How do I open a precious Metals IRA? Should I even open one, to begin with? What can I expect after opening a precious metal IRA? These are some of the questions that you could be asking if you are about to get started with precious metal IRAs, or you simply want to know if they are worth opening. This article will give you the answers to these questions so that you can find your way around precious metal investments easily. Read on to discover what is expected of you.
Whenever stock markets experience difficulties and are not simply doing great, some investors to safe-haven assets such as precious metals. Whereas these precious metals also have their own forms of volatility, it is believed that they are some of the very best investments to hold for a long-term horizon.
One can, however, not hold precious metals in a regular Individual Retirement Account, since this goes against the rules set by the IRS. As an investor who wants to invest in precious metals for your retirement years, you can only use a special IRA known as a gold IRA, in which you can hold gold, silver, platinum, and palladium.
What is a precious metal IRA?
A precious metal IRA is a special type of self-directed IRA. A self-directed IRA, or SDIRA as popularly abbreviated, gives you the freedom to invest in a wide range of unconventional assets, which include real estate, precious metal, promissory notes, etc. Such investments are otherwise prohibited in conventional IRAs.
With your precious IRA, an investor can use part of their funds to generate some investment income from precious metals. All precious metals can be exploited differently, though you will need to define what your investment goals are before making your choice (on the assets to hold in your account).
The thing about adding precious metals to your retirement account is that they offer protection to your wealth in a couple of ways, such as through the reduction of the volatility and risk of your portfolio, offering a suitable tax-shelter for the profits made during the investment period, as well as serving as a hedge during economic downturns.
How much of your retirement savings should you use to invest in precious metals?
When you get started with precious metal investments, you should do it conservatively. Depending on your current financial situation, you may have to invest about 5% to 10% in precious metals. Financial experts recommend this low figure for a couple of reasons, including:
It is necessary for one to have a well-diversified portfolio
Investors who have well-structured and diversified portfolios do not have to take on unnecessary risk by deciding to invest in one type of asset, or one asset class. If you come across a financial advisor telling you to channel all of your retirement investment savings into gold or other precious metals, you should run and never look back.
Precious metals lag the growth/performance of other asset classes
One main benefit about gold is that it has managed to historically hold its value over the long term. It, unfortunately, lags the performance of other assets, including stocks. Experts have actually established that when the stock market is performing poorly, gold prices are usually on the rise. In the same manner, whenever gold prices are not looking good, paper assets are usually flourishing. If you’re looking to keep growing your retirement investment portfolio, then you may end up shortchanging yourself if you own too many precious metals.
Gold prices are unpredictable in the short term horizon
We know very well that gold has managed to hold its value over time. It is, however, quite difficult to predict the direction that its prices will take in the short-term horizon. Precious metals also have their unique price struggles, but they offer peace of mind during economic downturns.
How can you open a precious metal IRA?
With the increase in the rate of the occurrence of economic crises, fueled by political crises all over the world, there is a need for investors to open precious metal IRAs, to shield their portfolios from negative forces of the market. Here are some steps that you can follow to open your precious metal IRA.
Choose a self-directed IRA custodian
Self-directed IRAs are usually overseen by custodians. A custodian is an institution that has been approved by the IRS to offer custodial services. Self-directed IRA custodians help investors to invest in alternative assets such as precious metals. If you get the right service provider at this level, then the rest of the precious metal IRA opening process will be smooth, so here’s your cue to do sufficient research.
Choose a reliable precious metal dealer
Next, you will need to choose a precious metal dealer, to whom you will direct the IRA custodian to send funds for the purchase of gold, silver, platinum, or palladium.
Again, you will need to do your research as to whether the precious metal dealer you are dealing with has an impressive performance track record.
Decide on which precious metals you will purchase
The precious metal, if honest and reliable, will help you choose the right precious metals, that will help you achieve your retirement investment objectives.
Select the right depository
Precious metals that are purchased through a precious metal IRA cannot be stored at home, or any random depository, you have to choose an IRA-approved precious metal depository. Your custodian may be more than happy to give you a list of depositories to choose from.
Complete your transaction
Once you have your custodian, precious metal dealer, and a depository in place, you can start making your moves. You may need to read more about gold to also know what you are getting yourself into.
Read also >>> Is it worth investing in gold?
If you are ready to get started with precious metal IRAs?
Then you might check out the recommended service providers below:
Thank you for making it to the end of this post in which we have answered the question, “How do I open a precious metals IRA?” Hopefully, you found it helpful, and that you know what to do when getting started with precious metal investments.
I wish you well,
Eric, Investor and Team Member at Gold Retired!