Is there such a thing as a Silver IRA? If yes, what can you use it for as an investor? Also, what should you know before getting started with one? In today’s post we shall take a look at all that and more, so hang on till the end to find out more about this topic.
What are your retirement investment plans? Do you plan on buying that beach house or moving in with your children? Do you hope to travel the world to savor the newly found freedom? Whatever you have planned out in your mind about your retirement years, I am sure you have also thought about the money it will take to fund your lifestyle. Even though you have not thought about switching to a luxurious lifestyle, there is no denying that without a retirement fund, you will suffer more than is necessary, well unless you have other sources of income then.
Which retirement fund, however, is the best for you? You may have heard someone talk about a silver IRA, which is where you are reading this post today. So, let me begin by confirming that Silver IRAs do exist, and there are already some investors who are making use of them to achieve their retirement investment and saving goals.
What is a Silver IRA?
A silver IRA is a self-directed individual retirement account that allows you to invest in IRA-approved silver bars and coins in addition to other assets that are allowed by the IRS. Most investors are familiar with traditional and Roth IRAs which allow investors to invest in paper assets such as stocks, bonds, and mutual funds. If you own a Traditional or Roth IRA, you cannot invest in anything else besides the paper assets.
Silver IRAs and other self-directed IRAs give investors the freedom to pick from a wide variety of investment options, in addition to the paper assets, while also giving the investor more control over the allocation of funds to the assets and running the account.
Self-directed IRAs (or SDIRAs) usually get their names based on the main assets that are supported by their custodians. This is why it is possible to mainly own silver through a silver IRA, and still own other precious metals such as gold, platinum, and palladium (provided that the IRA custodian supports these investments).
Why invest in silver instead of gold?
When it comes to investing in precious metals, most people turn to gold. This is because gold has been valued for thousands of years on end, and has been passed down from one civilization to the next. There are, however, some investors who opt to purchase and hold silver instead, and for some good reasons.
For starters, silver is quite affordable and is the perfect entry-level precious metal to purchase if you are on a budget, and would not like to put all your eggs in one basket. With just a few dollars, you can purchase IRA-approved silver coins and have them sent to an approved precious metal depository. It will, of course, make more sense to purchase a significant quantity of silver, to create the possibility of earning sensible gains.
The second reason people opt to invest in silver is because of the nature of its price. Silver has been referred to as “gold on steroids”, owing to how its prices rise or drop significantly faster than those of gold. Whereas we know that precious metals are meant to offer stability to investors, silver does not perform at the same level as gold. Investors who have a greater appetite for risk thus turn to silver with the hope that if the market favors an increase in the price of precious metals, their silver will perform better than gold.
How to buy silver, for use in a silver IRA?
If you are getting started with precious metal investing, then you may have questions as to how and where you are supposed to purchase silver. The good thing is that there are many precious metal dealers out there who you can turn to if you want to purchase the products you need for your IRA.
The one thing that you have to ensure, however, is that the products have a purity of 99.9%, which is the standard purity requirement set by the IRS, as far as silver products that can be used in an IRA are concerned.
You have three main options when it comes to the purchase of silver products, including :
- Silver coins – they must all be from government mints
Purchasing precious metal products from the government mints is often the best option since they have a good reputation for meeting the purity requirements. You can also access the same products from private mints, and at lower prices, though you may need to do some background research about the products you intend to purchase.
The income generation potential of silver
As we already saw, silver is more volatile than gold, which is a good thing, because it presents investors with a chance to earn more if things go well in the market. Silver is expected to rise by about 50% (from 2020 to 2022), and with the ongoing geopolitical tension and economic downturns, the earnings could be higher.
The thing about precious metals is that they tend to have a negative correlation with paper assets. This means that where stocks are underperforming, the prices of precious metals are on the rise. The gradual weakening of the dollar seems to be creating an opportunity for investors to reap more from their precious metal holdings (including silver), which is the reason why you should look into what it would take to allocate about 5% to 15% of your retirement funds to these assets.
Frequently Asked Questions on “Is there such a thing as a Silver IRA?”
1. What is a silver IRA rollover?
This is the process of transferring some or all of the funds in your other retirement plans into a silver IRA. The transfer happens when you instruct your custodian to move the funds to the custodian of the silver IRA, without you having to come into contact with the funds – this is known as a direct rollover. You can, alternatively, have your custodian send a check to you so that you can deposit it in your silver IRA within 60 days- this is known as an indirect rollover. Note that in this case, the failure to deposit the funds within 60 days can lead to the IRS perceiving the check you received from your custodian as a withdrawal, which may attract tax penalties.
2. How much can I contribute to a silver IRA?
The maximum contribution limits vary from year to year, but in 2022, the IRS allows investors to contribute $6000 to their silver IRAs, or $7000 if they are 50 years and above. Those who do not uphold this rule are also penalized by the IRS, with some accounts even losing their IRA status.
3. Which type of silver coins can I hold in my silver IRA?
IRA-approved silver coins have to meet the minimum fineness requirements, which stipulate that all coins be 0.999 pure. American Silver Eagles are 0.999 fine, so are a good choice. You can also turn to Canadian Silver Maple Leaf Coins, which are 0.9999 fine. To reduce the chances of owning silver products that do not meet the fineness standards, you can purchase your assets from government mints, or any IRS-approved refiner or assayer.
4. When can I withdraw/ take out my silver assets from my silver IRA?
You are not allowed to withdraw your silver coins from your account before you hit 59 ½ years. Doing so will attract a 10% early withdrawal penalty on the value of assets withdrawn. Once you hit 72 years, however, you will be required to start taking withdrawals from your silver IRA- these are known as required minimum distributions.
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That will be all for this article on whether there is such a thing as a silver IRA. My hope is that this article has helped you understand what silver IRAs entail, and the rules surrounding the ownership of such an account. Let me know if you have any more questions about today’s topic, by simply dropping me your questions in the comments section below, and I will get back to you right away.
I wish you well,
Eric, Investor and Team Member at Gold Retired!