How to Invest in Gold and Silver with a SDIRA
What is a Gold or a Silver IRA?
A Gold or Silver IRA is a specialized retirement account that allows Americans to invest in gold or silver bars or coins. It falls under the category of Self-Directed IRAs (SDIRAs), which enable investors to diversify their retirement portfolios with alternative assets.
How Do Gold and Silver IRAs Work?
Precious Metal IRAs typically require a custodian and a precious metals depository, though sometimes a single firm may handle both roles. The depository is responsible for the physical storage of the precious metals, while the custodian maintains the assets within the IRA. Precious Metal IRAs are available in any type of SDIRA account, including both traditional and Roth.
How to Invest in Gold and Silver with an IRA
To buy and invest in gold or silver for your retirement, you first need to find a custodian (such as Forge Trust) that offers self-directed IRAs (SDIRAs). Most well-known brokerage firms do not offer SDIRAs. After you’ve opened and funded your account, you then must find a precious metal dealer that sells gold or silver that conforms to IRS rules. The purchaser of the metal will be the SDIRA itself, not you personally. You then have to arrange for the metal to be stored at a bank or IRS-approved depository. Forge Trust offers two depository institutions to choose from.
Benefits of Gold and Silver IRAs
Gold and Silver IRAs have many potential benefits for a retirement saver:
- As tangible assets, precious metals can help preserve your purchasing power during inflationary periods. For instance, in the 1970s, gold surged significantly amid high inflation rates.
- Investors frequently turn to precious metals during periods of economic or geopolitical instability.
- When stored separately, precious metals offer minimal counterparty risk compared to some financial assets, like bonds or bank deposits.
Gold and Silver IRA Rules
There are some IRS rules to be aware of before opening a Gold or Silver IRA. One important regulation for Gold and Silver IRAs concerns the purity of the metal. U.S. tax law requires that gold and silver coins and bars must generally be 0.995% pure gold or silver to meet the standards for delivery on U.S. futures exchanges. The exception to this rule is the American Eagle gold coin, minted by the U.S. Mint, which has a slightly lower purity due to its copper content. Another key rule pertains to storage. For gold or silver to be included in a SDIRA, the metal must be stored either at a bank or at an IRS-approved depository.
Risks and Other Considerations
Before opening a Gold or Silver IRA, it’s crucial to recognize that, like all investments, the price of gold and silver can fluctuate considerably. While gold is currently experiencing an upward trend, for example, there's no assurance that this bull market will persist long-term. Historical trends show that gold bull markets can transition into bear markets, and these downward trends can endure for extended periods. For example, after peaking at $850 per ounce in January 1980, gold's price fell below $300 by the late 1990s, with the inflation-adjusted decline being even more substantial.
Gold and silver coins and bars are sold by precious metal dealers at a premium. This means you will generally pay more than the market value of the underlying bullion, so it’s a good idea to shop around and compare prices to the spot price of the metals. To realize a profit, the price of gold must increase sufficiently to cover this markup, along with the cost of insurance, transport, storage, and account fees.
Conclusion
If you’re looking to invest in gold or silver for your retirement, look no further than a Self-Directed IRA. A SDIRA is an ideal vehicle for owning hard assets such as precious metals, which may offer returns over and above that of the stock market.
Frequently Asked Questions About Gold and Silver IRAs
What kind of precious metals can I invest in?
You can invest in gold, silver, platinum, or palladium for your Self-Directed IRA. Just make sure you follow IRS rules regarding the purity of the metal you’re permitted to own. U.S. tax law requires that gold and silver coins and bars must generally be 0.995% pure gold to meet the standards for delivery on U.S. futures exchanges. The exception to this rule is the American Eagle gold coin, minted by the U.S. Mint, which has a slightly lower purity due to its copper content.
What is the maximum contribution to a precious metal IRA?
The maximum contribution to a Precious Metal IRA is based on the underlying account type opened, such as a traditional or Roth IRA. For 2024, individuals may contribute up to $7,000 to one of these accounts. Those over the age of 50 may contribute an extra $1,000.
How Do Gold and Silver IRAs Work?
Precious Metal IRAs typically require a custodian and a precious metals depository, though sometimes a single firm may handle both roles. The depository is responsible for the physical storage of the precious metals, while the custodian administers the IRA on behalf of the account owner. Precious Metal IRAs are available in any type of SDIRA account, including both traditional and Roth.
Do I Pay Tax on Precious Metals IRA?
However, if you withdraw gold or silver before reaching the age of 59½, you’ll face penalties. Additionally, with traditional IRAs (as opposed to Roth IRAs), you'll be taxed at your marginal rate upon withdrawal.
Zander is a seasoned product leader with a 12-year history in financial technology, specializing in private market investments. His tenure includes roles at LTSE, Alto, and IHS Markit, where he focused on product management and strategy. Zander holds an MBA from Vanderbilt University, focusing on International Business, and a B.A. in Economics from Colby College.