A silver IRA is a special type of retirement account.It allows you to invest in eligible silver coins and bars.
The rules are the same as those for any other IRA, except for a few exceptions. You are able to silver and other precious metals to your account in a silver IRA. Regular IRA’s focus on stocks and other paper assets.
Silver IRA’s can help to diversify your portfolio and act as a hedge against inflation. However, there are a few pros and cons you need to understand to bulletproof your retirement funds.
What Is a Silver IRA?
Most people are familiar with traditional IRA’s because that’s what most people have. These are the ones you open at a brokerage firm, like Fidelity or Schwab.
When you invest in these types of accounts, your money is buying paper assets. Paper assets are generally stocks, bonds and mutual funds.
A less familiar option is to open a self-directed IRA.
These accounts have the same tax advantages and the same guidelines as any other type of IRA but with one material difference: you manage the investments.
This means you’re not restricted to the menu of investments that the broker offers; you can choose exactly what goes into your account.
The options are extremely broad and include hard assets that you can see or touch. These assets include cash-flow real estate, businesses, gold, silver, platinum and palladium.
A silver IRA is simply an IRA that has some type of silver investment held in the account.
A Silver IRA Has All the Benefits of a Traditional IRA and Roth IRA
A self-directed IRA can be a traditional or a Roth IRA.
Pre-tax dollars funds a traditional IRA account. You only pay incomes taxes when you take money out of the account at retirement.
Post-tax dollars are what funds a Roth IRA account. This means there’s no immediate tax saving, but you can take out your money tax-free at retirement.
For both types of IRAs, the investments grow tax-free while in the account. As long as you keep the gains in the IRA, you will not be taxed when you sell the silver.
The Internal Revenue Service restricts the amounts of contributions you can make each year. Usual contribution limits apply
In 2018, the annual limit for IRAs is $5,500 across all your IRAs, or $6,500 if you’re age 50 or older. Those limits will probably go up by $500 in 2019.
A Silver IRA as a Hedge against Chaos and Inflation
Silver provides a hedge against inflation and economic volatility. While currency values have a tendency to fall and devalue over time, the price of silver historically has gone up over time.
A silver dollar has notched a tenfold return over the last century, for example, whereas the value of a paper dollar has fallen over 90 percent in comparison.
Investing in silver means you’re protecting your retirement savings against currency declines and safeguarding its purchasing power over time.
Diversify Your Portfolio
Most IRA’s are based on paper assets like stocks and bonds, which means they are susceptible to extreme markets.
Many people, on the other hand, seek after silver and it also holds its value well over time.
By investing in silver, you’re essentially ridding yourself of the volatility of paper assets. This means there’s no risk of the metal losing its value in the event of a stock market crash.
An ideal diversified portfolio will contain investments that are only loosely correlated with each other. An example would be stocks and silver coins. This is so that each asset performs differently under different market conditions.
What Type of Silver Can I Have in My IRA?
The IRS allows the ownership of physical silver bars and non-collectible coins that are at least 99.9 percent pure in self-directed IRAs.
Purity refers to the silver composition of the coins or bullion. IRA-approved coins include the American Silver Eagle, Austrian Silver Vienna Philharmonic, Australian Kookaburra Silver, Canadian Silver Maple Leaf and the Mexican Silver Libertad.
A lot of the silver bullion in the world will not qualify on the grounds of purity. However, you can get pure bars from approved mints or refiners.
IRA rules forbid any type of jewelry.
Mutual Funds and ETF’s: Other Options
You can also purchase a mutual fund or exchange-traded fund that invests in silver, silver mining stocks and silver options in your self-directed IRA.
These funds may have lower annual fees than what you might pay for owning the metal directly. This is because you’re not paying storage or insurance costs.
Returns Are Restricted to Capital Gains
A silver investment will not provide you with rent, interest or dividends. For some, that’s a major disadvantage.
