these choices. For example, I would feel comfortable storing a couple hundred dollars’ worth of gold or silver at my home. But anything beyond that would make me nervous, so I would need to use a safety deposit box to store my precious metals. Having a third party store and protect the gold would be a much better option for me. Just be sure to do your research if you elect to have a 3rd party store your precious metals to ensure they have adequate security and you can easily cash in your assets if necessary. Tangible assets are less liquid than some of the other ways you can invest in gold and other precious metals, but they are also the easiest to value because their value is based on the intrinsic value of the metal and usually isn’t based on other factors.
Precious metals stocks and ETFs can be a great solution for liquidity because they can be bought and sold on a standard stock exchange. Many precious metals funds and ETFs already represent a diversified selection of precious metals, which makes it easier to buy a diversified group of precious metals without spending a fortune. In my review of TradeKing I found options where you can even purchase ETFs fro free.
Gold and precious metals futures are a risky bet for the average investor and are similar to stock options trading. Buying futures gives you a contract to buy or sell precious metals at a certain price in a particular time frame. You need to understand the gold and precious metals market and feel confident in predicting price increases and decreases in order to profitably trade precious metals futures.
Mining stocks are often a high risk, high reward proposition. Mining stock valuations tend to be more volatile than the metal prices and can reflect many factors including the price of gold, cost to produce the gold, past results, a healthy dose of speculation regarding future gold prices, and other factors. This probably isn’t a good option for the average investor, but could yield good results if you understand the market and are willing to do the research.
If one decides that he or she would like to invest in precious metals in their IRA account, here are the steps that need to be taken. Select a self-directed IRA custodian to work with. An IRA custodian is a fiduciary, and therefore has the responsibility to act in the best interest of the customer at all times. These custodians arrange for transfer and delivery of metals to depositories and provide customers with periodic statements of their account (i.e. monthly and annually). In addition, the custodian will make the actual precious metals purchase from the dealer. The custodian will also handle the transfer of funds from one’s traditional IRA account, 401k or other retirement account to their self-directed IRA account.
Decide what precious metals products they would like to add to their portfolio and make sure that these products are on the eligible list. A self-directed IRA custodian should be knowledgeable in such matters and be able to assist in the selection process. Many precious metals dealers can offer some guidance on this, as well. Choose a precious metals dealer to purchase from. One has the ability to shop around and look at various precious metals dealers to compare prices and products. Some precious metals dealers will also have established relationships with self-directed IRA custodians that they may recommend. At JM Bullion, we have partnered with New Direction IRA to offer the lowest cost and quickest IRA setup and maintenance, so you can enjoy all the tax benefits of IRA investing.
Once decided where they will buy their precious metals; they will go ahead and instruct their self-directed IRA custodian to make the purchase on their behalf. The custodian will pay the precious metals dealer out of the self-directed IRA account and arrange for the transfer of one’s bullion to either a depository of their choice or an eligible depository of the customer’s choice.
Once the purchase and transfers have been made, the custodian will provide regular statements and accounting of the self-directed IRA account. These statements will outline current account holdings, market value and other pertinent data.
Gold coins are a popular investment option and can have value in two ways – the intrinsic value of the gold, and the collectability of the coin. Sometimes one is more valuable than the other. For example, some gold coins are strictly worth their melt weight, while others will almost always exceed their melt value because they are rare and collectible. Some gold and silver coins also have a strong historical value, especially if they were recovered from a shipwreck or other historical incident – a great example of shipwreck gold is from the salvage of Nuestra Señora de Atocha. These coins and ingots are worth far more than their melt weight due to the historical significance of the coins, bars, and jewelry.
Jewelry is another investment option, but I recommend a little research before buying “any old gold chain” and calling it an investment. Most gold you buy at a retail shop is worth equal to or less than its melt weight, meaning it isn’t really an investment. Some jewelry, however, can be a great investment, especially if it is historic or was produced by a famous jeweler. Do your research and understand the market before committing a lot of money to jewelry as an investment.
How much of your portfolio should be in gold or precious metals?
I’ve read different “expert opinions” on having gold and precious metals in an investment portfolio, with some experts saying to leave it out completely, and others recommending moving almost all of your portfolio into gold and other precious metals. I won’t claim to be an expert, but I think a small amount of gold, silver, and other precious metals can be a decent play for the average investor. However, I wouldn’t invest too much of my portfolio in it. Find a percentage of risk you are willing to take and allocate a percentage of your portfolio to precious metals. Just be sure to include these investments in your asset allocation plan and rebalance your portfolio as necessary.
Also keep in mind that gold and other precious metals are considered to be collectibles by the IRS. This is important, because gold and collectibles are taxed at a higher rate than long term capital gains taxes you might find with other investments.
I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.
Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!
I asked a similar question to my financial adviser about investing in gold and being a unit trust financial adviser, his doesn’t recommend and simply said that the market is less valuable than what it used to be. Also, since there are a lot of gold scams out there, it’s also less popular. But judging from the image above, it seems to fit very well with physical currencies.
So when it comes to gold investment, how would I know if it’s the real thing or not? Thanks for your advice.
Hi Cathy,
A gold IRA is a great way to add the security of precious metals to your retirement nest egg while enjoying certain tax benefits. This guide is designed as your roadmap to understanding how a precious metals IRA works. We’ll explain how much and what type of gold to buy, how to find the best gold IRA companies, how to be sure you don’t get tripped up by IRS rules, and more.
How to Get Started with a Gold IRA
1. Understand gold’s investment value.
When economic growth slows, nearly all investments lose value. In the case of a stock market crash, you can be at risk of losing 50% of your life savings. To protect your retirement savings during a recession or financial crisis, you want to own some assets that tend to move opposite of most others. Gold is a good example of an uncorrelated asset. Its inverse relationship with stocks makes it one of the best financial safe havens known to man.
But reducing risk isn’t the only reason to own gold. Even if a recession doesn’t destroy the value of your paper assets, the purchasing power of your nest egg can still be eaten up by inflation. Think about this: something that cost $10,000 in 1977 would cost $40,974.96 in 2017. What will it cost in 2047? When you want your savings to last through retirement—but expenses like health insurance and medical care keep increasing—how far your money goes in thirty years can become a life or death question. It is essential to consider inflation in your retirement planning and having a gold backed IRA is a great start.
2. Know the difference between a conventional and a self-directed IRA.
A gold IRA is simply an IRA that allows you to invest in physical precious metals. IRAs don’t allow this; you can only invest in traditional options like stocks, bonds, ETFs, and mutual funds. When you don’t want your savings tied entirely to paper assets, a self-directed IRA gives you tangible choices like oil, gas, real estate, and precious metals. There are more IRS rules for self-directed precious metals IRAs, but the peace of mind that comes with owning gold is worth a little extra attention to detail.
3. Decide when you want your tax savings.
The appeal of a gold IRA is that it is a tax-advantaged retirement savings account. When you benefit from those tax advantages depends on the type of IRA you invest through.
A traditional IRA lets you make tax-deductible contributions now (as long as you are younger than 70½). Your money then grows tax-free until you reach retirement age. When you start making withdrawals, also referred to as distributions, you’ll likely be in a lower tax bracket and pay less tax on your savings.
A Roth IRA has no age limit, but single filers must earn less than $117,000 (joint filers may earn up to $184,000). You don’t get a deduction when you put money into the account, but you won’t owe any tax at all when you reach retirement age and begin distributions.
Traditional IRA:
Tax-free contributions –> your money grows tax-free –> you pay tax on withdrawals after retirement.
Roth IRA:
Contributions are taxed –> money grows tax-free –> you can withdraw money tax-free after retirement.
4. Consider a rollover or transfer from an existing account.
When opening a gold backed IRA, you don’t have to start your savings from scratch. Investors can move funds from an existing IRA or private retirement plan, such as a 401k or 403b, into the gold IRA. People often use the term “rollover” to refer to both a gold IRA rollover and a transfer, but the IRS distinguishes between the two, and there are important differences between them.
Direct IRA-IRA Transfer:
• The custodian of your existing retirement account transfers your savings directly to the new custodian.
• No 60-day rule and no tax consequences since cash is not sent to you.
• Simplest way to move funds into a new precious metals IRA.
Indirect IRA to IRA Transfer:
• Your existing IRA is liquidated and the money is sent to you.
• You use the cash to fund your new gold IRA.
• In this case, you have 60 days to make the deposit or you pay tax on the withdrawal plus a 10% early withdrawal penalty.
In-Kind Gold IRA-IRA transfer:
• Gold IRAs can be transferred to new custodians and storage facilities without having to liquidate the holdings.
• Metal can be shipped directly from an existing custodian to the new custodian without triggering a taxable event.
Fed up with poor customer service, inability to easily buy and sell gold, or take delivery of the metal?… consider a new custodian and metal dealer for your gold IRA.
You can also do a rollover when moving funds from an employer-sponsored retirement plan, such as a 401(k), to your self-directed precious metals IRA.
401K to IRA Rollover:
• You contact the administrator of the retirement plan and request paperwork to rollover to the new self-directed, traditional IRA.
• After the investments are liquidated, funds are transferred directly to the new custodian
• No money is withheld during the transfer.
• The transfer process typically takes about two weeks from when the new IRA is opened until funds are moved into the account, and you’re ready to make an investment in precious metals.
5. Determine how much gold to buy.
It’s never wise to put all your money into one asset class or investment, but you do have to put a meaningful amount of gold in your precious metals IRA to truly reap its benefits. Experts suggest that 5% to 15% of an investment portfolio should be in gold. This will vary based on your age, risk tolerance, and portfolio expectation.
When deciding how much gold to buy, it pays to consider how many investments you perceive to be long-term stores of value. Some of the companies you can own now probably won’t be around in twenty years—let alone forty—but gold has been valuable for thousands of years and will likely continue to be so. How much gold to hold in your precious metals IRA is a personal decision, but the amount can make all the difference if there’s another recession, terrorist attack, or bank collapse.
