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While it is important to start investing in your retirement at a young age, you must do more than simply contribute your earnings to your IRA. You'll protect and grow your wealth better by diversifying your investments. For example, consider investing in precious metals, such as gold and silver. Since precious metals aren't adversely affected by most types of economic downturns, investing in gold and silver can help you safeguard your retirement wealth.
To invest in precious metals, you will need to open a self-directed gold and silver IRA. The following overview will help you understand more about opening this type of account and using precious metals to fund your retirement.
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What is this kind of IRA?
A self-directed IRA follows the same basic outline as any IRA, which means you will still enjoy tax deferments on your contributions. The primary difference with a self-directed IRA is that you can choose how you will invest your finances. This differs from a traditional IRA where a manager or trustee makes investments on your behalf.
Just like any other type of IRA, you can choose to invest in stocks, bonds, mutual funds, and similar investment types. The advantage of a self-directed IRA is that you can also invest in non-conventional types of assets. This includes investing in cryptocurrency, real estate, and precious metals. While the IRS does regulate how you can invest in these items, you are free to add approved assets to your portfolio.
A self-directed gold and silver IRA is a specialized type of account in which you can physically hold precious metals. The metals are stored with an IRS-approved custodian that operates interdependently and protects your bullion and coins. You can withdraw from the account by liquidating or selling the precious metals. Alternatively, you can have the bullion or coins delivered to your address. In either situation, you must be prepared to pay taxes on the withdrawal.
Our Top 3 Self-directed Gold & Silver IRA Companies:
Augusta Precious Metals (WINNER)
Augusta is praised for its transparency in regard to the fees they charge as well as for the vast supply of educational resources they offer. Customers find their online webinars especially helpful. The company maintains a staff of professional economists to help their customers evaluate their investments and retirement goals.
There are several reasons that Goldco has earned a strong and positive reputation among investors. To begin, their prices are very competitive and they provide enough information to help their customers feel confident with their purchases. The staff is knowledgeable and customers find them to be patient and communicative.
The thing that sets American Hartford Gold apart from other companies is that they don't require a minimum initial investment. Even though they forgo that minimum, they don't let that interfere with the high quality of customer service they offer. The company has built a strong reputation by ensuring their customers have positive experiences with them.
How Does it Work?
The IRS wants to ensure the purity and fineness of any precious metals used for retirement investing. For that reason, they regulate which bullion and coins you can deposit in your gold and silver IRA. Sovereign mints and other approved providers issue coins and bars that will meet these requirements.
It's important to note that you can only invest in approved forms of gold and silver. For instance, gold collectibles are prohibited. Similarly, scraps of gold and silver cannot be used for IRA investments. Historical coins, jewelry, and other items not specifically approved by the IRS cannot be used for IRA investment purposes. Only minted coins and approved bullion qualify for IRA investments.
Your self-directed gold and silver IRA will use a custodian to manage your holdings. They will operate a secure facility where your precious metals will be held. Aside from ensuring your precious metals are safe, their only responsibility is to follow your personalized instructions and issue audit reports. They cannot help you obtain precious metals to fund your account.
You must use an IRS-approved custodian for storing your precious metals. The IRS will not allow you to store your gold or silver in your home. Fortunately, the IRS has approved a large number of facilities for storing precious metals. In addition to approving facilities in each state, there are also depositories throughout the world that you can use.
Once you deposit precious metals in an approved depository, the custodian will assign a vault to you. The vault will be routinely audited and audit reports will be issued to you on a regular basis. Your vault will be fully insured just like a bank's safety deposit vault.
Aside from reviewing your audit reports, there isn't anything you need to do to maintain your account. Your precious metals will be safe until you're ready to liquidate them. At this time, you'll discuss your plans with the vault custodian. Often, the best method for liquidating gold and silver assets is to sell them back to your precious metals dealer.
Before depositing any precious metals, shop around for a depository that offers fair fees. In general, you can pay a flat fee or a percentage-based fee. A flat fee remains the same regardless of how much gold and silver you store in your vault. A percentage-based fee will rise in accordance with the value of your precious metals. As you add more gold and silver to your vault, you should expect your fees to increase. Be sure you request a list of all fees charged by the facility before you agree to use their services.