With stock investing, for example, you get to credit the annual dividend check to your IRA where the money grows tax-free until retirement.
You also get to reinvest that money and enjoy the benefits of compounding, whereby your interest earns you interest. Compounding plays a significant role in how quickly your retirement pot grows.
With silver, the only returns you make come in the form of capital gains from higher silver prices.
Like any type of investing, a silver IRA does not guarantee higher gains. A traditional IRA (but not a Roth) forces you to begin taking minimum distributions at age 70 1/2 and you likely will have to sell your silver to help meet this requirement.
If the price of silver happens to be low when you liquidate, you may get less money than you paid for it.
Restrictions in Silver IRA Custody
Many investors like the idea of silver investing because you get to own a real, tangible asset. But that’s only partially true.
IRS rules forbid you from buying the silver yourself, displaying your coins at
Rather, you must channel your investing decisions through an account custodian. This exposes you to counter party risk in the form of theft or fraud.
Custodians save you the headache of buying the silver, arranging insurance, physical transport and storage of your bullion. They will keep the coins safe in an insured and licensed third-party storage vault.
Because you never get to see the metal, you really don’t know what you’re buying and whether it’s actually there.
The U.S. Commodity Futures Trading Commission has a web page listing some common precious metals frauds.
You can mitigate these risks by educating yourself on the scams and choosing a reputable silver custodian for your IRA. Make sure to read the reviews on our List of Top 10 Gold/Silver IRA Custodians before making your decision.
Watch Out For Costs and Fees
Once you find a reputable custodian, opening an account is as simple as filling out a few forms and funding the silver IRA.
Custodians will generally allow you to rollover your current retirement plan such as a 401(k) with no taxes and penalties.
Administration and storage fees typically range from $250 to $500 annually, depending on the location and quality of the storage facility.
A more significant cost is the “spread” – anywhere from 17 to 33 percent – between the prices that the company will buy and sell silver.
You would need the silver to increase in value by the spread amount, just to break even.
What Does Investing In Silver Mean?
Investing in silver means putting your money into the production, trading and outright ownership of silver metal.
For most investors this means buying quantities of bullion in coin or bar form and holding onto it.
While silver is technically a commodity like any other, precious metals are somewhat different as an asset class.
Unlike crude oil, corn or lumber, consumption uses do not affect the value of silver In fact, while silver does have non-trivial industrial applications, most of its value comes from its status as an investment vehicle.
Like gold, market demand is what chiefly drives the demand of gold. Since silver is used relatively rarely compared to other industrial metals, it does not have the production/consumption cycles of most commodities.
Instead, it is the long-term investors or those seeking to ride out a down market who are chiefly driving its value. Often this means that silver (again, like gold) tends to perform counter-cyclically to the stock market.
Silver Is Not Better Money
It is, however, at this point that we should note the enormous volume of bad reporting on the subject of precious metals investment.
Many articles written on this subject urge investors to put their money into silver and gold because these assets are “real money” and inherently safer than fiat currencies. This is wrong.
Silver has limited inherent value. While, unlike a fiat currency, its supply is limited, like a fiat currency it is real money only to the extent that other parties will to accept it in trade.
Investors who believe in the “real money” theory of silver should try paying their bills in specie and see exactly how far that will get them.
Others should consider the asset’s high (sometimes enormous) volatility index compared to that of the dollar.
Fiat currency has structural value because of its ties to a national economy and its role in tax collection. Silver does not.
Supply and demand drives the value of silver almost entirely. Industrial applications also influence the value of silver.
That does not make it a poor choice of investment, but it does mean that its value depends entirely on what someone else is willing to give you for it, just like currencies, stocks and pretty much every other form of investment on the market.
Why Invest In Silver?
Compared with gold, silver is generally cheaper. An investor can buy more silver for less money, making it potentially popular choice for lower capitalization investors.