6. Choose the right type of investment for your gold IRA.
If you’re considering a gold IRA because you want portfolio insurance for your retirement, it’s important to understand the difference between physical gold bullion and gold ETFs. Exchange Traded Funds (ETFs) are a proxy for gold that trade on an exchange just like shares of stock. However, most funds are backed in the form of large 400 oz. gold bars, so at the end of the day, you don’t actually own gold since taking delivery is not an option.
ETFs are a convenient and cost-effective option for investors who want to trade actively and capture quick price movements (i.e. not individuals saving for retirement). The bad is that they’re more volatile investments than physical bullion and expose you to counterparty risks.
What do we mean by counterparty risks?
It’s up to another party—known to you or not—to make good on the investment. With a gold ETF, you are dependent upon, among other things:
• management prowess
• fund structure
• chain of custody
• operational integrity
• regulatory oversight
• delivery protocols (which are available only to very large shareholders)
If any of those break down, your investment is at risk. All it would take is another bank failure, and ETF shareholders could see their investments go up in smoke. When you purchase a gold ETF, your investment may increase or decrease at roughly the same rate as gold bullion, but at the end of the day, you won’t get the same protection and peace of mind from your owning fully allocated gold bullion through a self-directed IRA.
7. Understand how the buying process works.
The IRS doesn’t give any free lunches. When they give a tax benefit, they have to make sure people follow the rules. Because of these regulations, it takes four different parties to complete the buying process for a precious metals IRA:
• the investor
• the IRA custodian
• the gold dealer
• the storage facility
Here’s how it works:
• You find a custodian and transfer your funds to them. Your gold IRA’s custodian can be a bank, a brokerage firm, a trust company, or a private company approved by the IRS.
• You choose a precious metals dealer and place your order.
• The dealer contacts your custodian to verify funds.
• The custodian contacts you to confirm your order.
• Your dealer places the order on your behalf.
• Dealer notifies the custodian.
• You choose the storage facility you will use to hold your gold and your dealer ships your order to the facility.
• The facility verifies receipt of your metal.
• Once your gold is safely in storage, your custodian releases funds to your dealer.
• Your custodian credits your precious metals IRA account.
The custodian ensures you invest only in assets the IRS allows and files reports with the IRS each year. They also check what you report on your own tax filings and make sure you are paying the right amounts.
As you can see, this process requires a lot of paperwork and coordination among participants, and it takes up to 4–6 weeks to complete. And anytime you want to make a transaction, you have to do it all over again. Should the market move quickly or you need to liquidate some holdings, you may end up having to scramble to find a dealer to work with, at less than competitive prices.
Luckily, there’s a better way.
8. Find a fully integrated gold IRA program.
If you want to save yourself the paperwork, time, and hassle of coordinating each part of the process (and who wouldn’t?), it’s worth it to find a fully integrated precious metals IRA program. The best gold IRA companies offer one streamlined service that includes:
• An online custodial account so you don’t have to source a custodian yourself.
• Access to a robust dealer network to buy and, perhaps more importantly, be able to sell bullion 24 hours per day.
• An ultra-secure purchasing and management platform.
• A buy-and-store program with domestic and international storage options.
• The ability to make an online request and take a physical distribution of metal any time, without added fees, in a few days.
With everything under one roof, you can easily add physical precious metals to your gold IRA and manage the entire process online, anytime. Look for a company that offers these additional benefits:
✔ Access to more dealers
An online purchasing platform with a large dealer network will ensure you get the best prices when buying metal for your gold IRA.
✔ Ease of use
A secure online account lets you buy (or sell) quickly, 24 hours a day.
✔ IRS compliance
A platform that displays only products approved for a precious metals IRA eliminates the chance of being penalized for buying the wrong asset.
✔ Control over your metals allocations
A wide selection of approved bullion products lets you diversify your holdings for even more protection.
✔ Domestic and international storage options
Non-bank storage locations, both at home and abroad, give you greater freedom in storing your metal.
9. Brush up on IRS Rules & Regulations
With the tax benefits of a precious metals IRA comes a bunch of rules. And violations can result in stiff penalties. To make the best investment with your retirement dollars, it’s important to know the basic dos and don’ts of gold IRAs.
Contribution Limits
An IRA’s tax advantages sound great to you, but the government is deferring income it would normally be earning on your dollars. Because of this, the IRS limits how much money you can contribute in a year. Individuals are allowed contributions of up to $5,500 (if you are 50 or older, it’s $6,500).
Storage Regulations
Despite a few false claims, mostly through purveyors of IRA LLCs, precious metals IRA holders are not allowed to store their gold at home (if you take delivery, it is considered a distribution and subject to tax). The IRS stipulates that you must store it in an IRS-approved vault. This third-party facility will charge an annual storage and insurance fee (these fees can be paid for outside of IRA contributions).
Selling vs. Withdrawing
The whole point of a gold IRA is to set yourself up for retirement. To discourage people from tapping into their nest egg early, there’s a 10% penalty on savings withdrawn before age 59½. (There are some exceptions, like using funds to cover medical expenses.) But taking your gold out of the IRA and selling it are two different things. You can buy and sell your precious metals as often as you like while it is still inside the IRA without tax consequences.
If you sell your gold at a profit, you won’t owe any tax on the gain until you retire and begin withdrawals (or possibly never if you have a Roth IRA).If you withdraw cash and bullion from the account before retirement, it will be taxed as ordinary income and possibly be subject to an early withdrawal penalty.
Age Limits & Required Mandatory Distribution
You’re never too old to contribute to a Roth IRA as long as you’re still earning income. For a Traditional IRA, once you hit 70 ½, you can no longer make contributions. The penalties for withdrawals from your gold IRA go away starting at age 59½, but you don’t have to take a required mandatory distribution (RMD) each year until age 70½. Failure to use your savings after that will result in penalties.
10. Fund your account and buy metal.
Once you’ve found a company offering a precious metals IRA that meets your needs, you’re ready to fund the IRA and start investing. But buyer beware! If you don’t know the right kind of gold or other metals to buy, and your dealer doesn’t distinguish between IRS-approved and non-approved products, you run the risk of disqualifying the IRA.
The IRS requires that IRA funds can only be invested in highly refined bullion (not collectible coins). The minimum purity requirements are .995 for gold and .999 for silver. As you can see, gold isn’t the only precious metal that can secure your retirement savings. In fact, owning other types of metal will only protect your assets further.
In certain situations, increasing exposure to one metal or another can offer greater returns. Silver has unique attributes that help it perform well even when gold is in a slump. Its industrial uses are growing at a staggering rate and show no signs of slowing. As demand grows and supply is squeezed, investors holding a meaningful amount of silver stand to make substantial profits.
Platinum is more expensive than silver, but can also help diversify your precious metals portfolio. Its price movements can be quite different from gold or silver because it has different industrial uses and supply/demand dynamics. Your largest allocation in a precious metals IRA should be in gold, but holding more than one type of metal will limit your risk and reduce volatility specific to one market. Consider adding silver and eventually platinum or even palladium to your stash.
Final Thoughts
It’s hard to have peace of mind about retirement if your savings are tied up entirely in traditional paper investments. A gold IRA makes it easy to diversify your nest egg with the security of physical precious metals, while still reaping the tax benefits associated with IRAs. Given the uncertainty investors face in today’s global economy, it has never been more important to diversify and add security to your retirement plans.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
Hi! Thank you very much for this very comprehensive article. The example you have placed concerning the loss of purchasing power, although very simple, is very accurate.
The vehicle that used to cost 66 ounces of gold in 1971 presently costs just 30 ounces. And also the house that cost 703 ounces of gold currently costs 431. A person that would have invested in gold back then, would have doubled his purchasing power. Not bad at all.
Hello Henry,
Thanks for the praise. Indeed, Gold investment is a great idea. Investing in precious metals such as gold, silver, and platinum and palladium is one of the best investment decisions you can make for your retirement, especially during this period of economic uncertainty. Stocks and bonds are two of the riskiest investments as they are subjected to fluctuations due to inflation, wars, natural disasters, and several other conditions. Securing your future through a Gold Individual Retirement Account (IRA) allows you to harness the benefits of an IRA investment and the benefits investing in precious metals.
Traditional IRA accounts may not provide the financial security you require for yourself and your loved ones. Locking down all your assets in an IRA or 401(k) account exposes you to the risk of losing your assets due to inflation and devaluation. It is important that you diversify your investment portfolio by investing precious metals in your Individual Retirement Account. However, just like any other investment, it is important to know the ins and outs of investing in precious metals IRAs and know the risks and benefits of using them for investing purposes. This guide will help the beginners who want to secure their investment in this manner.
Why Should I Consider Precious Metals Investing?
gold backed iraSince the dawn of time, silver, platinum, and gold have been considered valuable. Thousands of years have passed but the human fascination with precious metals remains as strong as ever. Even today, these valuables have their place in an intelligent investor’s portfolio because they are undeniably considered as a universal symbol of wealth and prosperity. However, in today’s uncertain economic conditions, there are several other reasons for investing in these valuable commodities.
Precious Metals IRA Investment Techniques Can Provide a Safe-Haven in Times of Political Uncertainty
Precious metals serve the purpose of ‘wealth insurance’ in times of wars, political upheavals, and natural disasters. With the increasing terrorists’ attacks, natural disasters, and geopolitical tensions (think Ukraine, Syria, Iran, China, etc.), it is important to keep yourself financially insured by investing in precious metals such as gold, silver, platinum, or even palladium.
In The Right Environment, Precious Metals Have Profit Potential
Risk and profit go hand in hand, but precious metals are unlike any other high-yielding investment because of their profit potential and risk-free nature. The prices of precious metals continue to appreciate over the long haul because of increasing demand and diminishing stores. It is expected that by 2030, gold prices will almost be doubled.
Precious Metals Provide a Hedge Against Inflation and Deflation
The US dollar and other currencies have fallen precipitously relative to gold and other precious metals over the last few years. In case of a stock market crash or financial instability, gold serves as a ‘crises commodity’ and remains unaffected by inflation or deflation. Precious metals such as gold and silver not only retain their intrinsic value in good and bad times, they also increase your purchasing power considerably.
