A silver IRA is essentially a retirement account through which you can invest in a selection of eligible silver coins and bars. The rules that apply for silver IRAs are similar to those of other IRAs, except for the fact that you are required to add silver and several other eligible precious metals to this type of account, whereas with the regular IRAs you should add stocks or paper assets.
A silver IRA can help investors diversify their investment portfolio, but there are a couple of advantages and disadvantages that you should understand before you open one.
What is a self-directed IRA?
Most people are already familiar with what a traditional IRA entails. They’ve already opened them through brokerage firms such as Fidelity and Schwab. Upon investing in such accounts, the money goes into purchasing stocks, bonds, and mutual funds. These are referred to as paper assets by investors.
An alternative option to the above IRAs is a self-directed IRA. These accounts have the same tax advantages as guidelines as the other types of IRAs, with there being one major difference; you get to manage your investments. You are therefore not restricted to the list of investments that are offered by your broker, so you can choose the assets that you want to go into that account. You can make your selection from a variety of the hard assets that you can see and touch, including:
- Real estate
Silver IRAs are, therefore, self-directed IRA in which a silver investment is included in the account.
The Silver IRA possesses all benefits of traditional IRAs
Self-directed IRAs exist as traditional or Roth IRAs. With a traditional IRA, an investor usually funds their account using pretax dollars. This means that they only get to pay income taxes after they withdraw the money from their IRA at retirement.
A Roth IRA, on the other hand, is funded using post-tax dollars. This means that you get to withdraw your money tax-free at the time of retirement.
With both types of IRAs, your assets usually grow tax-free while in your account. Even if you decide to sell your silver, you will not get taxed as long as you maintain the gains in your silver IRA.
The amount of money that you can contribute to your account on an annual basis is defined by the Internal Revenue Service. The limits change from year to year, hence you should take the time to consult with the company through which you open your account through.
How to buy Physical Silver With a Self-Directed IRA
The IRS allows investors to only invest in Silver IRAs using specific silver coins and bars, whose value is attached to their metal content. In addition to that, you are required to stick to certain IRS regulations for the purchase and storage of the physical silver.
You should check with an IRA service provider whether you can purchase physical silver, as well as other assets. Most banks and brokerage firms offer self-directed IRAs, but you have to confirm whether you will be allowed to invest silver.
You should also choose a custodian for the account that you open. Typically, the company that provides the account usually takes this responsibility. With a self-directed IRA the investor, and not the account custodian, is responsible for choosing their investments and for complying with all the rules that are set by the IRS.
Select the depository in which your silver will be stored
Under the rules set by the IRS, you cannot keep the precious metals that you purchase with your IRA, and neither can the account custodian. In most cases, the account providers that facilitate the IRA investment in silver coins or bars usually set up arrangements with certain depositories to store the metals. You can also pick your preferred depository.
Fund your IRA through annual contributions
The amount of money you are required to contribute to your IRA varies from year to year, You can also roll over the funds held in your other IRAs to the newly created silver IRA.
Choose the silver bullion you want to hold in the Self-directed IRA
The IRS allows investors to buy specific types of silver bullion, including:
- American Eagle
- Austrian Philharmonic
- Canadian Maple Leaf
You can also use the same IRA to purchase silver bars that meet the set IRS purity standards.
Instruct your custodian to buy silver using your contributions
You should not purchase the silver yourself. This is prohibited by the IRS. The rules set by the IRS also prevent you from depositing your assets into an IRA account. You should, instead, deposit cash in the form of contributions, then let the account trustee carry out the transactions on your behalf.
Why should you invest in silver through a silver IRA?
There are several compelling reasons why you should consider investing in precious metals through an IRA, including:
- It guarantees a regular and disciplined approach to investment, hence is a sure way to financial security
- An IRA enables you to invest using undiluted funds if you qualify for one.
- You get the opportunity to explore non-traditional investments.
- You are not limited to the use of paper assets, which is the case with most retirement plans
- Anyone who has an income can open a silver IRA and begin taking care of their future.
- They allow you to put your money into tangible assets such as bars and coins that have intrinsic value
- They give you the flexibility to use the dollar-cost-average method, to accumulate your gains, or to trade in or out your investments as you please, in a bid to defer taxes on your gains.
Choosing to diversify your portfolio of retirement investments by opening a self-directed silver IRA is a sound approach to making sure that you are safe in the event there is an economic downturn. Here are some companies that can help you achieve this objective as an investor.
That will be all for this article on the basics of a silver IRA. Do you have any questions with regards to the subject matter? Feel free to drop your question in the comments section and I will get back to you with a comprehensive answer.
I wish you well,
Eric, Investor and Team Member at Gold Retired!