Silver is also more volatile than gold. For active investors this can make silver a potentially lucrative investment, as its tendency toward price swings can lead to sharp upward movements.
Much of this volatility comes from the fact that silver is a smaller market than gold, and that gold tends to draw more investors seeking more stability in uncertain markets.
Compared with stocks and paper investments, however, silver is still generally seen as a safe haven for investment during market instability.
Despite its volatility, investors will often move their money into precious metals at the beginning of a downturn.
Finally, silver is seen as a more liquid safe investment than other non-market options like government bonds.
The high volatility of silver can make selling more difficult, as you may have to wait for the price you want. However, it is still easier to end your position than in a Treasury bond, and often for a better (if still relatively low) return.
Bottom Line
If you are ready to invest in a silver IRA, view our List of Top 10 Gold/Silver IRA Companies and read for yourself why we recommend Regal Assets as the best silver IRA custodian.
Do you have any questions on how a silver IRA is a good hedge against inflation? Ask below!
I like this breakdown comparing investment in silver to investment in gold. It makes the differences including pros and cons quite clear.
It isn’t something I know a lot about already and this article is a particularly helpful introduction to it. I’ll be talking to my husband and financial adviser about it but it is something I am now very interested in
Hello Jess! We would definitely recommend consulting with a financial advisor, but make sure that your husband is aware of why he is investing in hard physical assets rather than paper assets in the first place. Gold and precious metals are hard assets that act well as a hedge against inflation. I am glad my article was helpful. I hope you make the right decision soon! Thank you again for dropping by.
I sincerely appreciate your recommendations. You’ve got a great write-up here. I’ve been looking for options to invest and save because I’m probably 20 or 25 years away from retirement age. That might sound like a long time, but it’s not if you were never able to save much money leading up to then. I’ll definitely look into your list of top Silver IRA companies to work with.
Thanks a bunch!
Hello Buck! Yes, it is a wise decision to start investing now rather than wait for retirement age. I’m glad you found the articles helpful. Make sure you understand why we recommend Regal Assets as the best company to invest in for a Silver IRA! They’re really the best silver IRA custodian out there in all ways. Cheers!
The topic of IRAs is absolutely foreign to me. I never knew people could invest in precious stones such as Silver, Gold, Platinum, etc as retirement funds.
News it may be to me, but I see the wisdom in it. I’m positive that this is a safer way to stay afloat when recession comes to sink the ship of the economy.
At what age does one become eligible to invest in IRAs?
Hello Peace, IRA rules have designated age limits for such things as when you can start taking the funds out of your IRA tax-free (59 and 1/2 for traditional IRA’s) or when you can stop contributing (70 for traditional) but you can start contributing (investing) in your IRA at ANY age! Thank you for dropping by!
Informative review! Is like I haven’t heard about Silver IRA before. I can say this is like a knowledge added to me. Am yet to retire, but is great to know that silver IRA is a special type of retirement account.It allows you to invest in eligible silver coins and bars, which a self-directed IRA can be a traditional or a Roth IRA.
According to my knowledge gotten through this post I love the Roth IRA, as Post-tax dollars are what funds a Roth IRA account. This means there’s no immediate tax saving, but you can take out your money tax-free at retirement. Being a person that really don’t like exposing my personal intentions to third parties, I don’t like the fact that you must channel your investing decisions through an account custodian, which exposes one to counter party risk in the form of theft or fraud. I like the silver as is generally cheaper compared to the gold. Great review, thanks.
Hello Topazdude and thank you for sharing your experience with both traditional and roth IRA’s! I look forward to hearing more from you. Thank you for dropping by!
I didn’t know there was a silver IRA. I had heard of a gold IRA, but not silver. Are there any other precious metal IRA types? Seems like an interesting way to invest outside of the stock market. I’ve also read a bit on using self-directed IRAs for real-estate. Do you have any knowledge or experience with that?