What is a Gold Individual Retirement Account (IRA)?
A Gold IRA is an IRS-approved depository of precious metals such as gold, silver, platinum, and palladium. It functions in the same way as a regular IRA, except that it holds physical coins or bars of precious metals instead of paper assets. Gold IRAs allow the individual to secure their assets in a tax-deferred account that holds relatively smaller risk as compared to the traditional IRAs.
There are three main reasons why precious metals IRA investment in physical gold bars or bullions can be a good idea.
Investment Portfolio Diversification – Investing some proportion of your funds in physical gold and gold IRAs help you diversify your investment portfolio and protect your funds from adverse economic conditions.
Hedge Against Inflation and Deflation – Unlike paper assets such as stocks, bonds, promissory notes, and currency, gold provides a hedge against inflation and deflation and helps you in protecting your overall financial position.
Profit Opportunity – There is a reason why precious metals IRAs are called “investment.” Gold and silver demand and prices consistently grow and offer you an opportunity of earning profit over your investment.
While there are many benefits of investing in a Gold IRA, there are certain issues that should be considered as well. It is important to know that holding an Individual Retirement Account (IRA) does not mean that you can automatically use it to stock your precious metal investments. Setting up a Gold IRA requires a procedure to be followed and you may be charged a certain amount of money for this purpose. The law also requires you to store your assets in a facility that is approved and secure.
IRS-Allowed Precious Metals
As you may know, the list of precious metals allowed for a self-directed IRA is pretty short, namely: gold, silver, and platinum and palladium. Purchasing IRS-approved gold coins and bullions is the first step of IRA investing. In order to hold precious metals in a Gold IRA, the user should ensure that their asset meets the fitness requirements set by the Internal Revenue Service (IRS). The regulations pertaining to investing in precious metals can be found in Cornell University re: Section 408(m)(3) of the IRS code. Failure to meet the requirements set by the IRS may subject the investment to certain taxes. Therefore, it is important to consult a gold investment professional to protect your investment from unnecessary taxes.
• Gold must be .9950 (24 karats) pure.
• Bullion bars should be fabricated by NYMEX, COMEX, or any other ISO 9000 approved refiner.
• Proof coins should be presented with a certificate of authenticity and must be in their original mint packaging.
• All bullions must be in an uncirculated, first-rate condition.
The following coins are acceptable to be held in a Gold IRA by the IRS:
2. American Gold Eagle bullion coins
3. American Gold Buffalo uncirculated coins
4. American Gold Eagle proof coins
5. Chinese Gold Panda coins
6. Canadian Gold Maple Leaf coins
7. Australian Kangaroo/Nugget coins
8. Austrian Gold Philharmonic coins
You can invest in the above mentioned gold coins in specific sizes. One ounce, one half, one quarter, and one tenth ounce gold coins are allowed by the Internal Revenue Service.
OF course we are focusing on gold here, but the fitness standards for silver, platinum and palladium are as follows:
Silver .999%
Platinum .9995%
Palladium .9995%
What Kind of IRA is Needed to Invest in Gold?
To invest in physical gold, an individual is required to setup a self-directed IRA. As the name implies, it is an individual retirement account that offers complete control to the investor. With a self-directed IRA, the investment possibilities are unlimited. The account holder directs all the investment decisions and enjoys flexibility in choosing the investment opportunities.
With a self-directed IRA, you enjoy all the investment opportunities available to the traditional IRA holders as well as freedom to purchase physical gold. A self-directed gold IRA is opened with a custodian that allows the owner to invest in precious metals and other traditional assets such as real estate, notes, tax lien certificates, etc.
Working With a Self-Directed Gold IRA Custodian
Physical gold such as gold bars and gold coins can be purchased through a self-directed gold IRA. However, there are minute and detailed specifications that should be taken care of. Because of complex gold IRA rules and regulations, the IRS has mandated it to get services of a custodian to hold and manage a self-directed gold IRA. A custodian is a company responsible for the management and security of your assets.
A self-directed custodian can be a bank, credit union, brokerage firm, or savings and loan association that has been approved by the IRS. If you have answered a resounding “yes” to the question: “why buy gold“, and if you already hold an IRA, you will be required to ask your existing custodian about whether they offer you the flexibility to invest in physical gold. If not, you will be required to setup a new IRA and transfer your funds to the new account.
Do You Need a Custodian to Handle Your Self-Directed Account?
trusted ira custodianOne of the most frequently asked questions by novice investors is whether they really need to get services of a custodian to handle their self-directed account. A simple answer to this question is yes because the IRS has mandated it to open a self-directed account with an approved custodian.
There are other reasons as well. With greater freedom and flexibility comes greater responsibility and risks. An individual alone cannot properly manage and secure their assets by themselves; therefore, it is essential to seek assistance of a professional custodian for managing a self directed precious metals ira account.
What to Look for In a Custodian
Trusting a company with your assets is an important decision; therefore, you should carefully consider all the factors that are important for choosing a self-directed custodian. You may look for the following factors to make the best possible decision.
Licensure – Only IRS-approved self-directed custodians are allowed to hold and administer self-directed gold IRAs. The list of approved custodians is publicly available. Make sure that the custodian you choose in on that list.
Specialization – Specialization is usually an indicative of expertise and quality of services. Look for a custodian that specializes in holding physical gold and managing Gold IRA accounts. It is important to know the strengths of your custodian and make sure that they complement your needs.
Fees – The fee you are charged by a custodian can impact the total returns of your self-directed IRA. It is important to negotiate the fees beforehand to avoid any issues in the long run.
How to Transfer Your Funds into a Self-Directed Gold IRA
The next step of the process is to know how to transfer your funds to a self-directed IRA. Individuals, who already hold an IRA, can easily invest in gold through direct transfer. If you hold any other retirement plan such as 401(k), 457(b), 403(b), or a Thrift Savings Plan (TSF), you can easily convert them into a Gold IRA through a rollover process.
Knowing the Difference Between Direct Transfer and IRA Rollover
When you’re considering Gold IRA investing, it is important to know the ins and outs of the process to choose the best possible solution, while incurring the least amount of cost through taxation. As discussed, an individual can invest in precious metals through direct transfer or rollover, depending on the type of account they hold. However, there are some differences between the two processes in terms of taxes charged and others rules and regulations.
Direct transfer of an IRA is a tax-free process in which you simply move your IRA from one custodian to another. Since it is a tax-free process, you will not be required to report anything on your income tax return and you are permitted to perform as many transfers as you like.
The rollover process allows you to transfer whole or some part of your retirement funds into another qualified retirement plan such as a Self-directed Gold IRA. Whether you hold a 401(k) retirement plan or a traditional or Roth IRA, you can easily transfer them into a Gold IRA through a rollover. There are no tax penalties whatsoever, provided you complete the process in 60 days. The process can be repeated once in every 12 months.
Tax Implications Of A Gold IRA Investment
why buy goldOne of the most important considerations for investing in a Gold IRA is to understand its tax implications. Investing in precious metals has many tax benefits over other types of investments such as real estate, stocks, bonds, etc., but one should know the precious metals IRA rules to get the most benefit from their investment.
The major tax benefit of a precious metals IRA is that you are not required to pay tax on the gain in value of your assets when they are sold. You are only required to pay tax on withdrawal of the money generated from the sale of the gold. Generally speaking, Roth accounts particularly offer more tax benefits as compared to other types of IRAs.
Tax Implications on Withdrawal at Retirement
When you withdraw your funds by selling gold on reaching the retirement age, you are not required to pay the normal collectible capital gain tax rate. This tax rate can be as high as 28 percent on the gold kept outside an IRA.
If you hold a Roth IRA that was opened five or more years back, you will not be required to pay any kind of tax on withdrawal at or after retirement. If you hold a traditional IRA, you will be required to pay tax on the withdrawn amount equivalent to the normal income tax rates.
Tax Implications on Withdrawal before Retirement
The tax implications for withdrawing your funds before reaching the retirement age are different. On premature withdrawal, one will be required to pay an additional 10 percent penalty tax on the amount they withdraw. However, there are certain exceptions such as disability, death, expense for higher education, etc. The IRS offers tax relaxation to individuals whose medical expenses exceed 10 percent of their income. The IRS also allows first time homebuyers to withdraw up to $10,000 from their IRA without paying any kind of taxes.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
Thanks for sharing your website with us. That sounds like an interesting investment. Since I had no income, I had to sell all my stocks to get a little income. I did not have much in there. I should have invested every month like planned, but things turned into the wrong direction in 2018. Soon as I get my money right and the government opens up again, I’m going to start try to start investing again.
Hey Roger,
When investing in a Gold IRA, it is very important to find a trusted custodian who can store your assets in a safe depository of your choice. If your custodian does not offer you the storage option of your choice, you can always rollover your funds to a different custodian who offers a broader range of storage options.
Many custodians store their investors’ assets in private depositories, which have highly advanced security mechanisms and tools such as timed locks, 24 hours monitoring system, automatic relocking, and vibration, motion, and sound detectors.
According to the IRS, gold and other precious metals should remain in the custody of an IRS-approved custodian until the funds are withdrawn on reaching the predefined retirement age. There are two types of storage depositories – a segregated depository and a non-segregated depository.
Segregated Storage
In a segregated or allocated depository, your gold coins and gold bullions are kept separately from other people’s assets. This type of storage option is available for gold bars of 10 ounce and greater. When you decide to withdraw your funds, you will receive the same gold bars that you had originally deposited. In a segregated depository, gold bars are identified by their serial number, refinery name, and size.
Non-segregated Storage
In case of a non-segregated or unallocated depository, your gold will be mixed with the assets of others. However, you will receive the gold coin or gold bar of the same year that you had originally deposited. In an unallocated depository, gold bars are identified by their weight and refinery, and gold coins are identified by the type and year minted.
Rules for Withdrawing Your Assets from a Gold IRA Rollover or Transfer Account
Just like any other retirement plan, there are certain rules for withdrawing gold from a self-directed IRA. It is important to know those laws in order to save yourself from facing any kind of tax penalties and to maximize returns on your investment. The rules and regulations are different on physical withdrawal of gold and on withdrawal of cash by liquidating the assets.