3 Benefits to know
There are three main reasons to consider investing in precious metals through a self-directed IRA.
Tax Incentives
As long as you use your retirement funds to purchase precious metals, you won't have to pay taxes on the purchase. The gold and silver you deposit will remain untaxed until it's time for you to begin liquidating and withdrawing the funds. This helps you appreciate more retirement wealth over time.
If you have another type of retirement account, such as an employer-sponsored 401k account, you can roll over those funds into a new self-directed IRA account. When it comes to converting cash into precious metals without paying taxes, an experienced custodian can assist you. Alternatively, some precious metals dealers offer these types of services.
Keep in mind that you must submit rollover paperwork within the first 60 days of opening your self-directed IRA. Failing to submit the documentation on time can subject you to taxes and early withdrawal penalties.
Protect Your Wealth Against Inflation
It's important to recognize that inflation is a constant factor in how our economy progresses. While sharp rises in inflation are more noticeable, the cost of everything rises on a more gradual basis from year to year. This means any gold or silver you own will become more valuable in the future. Just like real estate values rise with inflation, so does the worth of precious metals.
Look at the value of a dollar in 1960 and compare it to today's economy. You might not be able to buy anything with that dollar. However, if you had invested your dollar in gold in 1960, that gold would be worth considerably more today.
That's not to say that investing in gold and silver is a sure thing. There are risks with any type of investing, so you should be aware of these financial hazards. In the short term, the value of precious metals might dip. That means you might take a loss if you tried to liquidate gold and silver at the wrong time. However, holding onto your precious metals for several years will give them the time to appreciate in value. The gradual rise in value makes precious metals a more stable type of investing when compared to buying stocks or putting all of your money into mutual funds.
The ability of gold and silver to withstand the adverse effects of inflation is why more people are investing in precious metals. Almost every other type of investment runs the risks of significant losses during inflation. You could lose a large portion of your retirement savings if you're invested in stocks or funds at a time when the market crashes. However, you will still have any gold and silver you have stored in your self-directed IRA account.
Guard Against a Economic Volatility
You might also lose value in some types of investments when there's a recession or other forms of economic volatility. Keep in mind that this type of situation can occur at any time without warning. Even after you retire, a recession could zap your retirement wealth and leave you with insufficient funds to support yourself.
This doesn't mean you have to invest all of your wealth in precious metals. In fact, it's important to diversify your wealth into a variety of investing options. Some of your savings should be used to invest in gold and silver. Since you know precious metals increase in value during periods of economic loss, you'll be able to trust that some of your wealth is protected. This is a great option to consider if you're nearing retirement and looking for investing options with lower risks.
Consider how people's minds have changed in regard to trusting the economy. That uncertainty can lead to rash economic decisions that will make matters worse. If you invest early in precious metals, you'll have the peace of mind of knowing that your savings will be protected.
How Do You Start a Self-Directed IRA for Precious Metals
Before you can get started with a self-directed gold and silver IRA, you'll need to know where to find precious metals that qualify. Typically, this means going through a precious metals dealer. Here are a few of the more commonly used dealers to help you start your search.
Take the Time to Research Gold and Silver IRA Companies
In addition to Augusta Precious Metals, Goldco and American Hartford Gold, there are many more good companies to consider for your self-directed precious metals IRA. Be sure to take the time to research each company you're considering using. You can learn a great deal about each company by reading online reviews for each firm. This will help you evaluate the experiences of past customers and learn what to expect in your future experiences with them.
Additionally, take the time to read the terms of service for each company. Failing to research the terms ahead of time can put you in a situation in which you're unfamiliar with the fee schedule. You should know exactly what the dealer will charge you and what services will be included for that fee.
As with any other type of retirement investing, opening a self-directed gold and silver IRA requires due diligence. As long as you take the time to learn everything you can about the company with which you're working, you'll have a positive experience. When the time comes to retire, you'll have the financial security that comes with liquidating gold and silver from your self-directed IRA.