Hello Ryan! Yes, there are precious metal IRA’s for gold, silver, platinum and palladium. Self-directed IRA’s are like regular IRA’s except that instead of paper assets like stocks and ETF’s, you can now invest in hard assets like precious metals, businesses, and real-estate. The idea behind a precious metals IRA, or a self-directed IRA is to invest in hard assets such as real-estate in the first place. Thank you for the question and for dropping by!
Hi there, I came to your website looking for very safe investments, safer than gold. So I read your post with much interest, and I realized that a silver investment is actually more volatile than gold! So I guess I’m here educating myself and I thought you had a very good point, thank you for that. It’s always the same catch: we want high returns at low risk… well hopefully you’ll have suggestions on how to achieve that… looking forward to it! For now, I’ll keep looking… all the best, Phil
Thank you for your insight, Phil! The solution to wanting high returns at low risk is to simply invest in a self-directed IRA that allows you to first put your money in real assets such as real estate, businesses and precious metals rather than in risky paper asset ventures like stocks, bonds, and ETF’s. Thank you for dropping by!
I must say it really a good timing now to Diversify funds from dollar to real investment opportunities like silver or gold because all indications are already on the wall that this economy crisis may happen anytime soon and if not, it good to have investment for retirement purpose .i find all your article helpful and enlighten concerning investment in Silver IRA
I’m glad you agree that there will be an economic crisis very soon at the rate that the policies are running and fiat currencies are printing. Thank you for the insight, Ajibola!
I love this kind of investment. I trades silver. I do it by extracting silver from certain chemical wastes using some chemicals and it’s 9.99% purity. However I will still love to invest in silver IRA as a business man who loves to diversify his income but before I invest, It will please me to know the profit margin of this business and the percentage risk involved. Hope to hear from you. Thanks.
Hello Kenechi, unfortunately there is no profit margin and percentage risk involved at all. You are simply rolling over your retirement funds or a portion of your portfolio as a hedge against inflation, meaning that it definitely can increase in value indefinitely as the dollar decreases in value (indefinitely, as in we do not know the rate, but we just know that it does). That portion of your portfolio is now safe against inflation and financial disasters as silver acts as a hedge against inflation. However, this is more of a long-term investment, not for short term profit. Thank you for dropping by!
Thanks for sharing this article on silver IRA. The silver IRA is of great benefit as it allows for investing in eligible silver coins and bar. This an informative post. Also considering how cheap Silver coins are presently compared to the price of Gold, I think It can be rightly said that for any long-term investor, it is a good time to invest in Silver. Thanks for this informative article. You did a great job.
Hello Achievers! Yes, silver coins are one options for a Silver IRA, but we recommend having silver bullion more. Silver coins are collector’s item and can be a risky venture in and of itself. Silver bullion is a more stable option for your physical silver backed IRA selection. Thank you for finding my article helpful! I’m glad you stopped by again.
It appears that silver is a more stable commodity, and is not subject to market fluctuations, as much as stocks and bonds.
Seemly you can not however, use it in everyday transactions,as you can with currency.?
As you never see the metal, you are at the mercy of an official Custodian, so it behooves you to employ the best in the market, to safeguard your property.
In the silver market itself, because of the law of supply and demand,there is a high volatility, so if you want to buy or sell, you have to watch the market price closely.
Hello Robert, what you say is all true – however, with our best Silver IRA Company, Regal Assets, your silver can be converted to cash within 24 hours every time! You should check them out. Thank you for the insight!
Hi
So far I have never thought of investing in an Silver IRA. And today I am across your article.
I have major investments in mutual funds and it was good to know from your article that I have the option to purchase mutual funds that invest in silver. I am surely going to consider this during my next mutual fund purchase.
Silver IRA’s are definitely worth investing in to ensure a secure retirement income.
Hi Nick! Silver IRA’s are definitely the best way to invest in silver. There’s nothing better than owning the physical silver bullion, tax-free for yourself. Thank you for sharing your experience!