Cash Withdrawal by Liquidating the Gold
An IRA custodian can liquidize gold on receiving a distribution request by the investor. The gold is liquidated and cash is issued to the investor who is required to pay taxes at a predefined rate on the distribution of their gold IRA.
Physical Withdrawal of Gold
Gold stored in an IRA is the property of an investor, and they can request the custodian for a physical receipt of the gold whenever they like. However, one must consider that they will be required to pay tax twice, first on the distribution of their IRA and second when they liquidize their gold to cash.
Purchasing Gold With a Self Directed IRA
To purchase gold bars and gold coins for investment in a self-directed IRA, you should first contribute some funds to your account. This can be done by directly transferring the fund or by rolling over your existing retirement plan to your new self-directed IRA. With funds in your account, you can request the custodian to use your funds for purchasing gold from the selected dealer. The custodian buys gold on your behalf and delivers it to an approved segregated or non-segregated depository of your choice.
Purchasing gold with a self-directed IRA is an excellent investment opportunity but it comes at the cost of buying gold that is priced slightly higher than the gold on the commodities market. You may also be required to pay some additional charges such as purchasing transaction fees and shipping costs. Also, the custodian may charge you some extra amount for holding your assets.
The 4-Step Process of Investing in a Gold Or Silver IRA
A gold backed IRA is one of the simplest and most secure ways of investing your money. It is profitable, safe, and yields good return in the longer run. However, it is a common assumption that investing in a precious metals IRA is a complicated and lengthy process. As a matter of fact, with the help of an experienced custodian and a reliable dealer, the process becomes quite simple and quick.
The following 4-step process explains the whole procedure involved in investing a Gold IRA, from opening a self-directed individual retirement account to buying gold from a dealer.
Open Your Self-Directed IRA
The first step in investing is to open a self-directed IRA. The process of opening such an account involves nothing more complicated than completing an application. The new account is opened within two business days of receiving the application (sometimes faster with certain companies), depending on the custodian policies and procedures.
Fund Your IRA
This is the second step of investing in a Gold IRA. Once you have opened your new account, you can fund it in three ways:
Through direct transfer
Through a gold IRA rollover
Through contribution
The process is quite simple and quick if you are funding your new IRA by directly transferring the money through a wire transfer. On the other hand, if you are transferring your retirement funds by a rollover, such as a 401k to gold ira rollover, or a direct transfer, you will be required to consult with your custodian to ensure that you complete all the necessary steps involved. Depending on the policies and procedures of your custodian, the process may take several days to weeks. Therefore, it is very important to consider the time spent here when planning an investment.
Select a Storage Depository
Before purchasing gold from an approved dealer, the account holder must select a depository where their assets will be stored. Every custodian usually has a list of their affiliated storage depositories. However, a user can always rollover their funds to another custodian if they do not offer storage options of their choice.
Purchase Gold from an Approved Dealer
Once you have transferred your funds into your new Gold IRA, you can answer the question why buy gold? by investing in gold bullion and gold coins from a reliable and IRS-approved dealer. This is a multi-step process and requires expert advice from an authentic IRS-approved consultant.
• Once you have selected a dealer and funded your account, you can buy gold from your selected dealer by placing an order.
• Dealer then contacts your custodian to verify the availability of funds in your account.
• Custodian contacts you to verify the order.
• Custodian then contacts the dealer and confirms the availability of funds and authenticity of the order.
• Dealer delivers the gold to your selected storage depository and funds are released to the dealer once the depository confirms the receipt of gold.
• On completion of these five steps, gold is attributed to your self directed individual retirement account in a depository for safekeeping and you are ready to enjoy the benefits of investing in precious metals.
Should I Buy Gold For My IRA?
In the last two decades, investing in Gold IRAs has gained immense popularity due to their stability against volatile market conditions. Many people invest in precious metals IRAs as a way to diversify their investment portfolio; others invest to enjoy the ROIs offered by precious metals.
There are a number of benefits of owning a gold backed IRA. Let’s have a look at some of the fundamental advantages of investing in a gold individual retirement account.
Grow Your Assets With Gold
Economic instability weakens almost every type of investments except precious metals. Stocks, bonds, paper investments, and even real estate may see a decline in their market value in uncertain economic conditions. On the contrary, gold appreciates with time.
Investing in a Gold IRA is the best way to have a reliable source of income after retirement. It does not devaluate with time and increases purchasing power of the investor.
Tax Benefits of Investing in a gold IRA rollover or transfer
Gold IRA holders enjoy more tax benefits as compared to other investors. Gold IRAs come under income investments, which are tax-deferred. Therefore, the investor can accumulate their money by investing in gold year after year without paying taxes. The tax is only payable when the investment is liquidized into cash.
Protect Your Retirement Accounts
Can I use my 401k to buy gold?
The answer is “yes.”
An individual can invest in gold not only by opening a new self-directed gold IRA, they can also move their retirement accounts such as 401(k) and other traditional IRAs to a gold-backed IRA. This helps you to diversify your investment portfolio and preserve your wealth in a secure manner. With a Gold IRA, an individual is rescued from the worry of losing their hard-earned money due to inflation and stock market crises.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
This is nich I would really be interested to look and go into it because it has a lot of insight on. Precious metals that are as good money on your pocket yeah I love your help and the direction of in investing in the metals as source present and future investment
Hi Charles,
Investing in Gold IRA not only protects your investment from devaluation and other financial risks, it offers you amazing rewards in terms of a higher return on investment. The basic economics principle of demand and supply applies here. With time, the supply of gold has decreased but its demand continues to reach new heights, which makes your assets grow at a faster rate as compared to real estate and stocks.
Various countries such as China and India have started stockpiling gold, which is expected to cause an increase in gold prices. Seasonal demand of gold on Christmas, Chinese New Year, Diwali, and Eid also results in an upsurge in gold demand and gold price.
Cost of Investing in a Gold Backed IRA
gold ira rulesThe fee structure of maintaining a retirement account such as 401(k) and traditional IRAs is often very complicated. Because of this reason, many people think twice before investing in a Gold IRA. As a matter fact, the cost of opening and maintaining a Gold IRA is minimal compared to the profit it offers, and the process is quite simple. However, investing in this asset class is a business decision, which should only be taken after considering all the aspects of the process.
Gold IRA investment involves different parties, including the custodian, a storage depository, and the dealer. These three parties charge some amount to the investor for their services.
Fees of Opening a Gold IRA
Since gold IRA is a tax-deferred account, therefore, it must be opened with an IRS-approved custodian. The fees varies from custodian to custodian, but expect to pay around $50 when opening a new self-directed gold IRA or rolling over your existing retirement funds to the new account.
Fees of Conducting a Gold Transaction
Once you have opened a self-directed gold IRA, you are ready to invest in gold coins and gold bullions. However, you will be required to pay a transaction fee every time you purchase or sell gold and other precious metals. Again, the fee varies from custodian to custodian. Usually, $40 per transaction is charged whenever you conduct a gold transaction.
Fees for Maintaining Gold IRA
Custodians are responsible to protect your investment and take care of all the bookkeeping and account maintenance tasks. They charge you some amount on yearly basis, which may range from $75 to a few hundred bucks. The rate varies from custodian to custodian and most of the IRS-approved custodians disclose their fees on their websites. So, you can easily compare the rates and choose a custodian who charges the least amount.
If you are an experienced investor with huge investments in your Gold IRA, you are likely to get discounts from the custodian.
Fees for Funds Transfer
Whenever you purchase gold from an authentic dealer using your Gold IRA, your custodian is required to transfer the amount charged to the dealer through wire transfer. Each wire transfer may cost you around $25, but you can reduce this amount considerably by conducting fewer but bigger transactions.
Fees for Storage of Gold
The gold you purchase from a dealer is kept in a storage depository that is responsible to keep it secured and segregated from other people’s assets. Expect to pay around 0.5 to 1 percent of the value of your assets to the storage depository every year. In addition to the value of gold, the fee charged by a storage depository also depends on its type and other features that it offers. A segregated depository is likely to charge you more as compared to a non-segregated depository.
Your portfolio of precious metal assets also decides the amount you are charged by a storage depository. If your self-directed IRA account holds different types of precious metals such as gold, silver, platinum, and palladium, you are likely to be charged a higher amount by the storage depository.
The Principal Cost of Precious Metals
Whenever you buy gold coins, gold bullions, and other precious metals from a dealer, you are charged some extra amount by the dealer that is known as the spot price or dealer’s premium. It is based on various factors such as product type, dealer premium, and demand of the product.
Dealer premium amount varies from dealer to dealer and their ability to buy mints directly from the government or private mint producers. Generally speaking, dealers charge an extra amount to cover the cost spent on insurance, shipping, marketing, storage, labor, and other services.
FAQs About Gold IRA Investing
How can I invest gold in an IRA?
The process is quite simple. You start with opening a self-directed IRA with an approved custodian or by rolling over your existing retirement accounts. Once you have opened and funded your new gold IRA, you are ready to purchase gold from a dealer.
For more details please refer to our “4-Step Process of Investing in a Gold IRA.”
How do I transfer fund from my retirement accounts to my Gold IRA?
You can easily transfer your retirement funds through a direct transfer or a rollover process. Both the processes are safe and tax-free. However, there is a set of IRA rollover rules which should be followed in order to avoid penalties.
To get more information about funds transfer, read our section on “How to Transfer Your Funds into a Self-Directed Gold IRA?”
What type of retirement accounts can be transferred or rolled over to Gold IRAs?
The retirement accounts that can be rolled over to a Gold IRA include 401(k), 403(b), Thrift Savings Plan, pension plan, 457 deferred compensation plans, and other non-traditional IRA.
For more information, contact an expert IRA custodian.
Why do I need a custodian?
Just like any other IRA, a precious metal IRA or Gold IRA can only be opened with an IRS-approved custodian. Since this is a tax-deferred account, you will be required to get services of an approved custodian for precious metals IRA investment.
