The Basics of Precious Metals Investment – An Updated Guide for Investors

Precious Metals Investment

Unlike the stock market, gold has shown that it can withstand the instability of the economy by being a source of stable and steady growth. As a result, investors are now buying the idea of setting up a gold IRA (individual retirement account) to hedge and diversify the portfolios. Although most retirement investors invest more in traditional assets like bonds, stocks, and mutual funds, you can invest in Precious Metals Investment like silver and gold using a special retirement account.

Unlike the traditional IRA that you can easily set up with the help of a custodian, a precious metal IRA involves more steps. Investors are required to look for custodians and approved depositories. The gold must be bought and moved to the chosen depository for the custodian to oversee the Precious Metals Investment. 

To accomplish these things, investors must find reputable and reliable precious metals IRA companies that will facilitate the entire process. You can click here to get tips for choosing an IRA custodian.

What is a Precious Metals IRA?

It is a special, self-directed IRA (SDIRA) that permits account owners to hold silver, gold, and other approved precious metals. It also permits pre-tax contribution and the earnings from the investment can accumulate without the addition of tax. The limit for income and contribution is the same as a traditional individual retirement account.

As mentioned earlier, traditional IRAs hold paper assets but a precious metals IRA is meant for physical gold. The law does not permit retirement account owners to hold bullion themselves; they must find a depository for that purpose.

The IRS established certain guidelines to determine the purity or fineness that gold bar or coin must possess to become investable. This also applies to other precious metals like silver, palladium, and platinum. Additionally, the IRS permits only specific coins like the Maple Leaf and Gold Eagle. 

The investment company you choose should be able to tell you what is acceptable and what isn’t. But you can still check out to find out which metal you can invest in.

How to Store Precious Metals for IRA Investment

You cannot keep bullion at home if you already own a precious metals retirement account. The precious metals IRA Company will help you set up the account and then purchase the bullion. You would have to find a depository or the company can refer you to one of the custodians and/or depositories it partners with. Therefore, you must store precious metals in a depository that the IRS approves of, not in your home safe or deposit box.

A reliable investment company only works with secured depositories or storage forms after vetting them thoroughly. Some already have a partnership with different depositories around the globe. Hence, they can handle insurance coverage and transportation logistics.

The ball will then be in your court to choose which company to invest with. Ensure that it has the necessary licenses, bonds, insurance, and registrations to protect investments. You should also verify whatever information the company gives you to be sure it is genuine. You can also read online reviews such as this Gold Alliance review before doing business with the company.

Precious Metals IRA Fees

When it comes to silver or gold investment in an IRA, there are 3 categories of fees. 

First, you will pay between $50 and $150 to set up the account. This is a one-time fee. If you are starting up with a large sum, you may get a waiver, depending on the company you choose.

Second, there is a mandatory custodial or administrative fee, which you must pay every year. It ranges between $50 and $150. In fact, the amount you will pay depends on the value of your assets. So, you may want to find out from the company how it calculates the fee.

Third, the depository will charge between $50 and $300 per annum for storage, depending on how much gold you store with the company.

From the figures stated above, you can see that this type of IRA costs more than the Roth or traditional retirement account that accepts only mutual funds, bonds, and stocks. Some investment companies will even charge you extra for helping you to buy the gold. They add up their markup price to the spot price of the precious metal. However, companies that buy directly from bullion dealers do not charge anything more than the spot price because they do not use middlemen to facilitate transactions.

Final Notes – Is IRA the Best Method of Investing in Precious Metals?

You can Precious Metals Investment in various ways and precious metals IRA is just one of those ways. But whether it is the best method or not depends on various factors. You can buy your gold bullion without even setting up an IRA in the first place and will not face the restrictions from IRS. You can also store it at home and skip the exorbitant storage fees and custodial fees.

However, if you hold bullion by yourself for up to 12 months or more, it becomes subject to capital gains tax. But if you invest it in an IRA, when you withdraw or sell the bullion, you will pay the ordinary income tax. This is something you need to consider before deciding. You can visit this website to learn about the capital gains tax rate.

Furthermore, physical gold does not generate income. It must be liquidated to enable you to withdraw funds. Now, retirees approaching the age of 72 need sufficient funds in their retirement accounts before they can access their RMD (required minimum distribution). This could make them sell a portion of their precious metal holdings.

This might be a problem for retirees with heavy gold investments, but a more desirable situation for investors who have other assets in their portfolio. So, if your IRA holds paper assets, it means you have other sources of income to withdraw your RMD. For younger investors, it would be better to start with a traditional retirement account, invest in gold ETFs and other equivalents. When the gains accumulate, you can use it to set up a gold IRA.


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