What Is A Silver IRA? What can I invest in through this type of IRA? What are the rules surrounding the opening and management of a silver IRA? Welcome to this post, in which I intend to take you through a couple of things you should know about silver IRAs. Stay on till the end of the article to find out more.
What is a Silver IRA?
A silver IRA is a unique type of individual retirement account that allows investors to add physical silver to their investment portfolio, alongside other assets that are allowed in other IRAs. You can buy silver bars and coins and add them to a silver IRA provided that they meet the set fineness and purity requirements set by the IRS.
Like other types of IRAs, silver IRAs are tax-advantaged, and can as such be a very effective tool to help you save for your retirement years. Investors have the option to create their silver IRAs with pre-tax dollars( (Traditional Silver IRA), or post-tax dollars (Roth Silver IRA), which have nearly the same pros and cons as the Traditional IRAs and Roth IRAs.
The Silver IRA however comes with one major advantage over Traditional and Roth IRAs: whereas the regular IRAs only allow you to invest in stocks and bonds, Silver IRAs present you with the option to diversify your portfolio with physical precious metals.
Adding physical silver to your portfolio benefits you through offering you protection and growth that is offered by other more expensive precious metals such as gold, platinum, and palladium.
Why should I consider opening a silver IRA?
Silver’s intrinsic value is tied to the fact that it’s a very essential component of many electronic and non-electronic products. Besides that, it has proven to be an effective portfolio hedge during times of financial crises and geopolitical tension. Such are benefits that can lead to silver being quite rewarding to those who hold it in silver IRA during economically favorable and unfavorable conditions.
Silver outperforms gold when the demand for precious metals is high
Silver is also referred to as “ gold on steroids”, by investors who know how this precious metal behaves. This reference is usually in relation to the volatility of its pieces, in comparison to the more stable gold assets. If you for any reason are looking to invest in precious metals for the sake of making a lot of money (and not primarily stability), then you should consider opening a silver IRA. During precious metal bull markets (which are often triggered by economic turmoil), some investors turn to silver with the hope that they will make a larger amount of money than they would have if they invested in gold.
The growing demand for silver, limited by its limited supply
With the consumption of products that have components that are made from silver being on the rise, physical silver has also been in ever-growing demand. You may already know that silver is incorporated in smartphones, home appliances, vehicles, solar panels, etc. Currently, the demand for silver used in industries accounts for about 50% of the global market. 47% of the rest of the silver has found its place in jewelry manufacture. The remaining 3% is what all global investors are left with. This is such a small supply of silver, which we can link to the massive potential for profitability.
How can I create a silver IRA?
Most of the regular custodians do not allow investors to add precious metals to their retirement investment portfolios. You are, as such, required to work with an IRA service provider and a custodian that specializes in the provision of services to investors who are interested in holding alternative assets such as precious metals. If you choose a reliable custodian, you can rest assured that all your tax and compliance requirements will be handled in the right way.
The process of opening a new silver IRA is, in most cases, unique to the service providers you choose to work with. You can however expect to go through some if not all of the following steps:
- Open a self-directed IRA – a silver IRA is a self-directed IRA that allows you to add silver to your retirement investment portfolio. You can open your silver IRA by contacting a qualified IRA custodian to help you with the process.
- Fund your account – In a couple of days, you can fund the newly-created self-directed IRA, through a simple transfer or rollover from a qualifying retirement plan.
- Select the precious metals – At this stage, you are ready to start buying precious metals with your new account, as you seek to enjoy the protection benefits they give to your retirement savings.
Which silver products am I allowed to add to my silver IRA?
The IRS is very strict when it comes to the purity requirements that all silver products meant to be used in a silver IRA must meet. You can buy a wide variety of your silver products ( coins and bars) from an approved dealer. Since the purchase process is overseen by your custodian, you can speak to their representatives to ensure that all the purity requirements are not compromised.
As I have highlighted, there is a wide variety of silver products that you can purchase, but you should know that they do not have similar potential to make you money. This is why you should take up the opportunity to have a free IRA guide sent to you by a reliable Silver IRA company. Such resources enable you to get a clear view of what you are up against, and what you stand to gain when you put your retirement savings into a silver IRA.
N.B: Whichever products you decide to purchase, refrain from putting “all your eggs in one basket”. You can consult your financial advisor on how to go about asset allocation, though most of them will request you not to invest only 5 to 15% of your funds in precious metals.
Frequently Asked Questions on “ What is a Silver IRA?”
1. How much am I allowed to contribute to my silver IRA?
When it comes to making contributions to your silver IRA, you will be surprised to know that the same rules that are followed by other IRA owners also apply to you. You will therefore have to keep checking with your custodian each year, to ensure that you are not exceeding the set maximums. If you have other retirement plans, then this is something that you might want to be very careful with, since your accounts can easily be flagged for non-compliance.
2. Where is the silver I purchase using my silver IRA stored?
The silver you purchase within your silver IRA is usually shipped to an approved depository of your choice. In the depository, the precious metals are usually kept in an account under your name, and you’re then granted access to your holdings and all statements related to them. If need be, you can visit the depository and view your silver bars or coins.
When the time comes to take your distributions, you can either cash out your silver or have it shipped to your preferred address. This is all up to you.
3. What happens to my other IRA and 401(k) when I open a silver IRA?
If you choose to still hold on to your other retirement plans, you can invest in them in tandem with your silver IRA. Together, all your retirement plans can end up forming a well-diversified retirement investment portfolio. You may need to talk to your financial advisor about how your funds should be distributed across the various retirement plans, in a bid to maximize your earning potential.
4. What are the costs and fees that I should expect as a silver IRA owner?
You can successfully roll over your current retirement plan tax and penalty-free if you stick to the set guidelines. Upon rolling over the funds, you will be expected to meet the administration and storage fees, which typically range from $250 to $500 annually- this is dependent on the location of the depository and the nature of the custodian. You can also expect a 17 to 33% spread when purchasing or selling your silver. This means that your silver has to increase in value by the spread amount, for you to break even.
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That will be all for today’s article on what a silver IRA is. I hope that you enjoyed it, and found it informational. If you need more resources to learn about silver IRAs, check out all recommended resources within this article, or you can request me to point you in the right direction by dropping me a question or comment in the comments section below.
I wish you well,
Eric, Investor and Team Member at Gold Retired!