What type of metals can I hold in my Gold IRA except gold?
The investment opportunities are unlimited with a Gold IRA. Even though gold is the most popular type of investment, you can further diversify your investment portfolio by investing in silver, platinum, and palladium. However, you will be required to follow the precious metal fitness requirements set by IRS.
For more information on fitness requirement for gold coins and bullions, please refer to our section on “IRS Allowable Precious Metals.”
How can I monitor the financial performance of my assets?
You can always contact your IRA custodian to keep track of the performance of your Gold IRA. Your custodian is also responsible to provide you periodic statements about your investment’s portfolio performance.
Can I take physical possession of my gold and other precious metal assets?
As per the directions of IRS, your assets are kept secured in a storage depository in your name. However, you can withdraw the assets upon reaching the age limit set by the IRS without paying any penalties. The IRS also allows investors to withdraw their funds at any age after paying a certain amount.
For more information on withdrawal rules and regulations, see our section on “Rules for Withdrawing Your Assets from a Gold IRA.”
I heard that Gold IRAs are tax-deferred account. Is that true?
Yes. Generally speaking, Gold IRAs offer greater benefits in terms of their tax implications. The account holder is required to pay tax only when they liquidize their assets into cash. The tax implications depend on withdrawal time and other factors.
To know more about Gold IRAs tax implications, please refer to our section on “Tax Implications on a Gold IRA Investment.”
How much money can you put into a self directed IRA?
Yes. You first transfer should be $5,000 or greater. The annual IRA contributions limit depends on your income level and types of account you hold. Take consultation from your custodian or an IRA gold advisor to determine your annual contribution limit.
Can I contribute my existing gold to my new self-directed IRA?
No. Except for a rollover or direct transfer, you will be required to make all contributions to your new self-directed IRA in cash. However, you can always use your funds present in a self-directed IRA to purchase precious metals, including gold coins and gold bullions.
I heard that setting up a self-directed precious metal IRA is a complex and expensive process, is that true?
Setting up a precious metal IRA is quite similar to setting up any traditional IRA. The only additional step is the rolling over process for transferring funds into your new IRA. Expect to pay around $200 to $275 for setting up a new self-directed IRA.
For more information, please refer to our section on “Cost of Investing in a Gold IRA.”
Is my precious metal IRA only limited to precious metal investments?
No. A precious metal IRA offers you unlimited investment opportunities. In addition to precious metals such as gold, silver, platinum, and palladium, you can also invest in stocks, treasury securities, bonds, etc.
What are the basic eligibility requirements for investing in a Gold IRA?
Just like any other traditional IRA, a Gold IRA can be opened by anyone under the age of 70 years who earns regular income from any kind of employment and can make annual contributions to their gold IRA.
How do I choose the right IRA custodian?
This step is very crucial and you must take care of all the considerations to avoid unnecessary risks and penalties. Always choose an IRS-approved custodian who has an understanding of the tax laws and an extensive experience of managing precious metal IRAs.
For more guidance, read our section on “What to look for in an IRA Custodian?”
How do I select the right storage depository for my assets?
Your IRA custodian can help you in selecting the right depository for storing your gold coins and gold bullions. Generally speaking, you should consider the following factors when choosing a storage depository.
• Location of the depository
• Cost of insurance
• Security mechanisms in place such as automatic relocking, CCTV monitoring, timed locks, detectors, etc.
• Type of depository – segregated or non-segregated
Can I take my distributions in the form of physical gold instead of liquidizing them to cash?
Yes. You can always opt for cash or non-cash distributions. However, the distribution will be taxable, which means that you will be required to either liquidize the gold to pay taxes or to pay taxes from your personal accounts. Also, do not forget to consider the tax implications on cash and non-cash withdrawals.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
Hi there,
I have been shy to the idea of investing in these precious metals for the simple reason that I don’t have the necessary knowledge and risking my capital into something I am not familiar with does not really makes sense to me. However, after reading your article, I think it would make sense to balance my portfolio with some of these precious metal as I have seen my investments (mutual funds) lose a lot since October. But I think that, like you mention, these are also risky.
I know I have to get myself educated first and my first step is to bookmark your website. You have obviously a lot of knowledge in these options and I will benefit from your experience.
One last thing, besides education, what would be the best way to learn how to invest in these precious metals? Where do I start?
Thanks
Hey Denis,
If you are interested in investing and financial planning, you are probably familiar with buying precious metals like gold and silver. Many financial advisors recommend diversifying your portfolio, which is essentially spreading your investments across an array of stocks and commodities to help minimize risk; if one investment drops in value, it can be beneficial to have additional investments that may not be as greatly affected by the market.
Precious metals provide not only a hard asset, but an ideal safe haven investment that has historically withstood economic uncertainty. The utility and rarity of these metals has been treasured for centuries as a monetary device and a symbol of wealth.
But even with the knowledge that investing in precious metals may be the right option for you, learning where to begin can be overwhelming. This guide is designed to give you a basic overview of investing in precious metals. Once you discover your areas of interest, you can do some additional research or bring questions to your financial advisor for a more thorough understanding of the market.
Types of Metals
Precious metals are naturally occurring metallic elements that are relatively rare to find, which has contributed to their value throughout history. It is common to find metals like gold and silver in jewelry, but precious metals also have a wide variety of industrial uses as well. The supply and demand of these metals across various industries is what causes spot prices—the current price of a metal—to stay in flux while markets are open.
The most common precious metals used for investing include:
Gold: Treasured for its durability, malleability, and conductivity, gold is primarily used as a form of currency and in the making of jewelry. It has additional uses in electronics and dentistry.
Silver: With more industrial uses than gold, silver price fluctuations are often more volatile; but its affordability makes it an ideal choice for beginner investors. Silver is used for electrical appliances, medicinal applications, batteries, circuits, and a variety of other purposes.
Platinum: Due to its rarity, far less platinum is pulled from the ground than gold. The most common use of platinum outside of ornamental purposes is in the manufacture of automotive catalytic converters. It is also used in the computer industry and for chemical refining.
Palladium: Similar to platinum, palladium is used to make engines and ceramic capacitors in chargeable electronics. It can also be alloyed with gold to make white gold, which is mostly used for jewelry.
Some investors also choose to buy copper, magnesium, zirconium, iron, and other metals that have a host of industrial uses.
Why Invest in Precious Metals?
With a paper money system in place, why should you invest in precious metals? While we cannot predict exactly what could happen to our economy in the future, we can take notes from history. Several forms of paper money—also called fiat currency—have collapsed in various cultures over the centuries. But gold, silver, and other metals have remained universally valuable commodities.
People often view metals as a safe haven investment. It is common to see an increase in demand during times of economic or political instability, as well as during times of war or other crises. Faltering real estate, stocks, and bonds may also drive people toward precious metals. If security is threatened, metals provide a valuable asset that you can keep in your own possession.
Another benefit of investing in precious metals is that they offer protection against inflation. You cannot create more metals than what already exists, so they cannot be inflated. Metals are also free of credit risk. Owning metals helps diversify your portfolio, which is often recommended for more investment security.
How to Invest in Precious Metals
The first step to any investment plan is identifying your goals. This helps you determine which types of investment options can help you achieve what you want. Whether your goals are short-term or long-term, there are several ways to begin investing in metals. But bear in mind that precious metals should only be a portion of your portfolio. A healthy mix of investments helps protect your finances from market volatility.
Some of the ways you can begin investing in precious metals include:
Exchange-traded fund (ETF): This is a basket of funds that tracks a commodity or index. It is a security on the investment, so you can profit as others buy metals. You can get an ETF for gold, silver, or platinum as a liquid means of purchasing metals.
Gold or silver stocks: This is an investment in the companies that mine metals, not the metals themselves. It provides an indirect way to invest in the market.
Physical metals: You can buy precious metal bullion in the form of coins, rounds, and bars. So long as you have a safe method of storage, this provides you with a tangible asset for wealth protection. This is a favorable option for people who wish to incrementally accumulate wealth over the years.
Precious metal IRA: This allows you to reap the benefits of owning metal, without the hassle of storing or transporting it. Rather, it is kept in a bank vault.
The economic value of precious metals
James Webb Space Telescope Coated in Gold
Why do precious metal prices follow a consistently upward trend? It’s essentially a question of supply and demand. Precious metals are relatively scarce. Many of them have high economic value because they are used in various industrial applications. Historically, gold bullion or silver coins can give you a substantial return. In fact, there are several different precious metals that you can think of including in your investment portfolio.
Top 4 precious metals for your portfolio
Investing in Precious Metals
Here’s a brief description of the most common precious metals to invest in:
Gold
Silver
Platinum
Palladium
Gold
Traditionally, gold has been seen as a safe haven investment. When the economy slows or when the political situation is uncertain, investors turn to this precious metal. At the time of the global financial crisis in 2008, the stock market crashed, leading to large losses for many investors. Between December 2007 and February 2009, the Dow Jones Industrial Average, which is a stock market index that includes 30 of the largest US companies, fell from a level of 13,264 to 7,062. That’s a loss of 47% of its value in a 15-month period.
Gold Price Performance 2000 – 2017
In the same timeframe, gold prices increased by 17%. The chart above illustrates how an investment in gold has provided far superior returns to the stock market since 2000. As mentioned, historically gold is considered a safe haven investment. This precious metal performs especially well in times of:
High inflation (or even hyperinflation) where investors use gold as store of value.
Economic or financial crisis where banks and regular currencies may become unstable.
War or political crisis where people use gold as medium of exchange and store of value.
Silver
Silver Bullion
As an investment, silver can be considered to be very similar to gold. Both precious metals are regarded as a store of value and a hedge against inflation. However, there is one important difference between gold and silver. Gold has a limited number of practical applications and it’s way more expensive. It is extensively used in making jewelry and gold coins. It is also used in dental fillings and smartphones. But that’s about it.
Silver, on the hand, has a wide range of industrial applications. Before digital cameras became popular, the precious metal was extensively used in the photography industry. Therefore, silver was an important raw material in the manufacture of silver-based photographic film.
Although demand for this application has dropped, a number of other industries require large quantities of this precious metal. It is used in batteries, superconductor applications, and the manufacture of microcircuits. In recent years, there has been an increase in demand from the solar power industry. Silver also has applications in medicine and consumer products. This wide range of industrial applications makes silver an interesting investment.
Platinum
Platinum Nugget
This precious metal is used extensively in the manufacture of jewelry and as a catalyst in the manufacture of fertilizers and plastics. However, the greatest demand for platinum comes from the auto industry. It is used as an auto-catalyst in diesel vehicles. The precious metal helps to convert diesel exhaust into carbon dioxide and water vapor. However, platinum’s price has seen a steep decline because the auto industry is moving away from diesel as a fuel source.
Platinum prices have been trending downwards for years. In May 2008, spot prices for platinum crossed the $2,000 per ounce mark. Since then, prices have been in decline. Currently, platinum is trading at less than $1,000 per ounce. Some experts think that at the current levels, platinum presents a buying opportunity. However, that could be a contrarian investment. You should invest in this precious metal only if you are willing to take on a high degree of risk.
Palladium
Platinum’s loss has been palladium’s gain. Prices of the precious metal have skyrocketed in recent times. A year ago, palladium was trading at $775 per ounce. Its price in April 2018, is in excess of $1,000, a gain of almost 30% in a year. What has led to this rapid increase? Palladium is a substitute for platinum in the auto industry. Gasoline powered cars, which traditionally used platinum in their catalytic converters, have switched over to palladium. Today, about 78% of the world’s palladium is utilized by auto manufacturers.
How to invest in precious metals
Gold Investment
New investors are often confused about how to buy precious metals. Is it a good idea to buy bullion coins? Will investing at the current gold price provide a high rate of return? Is it advisable to purchase precious metals online? It’s important that you understand that if you plan to invest in precious metals, you must exercise a certain degree of caution. As with any investment, you need to do your due diligence and understand the potential risks.
If you buy gold coins or any other physical metal like silver, you will be exposing yourself to investment risk. Valuations may fall after you make your purchase. In addition to the possibility of losing money because of a decline in prices, there is another risk that you are exposed to. You could be cheated if you buy, say, physical gold from an unverified source. Here are some precautions that you could consider taking if you plan to buy gold.
Buying gold bullion
If you are planning to invest in physical gold, it’s a good idea to buy from an LMBA (London Bullion Market Association) approved dealer. LMBA sets standards for precious metals trading around the world. LMBA has 144 member companies located in 30 countries around the world.
Gold Bullion
If you are dealing with a trusted supplier, you don’t even have to take delivery of the physical gold that you buy. It can remain in the custody of the LMBA approved supplier. You can also sell your gold directly to a dealer if it is stored in an LMBA approved vault. But what if you are planning to invest in gold that you plan to purchase from an unfamiliar vendor? How do you ensure that you are getting what you are paying for?
You may want to carry your own digital scale with you. Gold is weighed in troy ounces. One troy ounce is equal to 31.1 grams. If you are planning to buy gold coins, restrict your purchases to government-minted bullion coins. You can visit the official website of the coin-issuing authority to check the dimensions of these coins.
The price that you will pay for a gold coin to a dealer will be above the gold spot price. Smaller gold coins attract larger mark-ups. Be prepared to pay 1.5% to 10% more than the spot price. If you are offered a rate that is below the spot price, it is likely that you are being cheated. One final check that you can conduct is to verify if the gold that you are buying is attracted to a magnet. Gold is not magnetic. It’s a precious metal that won’t stick to a magnet.
Mining stocks
What if you don’t want to go through the trouble of investing in precious metals by buying and storing gold or silver? If you take the route of a physical investment in precious metals, you have to take certain precautions to ensure that you do not get cheated. You also have to arrange to keep your bullion or coins in a safe location and insure them.
One alternative option is to invest in precious metal stocks instead. Buying stocks in a gold mining company or a firm that mines diamonds can be highly profitable if you make the correct choice. Mining stocks like Barrick Gold or Anglo American have one other great advantage. They can pay you a regular dividend. This can give you a steady stream of income. Remember that you will not get this benefit from the physical gold or silver that you buy and store. That’s one of the disadvantages of investing in precious metals in their physical form.
Take the example of Freeport-McMoRan Copper & Gold Inc. This international mining company headquartered in Phoenix, Arizona is a producer of copper, gold, and molybdenum, which is a brittle silver-grey metal used in some alloy steels. Freeport-McMoRan has seen its share price escalate from $12.51 on April 20, 2017, to $19.57, a year later. That’s an increase of 56% in a year.
Remember that mining stocks are a leveraged play on precious metal prices. If conditions are right, you can make high returns by buying the shares of a company that produces precious metals. But it can work the other way as well. Say, the silver price falls by 10%. A company that produces silver may see a far greater decline than 10% in its share price. That is a risk that you have to take when buying precious metal stocks.
ETFs and mutual funds
Precious metal exchange-traded funds (ETFs) invest in gold, silver, platinum, and palladium. They take futures-based exposure as well as physical exposure. Physical exposure involves the ETF using the funds that it collects to buy a physical precious metal, say gold.
An ETF may also invest in precious metals futures contracts. This involves entering into contracts for delivery of gold or silver at an agreed-upon price in the future. These contracts offer greater financial leverage and therefore can provide higher returns. But they also carry a greater degree of risk.
SPDR Gold Shares is a gold ETF that offers investors a cost-efficient and secure way to invest in the precious metal. It currently owns almost 28 million ounces of gold valued at over $37 billion on behalf of its investors. It has provided a return of 4.82% in the year to April 20, 2018.
You also have the option of investing in precious metal investment funds that are structured as mutual funds. A mutual fund is similar to an ETF but it doesn’t trade on the stock exchange. Therefore, your buy / sell transactions have to be entered into with the mutual fund company.
Why your investment portfolio should include precious metals
It is absolutely essential that you diversify your investments among different asset classes. Precious metals can prevent your portfolio from losing value when there is a decline in stock market values. Which are the best precious metals to invest in? That can be a difficult choice to make, but it’s prudent to stay with the favorites like gold and silver. If you are willing to take on a greater degree of risk, you can venture into palladium as investment.
If you decide to stay with, say, gold, buying gold stocks could be a good option. But here again, it’s not easy to choose the company that you should invest in. A strategy that you can use is to track a gold index like the NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index. This is also referred to as the HUI index. The HUI index tracks 16 companies involved in gold mining. The VanEck Vectors Gold Miners ETF is a fund that tracks the HUI index. You can consider investing in this ETF if you want to diversify your gold mining stock holdings.
Alternative metals as interesting investment opportunities
So far we’ve taken a look at investments in common precious metals like gold or silver. However, apart from investing in precious metals, there also are other metals that bring interesting investment opportunities. We’ll now cover a few metals that are chemically not precious metals, but still highly interesting for investors:
• Lithium
• Cobalt
Lithium is a soft silvery-white metal. Under standard conditions, it is the lightest metal and the lightest solid element. This industrial metal has seen a sharp increase in demand as it is used in the manufacture of lithium-ion batteries, the power source for electric cars. The price of lithium has doubled to more than $21,000 a ton in the last two years. If this precious metal had found a place in your investment portfolio, you would have made a significant return.
Cobalt
Cobalt is used to make magnets and also finds application in jet engines and gas turbine generators. But in recent times, it has seen an upsurge in demand as lithium batteries utilize the precious metal. In 2006, only 20% of the world’s cobalt production went towards the manufacture of lithium-ion batteries. By 2016, an estimated 51% was being used for this purpose.
According to projections that are based on the expected increase in the production of electric vehicles, 62% of global cobalt output will go into making lithium-ion batteries by 2020. What effect has this had on cobalt prices? Valuations have zoomed upwards in the last two years. Since the beginning of 2016, cobalt prices have increased by over 300%. Currently, prices are in the region of $90,000 per ton.
Conclusion: Investing in precious metals
A final word of caution before you begin investing in precious metals. Valuations can be volatile and it is quite possible that you could see gold market prices move sharply upwards or downwards after you make your purchase. That could be true of other precious metals too. What should you do when that happens? It is advisable to stay calm. Don’t be in a hurry to cash in on your profits or to limit your losses.
Precious metal purchases should be viewed as long-term investments. Look at them as a type of insurance policy. If your other investments, especially your stocks, perform poorly, your gold or other precious metal holdings could serve to cushion your losses. But for this to happen, it is important to stay invested for the long-term.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
This article is just mind blowing ! I would never have thought about the tremendous decrease in value of the dollar after Nixon eliminated the ratio between the money and the precious metal.Having in mind the current unstable market ,is clear that precious metals are the best way to keep your wealth or to save yourself from market crashes .
Hi Sebastian,
Although some restrictions apply to a precious metals IRA, you are able to purchase both Physical Gold, Silver and other precious metals inside your IRA. Well, it’s true you do have the option of holding physical gold and silver in a retirement account, and it’s a very straightforward process. Precious metals can be highly advantageous alternative assets. However, when you decide to buy gold, silver, platinum, or any other precious metal inside your IRA retirement portfolio, there are some steps that you want to take.
The Process Begins with a Thoughtful Investing Strategy & Research
Before setting up an account or rolling over a 401k, you need to think ahead of time as to what you are placing into the portfolio of your IRA. You also need a comprehensive, personalized investment strategy because each item you purchase is going to have a financial impact one way or the other. The only way to be sure you know what are buying and whether or not it fits your financial goals is to do your due diligence.
Setting Up The Appropriate IRA Account and Funding It
Next, is to establish an Individual Retirement Account with a trusted IRA company who can act as a custodian. Once you have funded your precious metals IRA account, you will want to begin researching precious metals brokers. There are many metals brokers out there, so make sure that you choose one that you are comfortable with investing. Make sure to do your research, and you know what you’re buying before committing any funds.
Note: Once you decide that investing in metals is right for you, make sure you choose an IRA custodial firm that will allow you to add physical metals to your retirement account.
When you have an IRA, you can fund it in many different ways. This is a step that you have to figure out based on your current financial situation. It can be a rollover from a 401k account or an inherited IRA account that you roll over. It can also be funded by direct deposit or through a checking or savings account.
Once the money has been deposited, you can decide what the money is used for regarding investments. This is critical because your IRA is self-directed, you decide where to direct the funds. This means that you can choose stocks or you can choose other allowable assets, such as precious metals.
Precious metals are considered a secure tangible asset because you can access them at any time and since they have stood the test of time. Metals will likely always remain as a form of currency so that it may be a viable option for you in comparison to paper assets or more specifically non-tangible assets, such as stocks and bonds alone.
Options for Purchasing Physical Precious Metals in an IRA
You have two options when it comes to buying the precious metals in your retirement savings account.
1. Purchase Directly From a Standard Self Directed IRA
The first option is to have your IRA custodian hold them for you in the name of your IRA. Set up the account, fund the account, and choose the metal broker of your choice. You would send a direction of investment from you custodian to the brokerage company to let them know who will be providing the funding. An invoice will be used to ensure that everything is accountable.
All precious physical metals owned by an IRA should be held with a federally regulated depository, such as Delaware Depository. To get the process started, you would open your IRA account with an IRA custodian and fund the account by rolling over an existing retirement account or fund it with new contributions.
Precious Metals IRA Step-by-Step Checklist:
Once the precious metals IRA account is funded, you will need to follow these steps.
• Locate a precious metals broker or dealer to purchase from and agree on a purchase price for the assets.
• Have the precious metals dealer send an invoice to the Custodian with the purchaser named as “Name of the Custodian for ___your name___ IRA.”
• Note: In most cases, the broker will complete their due diligence, verify you have an account and ensure you have the appropriate amount of funds to complete a purchase.
• Next, you will send a direction of investment form along with an invoice from the broker to let the Custodian know to fund the purchase through your IRA account and to tell them where to send the money.
• The Custodian will send the funds reflected on the invoice along with shipping instructions to the broker.
• The broker will send the metals and a copy of the invoice to the depository.
• The depository should match up the invoice with what they receive to make sure they received what you purchased.
• In the case of the Delaware Depository, the Depository will send the gold IRA custodian an invoice showing what they received, and we will match it with the broker invoice to make sure they are the same.
If you are going to have Regal Assets store the metals for you, then the metals are held at a Delaware Depository, which is regularly audited. Caution storing your metals at home. It should also be noted there will be additional fees added to your annual invoice. For Regal Assets, the fee is only $125 per year for precious metals storage.
2. Purchase Precious Metals Through an IRA LLC
The other option of funding via the IRA is to purchase the metals through an IRA LLC arrangement.
So you are aware, you will have to set this special LLC first.
We strongly suggest hiring a competent IRA LLC facilitator to establish the IRA LLC structure for you, such as a tax attorney or an IRA advisory firm who specializes in setting up IRA LLCs. After completion, you will be required to send us – your IRA LLC custodian – a copy of the LLC Operating Agreement for review.
Next, you will fund the LLC, and you will send Regal Assets a direction of investment telling us to fund the LLC through your IRA. We will either send you a check, or we can wire funds directly to the LLC checking account that you set up at the bank of your choice.
Once the LLC entity is funded, you will need to find a precious metals broker, agree on a price and purchase the metals in the name of the LLC, instead of the name of the custodian company for the benefit of (FBO) the account holder. Make sure to purchase the metals in the name of your LLC to avoid a costly prohibited transaction.
Doesn’t the Manager of your IRA have to keep it for you?
You will take possession of the metals in the name of the LLC. However, the metals will need to be kept with an independent third party such as at a bank in a safety deposit box or another depository of your choice.
Once a year, you are required to report the value of your gold and other assets in your IRA to your custodian using an Asset Valuation Worksheet. Regal Assets, as a gold IRA provider will provide the valuation worksheet to clients in January of each, so you can quickly report back the value of the assets held by your LLC.
The worksheet will tell us what metals you have purchased in your LLC and their value. This is what we use to determine the fair market value of your IRA.
Regardless of which option you choose, you should to be mindful as to the name you use when buying from a metals broker. Again, if you were to use your name instead of the name of the brokerage or the IRA LLC, then you would be violating the rules within the IRA format, which can slow the overall process down dramatically. You also want to avoid any problems with the IRS, so you want to follow all of the right steps.
Once the metals have been purchased, the metals have to be held by a qualified depository, namely Delaware Depository or a bank safe. You cannot simply buy the physical assets and store them wherever you want. If you have any questions as to where they can be stored, then you can talk to the company holding your IRA account, and they should be able to help guide you to a quality source for proper storage.
What Types of Physical Metals Are Eligible For Purchase Inside An IRA?
Before you buy any physical assets for your IRA, you have to determine which one or combination are going to be the best to invest in by becoming knowledgeable about your options.
Interested in gold? Here some of your diversified opportunities for investing in a gold-backed IRA:
– Gold Eagle Coins
– Australian kangaroos and nuggets
– Austrian Philharmonics
– Gold Maple Leafs
Although, this is not a direct endorsement of Gold for America. They are a great resource to learn more about some of the physical metal and gold IRA options available to you. Interested in a complete list of allowable IRA metals?
You can also talk to gold and silver broker to determine whether you can buy certain metals in your retirement account. There may be some guidelines depending on the seller regarding the specific types of metal as well as certain quantities. You never want to purchase anything on your own, and also, you should always discuss your overall strategy again with a financial advisor first, as they could shed some additional light on the topic for your situation specifically.
In the end, you must be following the guidelines set by the IRS to make sure you are making transactions that are allowed within a self-directed IRA. For example, the minimum fineness needs to be met, which for gold has to be at a minimum of .995 fineness and silver has to be a minimum of .999 fineness.
Difference Between Gold or Silver Bullion & Collectibles
If you’ve been following our blog for a while, you’re probably tired of us writing about prohibited IRA transactions. Until you all know the IRS code for prohibited transactions by heart, I will continue to talk about these forbidden activities every chance I get. Violating this point can cost you your retirement account’s tax protection. One could quickly toss years of effort out the window by neglecting a single point; and who wants that?
“It is extremely important for you to know what prohibited transactions are and how to avoid them,” Terry White, CEO Regal Assets.
Purchasing Collectibles in an IRA is Prohibited – PERIOD!
We’ve discussed several times about collectibles being considered prohibited transactions, but I’m talking about one exception to this rule: Gold. Up until 1997, IRA investments in gold and other precious metals were considered prohibited transactions. However, Congress passed the Taxpayer Relief Act of 1997. One issue addressed in the bill was making certain types of gold and other precious metals eligible for IRA investment. Precious metals can be a great choice if you do your research.
CNN Money is a great source to see the movement of metal prices. Whenever you need specific personalized investment advice in regards to funding your IRA or anything else, it’s a good idea to work with an experienced attorney or a CPA. They should be able to answer the questions you have and provide you with guidance regarding making investments that are financially savvy based on your financial circumstances. Make sure to take the appropriate amount of time to explore precious metals in detail and find out what your broker has to say about such an investment.
The IRA is part of your retirement savings so that you won’t be touching it for a while. Precious metals, according to Bloomberg are anticipated to grow tremendously in value over the next 10 to 20 years, though you will want to talk with your CPA or broker to find out if it is the right move for you. While buying and selling quickly is not always advantageous, if you are looking at the long-term, then it may be right for you. Fortunately, if you set up a self directed IRA account with Regal Assets, then you can invest at any time in any asset that is allowed by the IRS. Therefore, since you are self directed, you have the freedom to invest when the time is right; you can invest where, when and how you want.
Regal Assets has developed some informative videos on the matter. Each Tuesday at 2 pm new videos are released, providing you with more insight into IRAs and other matters of money. You can view these videos online to learn about some of your options and how to take the first step in setting up a precious metals IRA.
Regal Assets Was Featured by American Bullion
We recently received an email from American Bullion in Los Angeles, saying that Regal Assets had been featured in their infographic containing information on self directed IRAs. The infographic has a wealth of information. It contains the advantages and disadvantages, a quick history, a list of assets that can be held in an IRA, restrictions, contribution limits, and a list of custodians that can administer self directed IRAs. Best of all, it’s comprised of an easy to read format. Enjoy!
Frequently Asked questions About Setting up a Precious Metals IRA with Regal Assets
The investment to set up an account with SunwestTrust.com is $350 for the year. The custodial fee also includes depository fees, correct?
$50 set up fee. $350 if we are storing the metals. Check out our complete IRA fee schedule here.
Do you deal with one or multiple depositories or can a client choose? Where are the depositories located?
Regal Assets utilizes Delaware Depository. However, if an IRA client has an IRA LLC set up, individuals can choose their own depository, however, be advised you can’t store your precious metals whether if it is either physical gold or silver IRA in your home under your mattress or even in a fireproof safe. Doing so would be considered a prohibited transaction. Beware of the late night infomercials now running both on the radio and TV that may mislead you into thinking you can start a self-storage IRA or home storage IRA for your precious metals.
If you have a captive or primary depository, then who is it with? Where would a precious metals dealership client purchases? Why do you recommend such and such depository over another?
We only work with the Delaware Depository located in Wilmington, DE. You never touch the precious metals. The metals are shipped directly to the depository for safe storage. If you are investing in precious metals directly through your IRA at Regal Assets, we require you to keep your metals at the Delaware Depository only because we know them and we have an excellent working relationship with this them. We have an auditor that visits the facility annually to make sure that everything is accounted for.
If you have an IRA LLC, you may have the gold broker send the metals directly to your LLC. When you receive your precious metals, you will need to keep them in a bank safety deposit box under the name of your LLC, or you can also use Delaware Depository. If you have an IRA LLC, we aren’t responsible for auditing on your behalf.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals
Thanks for posting the detailed article about investing in precious metals. I am already associated with Regal Assets and have few different income streams adding precious metals is a fairly low risk strategy. Your article will certainly educate some people that are sitting on the fence regarding precious metal investment.
Hi Martin,
The IRS allows a variety of different retirement accounts such as an IRA, Solo 401(k), HSA, or ESA to acquire certain precious metals as an asset, all while retaining the tax benefits associated with the account type. Investing in gold, silver, platinum, or palladium in your self-directed IRA is one way to diversify your retirement portfolio. Not all IRA providers allow their clients to possess a gold IRA account; however, New Direction empowers our clients to invest in the asset markets that they know and understand.
Many people have had experience investing their personal funds in precious metals. They are now looking to capitalize on that experience and generate retirement wealth that is tax-deferred or tax-free by investing in a gold and silver IRA. In order to invest in physical precious metals in an IRA, the account holder will first choose a metals dealer/broker and a depository. The depository is a secure facility where the metals are held in the name of the IRA.
An IRA can purchase precious metals from any non-disqualified person or entity. You, the IRA holder, select a dealer/broker from which to buy metals, and direct us to send money from your IRA to close the deal. We make sure that the entire process takes place within your IRA, so that the self-directed gold IRA can maintain the right to any tax benefits associated with the account type.
New Direction IRA has strengthened its support of and commitment to precious metals investors with the formation of its Precious Metals Asset Team (PMAT). The team includes specialists in gold IRA or silver IRA investments options, who are able to guide you through the entire process and can help make self-directed investing in alternative assets an easy and pleasant experience.
Ways to Purchase Precious Metals with Your IRA
Physical Metals: In this scenario, the IRA purchases coins, bars, and/or rounds from a precious metals dealer of their choice. The IRA owner works through a precious metals dealer to purchase eligible metals, some of which may have better appreciation potential. The physical metal is then stored at a depository in the name of the IRA until such time as the IRA holder decides to sell, distribute, or exchange the assets.
Fractional Ownership of Physical Metals: In this scenario, the IRA purchases a fractional ownership of physical bullion that is held in an allocated vaulting account. Often, vendors that offer this asset provide an online marketplace that allows the IRA to buy, sell, or trade their metals. Marketplaces vary in their offerings, but tend to allow more speed and flexibility than the physical scenario above.
Paper/ETF (exchange-traded fund): ETFs are shares in a fund or trust representing an ownership interest in gold bullion, where shares are held in paper form and shareholders have no rights of redemption. Owning an ETF is clearly not the same as owning physical gold. This scenario is typically utilized by equity traders, institutional investors and hedge funds.
Self-Directed IRA Educational Videos
Introduction to Precious Metals Investing Webinar
Learn how investing in precious metals such as gold, silver, platinum and palladium with a self directed IRA/401(k) can be part of a sound plan to diversify your retirement portfolio. Self-directed IRA gold is a viable investment option which has become increasingly popular among those who are seeking alternate investment opportunities outside the stock market. It is also a much quicker and easier process than many IRA holders realize. This brief 30-minute presentation will discuss IRS rules for gold IRA investments, eligible metals and coins, as well as the basic steps on how to open, fund and invest in a precious metals retirement account with New Direction IRA.
Step-By-Step Guide to Acquire Precious Metals in Your IRA
1. STEP 1 Open and fund your IRA – It takes New Direction IRA one to two business days to open your account once your application is in the office. You will then fund the account with a rollover (such as a gold IRA rollover), transfer, and/or contribution. This may take several weeks, depending on your current custodian, so plan for that in your timetable.
2. STEP 2 Choose a dealer and depository – A gold IRA is allowed to purchase metals from any non-disqualified person or entity.
3. STEP 3 Fill out a Buy Direction Letter and Depository Election Form, then submit it to New Direction.
4. STEP 4 Agree on a purchase with the dealer. Dealer will send an invoice to New Direction.
5. STEP 5 NDIRA pays the dealer from the IRA funds. New Direction sets up an account at the depository in the name of the precious metals IRA. Metals are shipped by the dealer to the depository.
Gold IRA Rules – Important Things to Know
• The IRA is the owner of the precious metals, not the IRA holder. Therefore the purchase, shipping, and depository costs are paid by the IRA. All gains remain in the possession of the IRA until the client reaches age of distribution.
• All legal documents related to an IRA-owned asset must be in the name of the IRA, not your personal name.
• The IRS does not allow the IRA holder to possess the physical metals while those assets are in the IRA.
• The metals must meet certain fineness standards, as specified by the IRS, to be held in a retirement account.
When you are considering buying gold in preparation for retirement you can probably think of a dozen questions to ask, especially if you’ve never had the opportunity to invest in gold. Your IRA (individual retirement account) is a great product to use in gold investment but what if you have a 403(b) account? Let’s take a look at exactly what a 403(b) retirement account is and what you can do with it if you want to invest in gold.
What is a 403(b) Account?
If you work for a tax-exempt organization such as a public or private school, hospital, a church, a museum, or a charitable organization you probably have a 403(b) retirement account. The 403(b) is so named simply because it is in section 403(b) of the tax code that deals with retirement plans. Established in 1913, the tax code originally was 400 pages long. By 2010 it had grown to 71,684 pages and is surely much longer now! With so many rules, requirements, and exemptions, referring to specific financial products by their number in the tax code is about the only way to keep them straight.
A 403(b) retirement plan is tax deferred, which means you won’t be taxed on it until you start to use it. Anything you take out of it during retirement is taxable income. Unlike other IRAs, you must begin mandatory minimum distributions at age 59 ½ whether you have stopped working or not. Once you begin to withdraw money from your 403(b) you will have to pay taxes on it just as you do on the money you earn before retiring.
How Much Can I Contribute to a 403(b)?
If you are younger than 50 you would have been allowed to contribute $18,000 into the account in 2016; if 50 or older you could make catch-up contributions up to $6,000. You should check with your human resources department or the tax code to get the current limits.
What Investment Products do 403(b) Accounts Use?
The 403(b) plan used annuities as their sole investment product until the mid 1970s. Annuities are basically insurance policies; your contributions to the fund pay the premiums on the policy. When you retire you can draw a monthly income or a specific amount in a lump sum. The lump sum will consist of your contributions plus the interest they have earned. Some annuities offer a fixed interest rate while others vary with the market. And although the contributions are tax free, there are stiff penalties for withdrawing from the account before the annuity matures.
These days most 403(b) plans allow participants to invest in stocks and mutual funds, as well as annuities or a combination of the three products. If you have done any research on investing, you know that the key to success is diversity. Having a 403(b) retirement plan limits your investing options but you may be able to contribute more over your lifetime since your contributions are not taxable.
There are four types of investments currently approved for 403(b) retirement accounts:
Mutual funds
Individual bonds and stocks
ETFs, or exchange traded funds
Fixed or variable annuities
Can I Fund a 403(b) With Gold?
You cannot yet use a 403(b) retirement account to invest in gold or other precious metals but some plans do allow gold investment in the form of gold stocks and gold ETFs (exchange traded funds). While many investors find that gold stocks and ETFs are profitable for them there are significant risks in “paper gold” as these investments are called.
The Pros and Cons of Funding a 403(b) Account with “Paper Gold”
Paper gold is just that—a declaration of gold value on paper or papers that state you hold shares in a gold mine or a company that owns a gold mine. You can find companies like this on the Gold Miners Index (GDX). ETFs are another form of paper gold whose value rises and falls depending on how risky the financial climate is.
Owning part of a mining facility can be very profitable but you are also prey to circumstances beyond your control. You are at the mercy of regulations and taxes imposed on these companies by the federal government. If you buy stock in a mine that is located in a foreign country you could profit more due to the lack of regulation. However, if your mine is in a volatile, unstable country you run the risk of it being confiscated by a temporary government, rendering your investment worthless.
Owning stock in a mine also means that your profits depend on the costs or production and the quality of management in charge of the facility. Poor management can mean that you are left holding worthless paper if the mine shuts down. You are also out of luck if the nation experiences a currency collapse since the value of your gold is only on paper, not in your physical possession.
currency fail – buy gold
Gold ETFs are also riskier than owning physical gold because the stocks rise and fall faster as the spot gold price moves around. There are scores of these ETFs on the market today and some perform very well, making nice profits for their owners. Others aren’t efficient gold investment products because of excessive fees. When choosing an ETF product it’s important to make sure that all your profit isn’t consumed by fees and other expenses.
You Can Still Use a 403(b) Account to Buy Gold
If you work for a tax-exempt company that has provided you a 403(b) retirement account you can still use that account to invest in gold bullion, bars, or other forms of physical gold. All you need to is roll over your 403(b) into a more conventional 401K or other retirement account that allows you to fund it with physical gold.
Rolling over your 403(b) is not at all difficult. You have a choice of a direct rollover or cashing out and re-investing in a 401K. If you choose to cash out you have exactly 60 days to invest the funds. If you haven’t done so by day 61 you’ll pay a hefty 10% penalty on those funds. You are not permitted to use the cash to buy investments before you establish a new IRA. Having an IRA already set up before you withdraw funds is the best way to maneuver those funds and keep within the time limits allowed. You are limited to one rollover annually.
Of course, you can also take advantage of a direct rollover in which you never see the proceeds of your 403(b). It is transferred directly into a waiting IRA, ready for you to invest it as you see fit. Most people choose this option because it’s so convenient. Once your funds are deposited to a more conventional IRA you can begin buying gold and storing it for your retirement.
Diversity is the Key to Successful Retirement
Successful, profitable investing depends on diversity. Gold investment should be only one of many financial products that you use to insure a comfortable retirement. While gold will always be valuable and never worthless, don’t put all your money into precious metals. You should have an assortment of products such as stocks, mutual funds, bonds, real estate, and other investments. When one product is not doing so well the others will likely be earning. Ideally you should invest at least 5-20% of your retirement assets in precious metals. You can do more if you want but the more you diversify the more secure and comfortable your retirement will be.
As you can see, the form your IRA takes doesn’t have to keep you from buying gold. There are legal and sensible ways to invest in gold no matter what type of IRA your money is invested in.
Rest, you can look out the below link to to read more about the details about what type of precious metals can be stored in a Precious Metals IRA.
http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals