Precious Metals IRA Guide 2021

If you want to invest in gold, silver, or any precious metal through IRAs but aren’t financially literate enough to help yourself, this precious metals IRA guide is just for you.

Top Precious Metals IRA Companies

goldco
This company is best known for IRAs and retirement rollovers. Created in 2006, its staff has more than 100 years of experience in the industry, notably precious metals.
Regal Assets
This Gold IRA company is top-rated on the market, featured in Bloomberg and other financial publications.
Birch Gold Group
This company is relatively new compared to others, as it began in 2003. Since then, thousands of customers use Birch Gold Group for their Gold IRA needs.
Augsuta Precious Metals
With over 50 years of experience, many investors use Augusta Precious Metals for retirement with silver and gold IRAs.

Why Invest in a Precious Metals IRA

Precious metals have been always considered a safe haven to hold or invest money in. It is relatively stable, goes up in value steadily over a period, and has served as the perfect hedge when the financial markets are down. In other words, when debt and inflation cause paper assets to completely lose their worth, a precious metal investment like gold investments stays afloat. 

On the flip side of the coin, precious metals investments don’t pay any interest (like bonds do) or dividends (like shares), and the costs pertaining to the secure storage and delivery of the physical metals are relatively high too. 

This begs the question: Where do precious metals IRAs stand as a viable investment/savings vehicle? Is it sensible enough to save money in precious metals IRA for retirement when there are other investment choices available? All these questions and more will be answered in this guide.

The Best Precious Metals IRA Companies

goldco

Goldco is best known for IRAs and retirement rollovers. Created in 2006, its staff has more than 100 years of experience in the industry, notably precious metals.

GoldCo is transparent with its operations, providing effortless 401(k) and IRA rollovers.

For more diversification, they offer SEP and SIMPLE IRAs. If you want to learn more, the company provides massive educational materials. If you choose this company for investing, they offer advice with a personalized, dedicated manager.

GoldCo has impressive BBB reviews with an A+ rating.

Read full review

Regal Assets

Regal Assets Gold IRA company is top-rated on the market, featured in Bloomberg and other financial publications.

Regal Assets offers competitive rates for gold or silver IRAs. They’ve expanded their services past precious metals, as they provide cryptocurrencies as well.

Investors choose Regal Assets for their Gold IRA because of their long-standing reputation and expertise.

This company has hundreds of satisfied customers on TrustLink, with a 4.6 rating out of 5 ratings.

Read full review

Augsuta Precious Metals

Augusta Precious Metals is family-owned and specializes in gold and silver.

With over 50 years of experience, many investors use Augusta Precious Metals for retirement with silver and gold IRAs.

The company is different from others, as each individual receives a dedicated manager. From there, you will build a long-term relationship with the company, receiving guidance customized to your needs.

Augusta Precious Metals makes it easy for customers to create an IRA account and rollover previous retirement accounts. Any investor will receive the opportunity to defend against inflation and economic downturns.

Read full review

Birch Gold Group

Birch Gold Group is relatively new compared to others, as it began in 2003. Since then, thousands of customers use this company for their Gold IRA needs.

They provide competitive rates and excellent customer service.

Birch Gold Group has fantastic reviews on the Better Business Bureau (BBB) with an A+ rating.

They offer gold and silver IRAs for retirement with a personalized specialist to set up the account and offer guidance. You will receive helpful tips along the way, including access to educational content, allowing you to learn more about precious metals and IRAs.

Read full review

Noble gold

Noble Gold is an established investment service from California, offering various IRA accounts.

You can choose to invest in either gold, silver, platinum IRAs, or silver, platinum, and palladium for more diversification.

Their services are based on customer satisfaction and provide more transparency than other Gold IRAs. There are also low IRA fees and an easy buyback policy if you want to sell our IRA at a solid rate.

Besides funding a Gold IRA, you can roll over your retirement accounts into the same asset, earning more in the long run.

Read full review

A Brief Intro to IRAs

Also referred to as “individual retirement arrangement”, an IRA (individual retirement account) is a retirement saving plan for individuals. It is not a “qualified plan” – meaning, it’s not “employer-sponsored”. The account holds money and accumulates interest income, which the account holder should ideally withdraw/distribute after their retirement. Premature withdrawal is feasible, but the penalties will tag along.

Instituted in 1974 to encourage individuals to save for their impending retirement, IRAs were initially only available to citizens who had no employer-sponsored retirement policies going. IRA rules, however, were later modified to accommodate people who were already enrolled in a company-sponsored retirement savings scheme.

In 1981, the ERTA (Economic Recovery Tax Act) permitted all employed taxpayers below 70 years of age to allocate a portion of their annual income to an IRA. The maximum contribution allowed back then was $1,500. After a revision, IRA owners were able to contribute up to $2,000 annually and an additional $250 on their non-working spouse’s behalf.

Over the years, the maximum allowed contribution to IRAs gradually increased. In 2019-2021, the maximum the rightful owners of the account can pay is $6,000. Those who are more than 50 years of age could add up to $1,000 extra to make up for the lost time or their late start.

gold ira

Asset Types

IRAs typically hold money or are invested in assets such as stocks, bonds, mutual funds, etc. They are not meant to own collectibles or “alternative investment” assets such as gold, real estate, commodities, private equity, etc.

On the other hand, self-directed IRAs afford the provision to invest in private mortgages, real estate, oil and gas, private company stock, intellectual property, precious metals, etc. If you want precious metals to be accounted for in your IRAs, set up a “precious metals IRA”.

Precious Metal IRA: An Introduction

Precious metal IRAs let you buy or invest in expensive metals such as gold, silver, platinum, etc.

It permits you to own precious metals through an IRA, usually in the form of coins or bullion. Kindly note, you cannot take custody of the gold coins or billions. The metals purchased will reflect in your IRA account statements.

A standard IRA can also give you exposure to precious metals such as gold, but only through stocks or bonds of gold mining firms or gold or silver exchange-traded funds (ETFs). It doesn’t allow you to invest in the metals directly. A precious metals IRA, on the other hand, enables that option.

Coming under the umbrella of “self-directed IRAs”, gold or other precious metal IRAs function just like other IRAs. The tax benefits, withdrawal rules, and contribution limits are pretty identical. However, precious metals IRAs have some additional record keeping and tax reporting requirements.

To know more about the tax implications or concepts (such as tax code exceptions and internal revenue codes) pertaining to precious metal IRAs, get in touch with a CPA.

gold prices rising

Permitted IRA Precious Metals and Their Forms

Gold, silver, platinum, and palladium are the precious metals held in self-directed IRAs, with gold and silver being the most popular metals. But not everything that’s gold, silver, platinum, etc., is automatically eligible for an IRA. Specific requirements pertaining to the precious metals’ purity, form, etc., must be met for the metals to qualify for an IRA.

The following are the exact requirements or purity standards the precious metals should meet to be deemed “IRA-appropriate”:

American Gold Eagle
  • The gold should be 99.95% pure, and the silver’s purity must be 99.99%. Palladium and platinum should be 99.95% pure.
  • The precious metal coins, bars, etc., must be manufactured by an accredited assayer, refiner, or coins manufacturer.
  • Proof coins should have original, complete packaging. They must come with their certificate of authenticity. The coins must be in excellent condition.
  • Bullion bars should be built to their exact weight specifications.

The IRS provides the approved metals list, which includes:

american platinum coin
  • Gold: American Eagle, Canadian Maple Leaf, Austrian Philharmonic, Australian Nugget, etc.
  • Silver: American Silver Eagle, Austrian Philharmonic, Canadian Maple Leaf, etc.
  • Platinum: Australian Koala, Canadian Maple Leaf, American Platinum Eagle, etc.
  • Palladium: Canadian Maple Leaf, and several other palladium rounds and bars.

For the complete list of coins and bars allowed, click here.

Some of the precious metal coins that do not make the cut and are conspicuous by their absence include the South African Krugerrand, French Gold Napoleon, and British Sovereign. The coins don’t qualify as they do not meet the requirements mentioned above.

Setting Up a Precious Metals IRA Account

Compared to a traditional or Roth IRA involving stocks and bonds, opening a precious metal IRA is slightly complicated. That’s because there is an “ecosystem” of sorts or different stakeholders or companies or brokerage firms at work. It’s also not as structured as a standard or Roth IRA.

The following are the steps to set up a precious metals IRA and get rolling with one:

  1. Pick an accredited custodian, precious metal dealer, and a depository.
  2. The custodian will buy the eligible metal from the dealer for your IRA plan, using the funds you provide.
  3. The metal purchased would be directly sent to the depository. The depository will safely store the precious metal until you decide to withdraw and sell them.
Step 1 for a Gold IRA

Choose a Custodian

Select a custodian or caretaker for your self-directed precious metal IRA payments or transactions. The guardian holds your IRA account’s investments safely and ensures you meet all government and IRS regulations at all times. The caretaker could be a bank, trust firm, or any financial institution approved by the IRS (Internal Revenue Service).

As the IRA account owner, you direct and facilitate your custodian to buy the precious metals for your account. In other words, you are in complete control or have all rights reserved, and the custodian will not perform transactions related to your account without your approval or knowledge. Guardian companies will also not push or influence you to make the transactions, thereby not functioning as investment advisers. They act only based on your directives.  

The account caretaker provides you an online portal to check the real-time status of your transactions and the investment products such as gold and silver you hold. Asset description, valuation, and a host of other information can be gleaned through the account or accounts (if you hold multiple accounts). All account-related actions can be initiated and performed via your online custodian account.

Step 2 for a Gold IRA

Buy the Precious Metals

After selecting a custodian, zero in on a valuable metal dealer such as Lear Capital from whom you would buy the metal for your IRA plan. The dealer of gold bullion coins or other precious metal bullion products could also help you pick suitable metals for your IRA account.

As mentioned above, not all gold coins or other precious metals qualify for individual retirement accounts. And as a first-time bullion investor, you are likely to not know which bullion investments are ideal or right for your requirements. Luckily, your dealer will more than just fill you in on that information, typically providing you a list of bullion coin options and their exact variants eligible for investor purchase.

The dealer should be accredited or recognized by industry trade groups such as Industry Council for Tangible Assets (ICTA), American Numismatic Association (ANA), or Professional Numismatists Guild (PNG) to make sure you’re associating with the right companies.

Step 2 for a Gold IRA

Select a Depository

Once you direct your custodian to buy gold and other precious metals for your IRA investment plan, they will pay the dealer using the money from your account. The dealer shall then ratify the transaction and move the purchased gold coin or bullion to a depository.

A depository is an IRS-approved or accredited third-party firm that physically stores your precious metal. You cannot stockpile the purchased metal in your home, your relative or friend’s location, or any self-storage place not recognized as an “assets storage facility” by the IRS.

How is a depository different from a custodian?

Depositories are storage facilities or companies wherein a physical asset, such as a precious metal, is stored and safeguarded. They may either store just gold bullion or offer to store other kinds of physical assets as well safely for your retirement accounts.

A custodian, on the other hand, is a financial institution that holds securities. In this case, it holds the documents signifying the ownership of the expensive metal stored in the depository. The caretaker rarely holds the physical metal, making a depository an essential cog in the “precious metal IRA wheel”. The depository could also remotely update your IRA account to reflect the current prices of the metal in your possession.

Your account caretaker or dealer could guide you in finding a reliable depository for your IRA. Some dealers have depositories they prefer or recommend one to their customers, for they could have better digital linkage or communication with them. Certain custodians may also have strong connections with depositories.

But do your research as well. Maybe the custodians or dealers you pick have ulterior motives in suggesting specific depositories. However, if the custodian and depository are well-established and reputed, such foul play will be non-existent. So don’t break your head over the matter too much.

IRS

To summarize the above:

  • Pick an accredited custodian, precious metal dealer, and a depository.
  • The custodian will buy the eligible metal from the dealer for your IRA plan, using the funds you provide.
  • The metal purchased would be directly sent to the depository. The depository will safely store the precious metal until you decide to withdraw and sell them.

As stated above, custodians are not meant to offer you financial or investment advice. But some may offer advisory services. Check with your custodian to know more. Check their websites for their precious metals IRA reviews.  

Funding Your Precious Metals IRA

You can fund your precious metal standard or Roth IRA by transferring money from your bank account into your custodian account or rolling over an existing retirement account to your self-directed IRA

People on the lookout for a different form of retirement savings account or who are changing jobs may need to move their funds out of their existing retirement account, such as a 401(k) or a non-precious metal IRA, to a precious metal IRA.

If you are quitting your job to start your venture, you have to move funds from your 401(k) to a self-directed IRA. This transfer process is referred to as a “401(k) rollover”. Your 401(k) provider could directly wire the funds to your gold IRA investor account. Alternatively, they could send a check to you, which you may later deposit into your IRA.

Regardless of the route you take, follow the yearly IRA contribution limits mentioned above.

Precious Metals IRA Rules – Withdrawing/Distributing Funds

You can withdraw the bullion by either having the precious metal sent to you (when you’re 59½ years old) or selling the metal at its current market prices. Upon withdrawing the investment, however, you’ll cease to benefit from the “zero-tax benefit”. The actual sum you’ll pay as penalties and taxes will vary depending on your age at the time of withdrawal and your account type.

If the money is transferred to another IRA, or if the cash directly moves from a financial institution, such as a bank, to another custodian and the money never reaches your personal bank account, the sum transferred will not be penalized or taxed.

Premature Withdrawal

Cash from IRAs could be withdrawn penalty-free when you are 59½ years old, retired or not. If you withdraw the money before you turn 59½, the IRS will impose a 10% penalty for the early exit – in addition to levying taxes on the sum realized. And, once you turn 72, you cannot continue to hold the cash in the IRA, even if you’re not retired. The required minimum distributions rule will come into effect. 

In cases such as a medical emergency, property purchase, university fees, etc., the premature withdrawal penalty won’t be levied. And if the prematurely withdrawn sum is donated to a charity, the penalty will still apply, but the amount will not be subjected to taxes.

On a related note, if you purchase gold collectibles or the wrong gold coin to add to your precious metal IRA, the IRS would deny the transaction and consider the purchase as a withdrawal. As a result, you’ll owe tax on the item’s value. And if you’re not 59½ or older, you’ll also incur the 10% early withdrawal penalty.

Advantages and Drawbacks of Precious Metal IRA

As with all things in life, there are both good and bad sides to a precious metal IRA. 

Advantages

The following are the positive aspects:

Adds Diversity and Balance to Your Portfolio

Diversification is arguably the biggest reason why you may consider including a precious metal IRA in your retirement strategy. Precious metals such as gold and silver coins provide a safety net against financial tremors and shocks. The key to proper portfolio diversification is choosing assets that almost play against each other.

Precious metals, such as gold and silver coins and also palladium bullion, usually move in the opposite direction of stock price movements. If you are averse to the volatility of the stock market, you’ll appreciate what gold or silver IRAs bring to the table, or how it helps offset trends when your company shares are undergoing a downward spiral.

Long story short, when stock market corrections are underway, your precious metal investments offer a cushion and make sure your hit is not catastrophic. In case you’re wondering how much of your total retirement savings should you set aside for a precious metal IRA, 5 to 10% is ideal. And the reason being “diversity”.

Secures Your Future

Holding some money in precious metal is insurance (kind of). In other words, the monetary utility of gold, silver, platinum, etc., will never be zero. The same, however, cannot be said of stocks of companies, which could completely plummet if the concerned organization goes out of business or experiences significant losses.

Also, since precious metal prices typically move in the direction opposite to paper assets, such as stocks, a precious metal IRA provides a hedge against inflation. The stock or trading market is highly vulnerable to the price rises.

Affords You Complete Control

A precious metal IRA plan is self-directed, which means you fully control the asset mix. The “self-directed” nature of the IRA also signifies complete control over your risk exposure, gains, and losses. If you want to be more hands-on with your retirement account or want to have more of a say concerning your IRA, you’ll feel at home with precious metal IRA plans.

Drawbacks

But all’s not rosy with self-directed IRAs. Here are things you need to put up with to seek the aforementioned benefits:

The Cost Factor

Choosing a custodian, buying the investment metal from a dealer, and storing the gold, silver, or platinum securely in a depository all come with a cost. For instance, the guards, vault system, insurance coverage, etc., associated with a depository service cost finances. In other words, precious metal IRA fees are higher than regular IRA.

  • Setup fee: The custodian would usually charge you an upfront fee for setting up your account. The fee is typically a few hundred dollars. If you put in a bigger deposit, such as more than $20,000 to $30,000, the fee could be waived off.
  • Custodian fee: This yearly fee is for account maintenance, or to cover the administration costs of overseeing the account and paperwork handling. The fee is a flat rate and can be anywhere between $75 and $300 a year. The more money saved in your custodian account, the marginally higher the fee will be.
  • Seller fee: The precious metals seller or dealer obviously will not sell you the metal at its exact market price. They would place their markup. The actual charges vary based on precious metal type and prevailing market conditions. Besides adding their margins, the seller would also charge a flat fee or a percentage as a commission for handling the transaction.
  • Storage fee: The depository will also charge you for the physical space used to store your precious metals securely. The greater the footprint or valuation of the precious metals, the higher the fee. For example, companies can charge $100 for the first $100,000 worth of precious metals stored and a dollar extra for every $1,000 worth of additional metal added to the pile.

Some other costs you may bear beside the above include insurance fees, wire transfer fees, and cash-out fees.

Steady Performers, But Not Great

Precious metals lack the performance other asset types, such as stocks and ETFs, are known to offer. If you invested a significant portion of your retirement funds in a precious metal such as gold, your retirement accounts portfolio wouldn’t lose value too much, but the fund’s growth will not be anything to write home about.

It’s not uncommon to see prices of gold and silver being the same at the beginning and end of a decade. For instance, the price of gold was $1,791 per ounce in August 2011. In April 2021, it was $1,770. Similarly, silver prices were approximately $29 an ounce in December 2011. In April 2021, silver was around $26 per ounce. Refer to this chart to learn more about the prices.

People safeguard their money by investing in gold and silver and also to benefit from the appreciation. But they are not likely to or even hope to become rich investing in a precious metal. Those who made millions investing put their money in stocks.

Not Immune to Volatility

Though not as fluctuating in value as stocks, gold, silver, or any other precious metal investments also have stability issues or their fair share of ups and downs. Generally, when the stock market is down, prices of a precious metal go up. But when share prices increase, the metal invariably starts to dip in price. If you refer to the chart linked above, you’ll infer how gold prices have not necessarily been steady.

Other Ways to Invest in Precious Metals

Precious metal IRAs are ideal if you are worried about your investments losing value owing to market conditions. Also, if you’d like to buy a precious metal like gold and keep your money held in them for long, opt for a gold or silver IRA.

However, as stated above, there are multiple steps involved. Most people would not fancy the hunt for reliable custodians, depositories, and dealers.

Fortunately, precious metal IRAs aren’t the only way to invest in or gain exposure to gold, silver, and other expensive metals to secure your retirement money.  

Mutual funds or ETFs (exchange-traded funds) that track expensive metal indexes or prices are solid alternatives. You could opt for a gold or silver mutual fund or ETF. They typically put money in a basket of different investment vehicles that deal with gold, silver, and other precious metals – such as a gold mining company. When expensive metals go up in their price, the mining firms’ share values go up as well.

ETF companies could also be into physical metals instead of the shares of mining businesses. Also, there are funds directly tracking the spot prices of gold, silver, platinum, etc., using futures trading methods. Businesses that finance mining firms also offer their shares to the public.

If you have a greater risk appetite and/or good knowledge about the financial market, cut out the middleman (mutual fund company) and invest in stocks of precious metals mining firms directly.

Conclusion: Precious Metals IRAs

If you’re new to precious metals IRAs, this guide hopefully gave you a ton of valuable information. And possibly, it egged you in the direction of looking at precious metals as compelling investment vehicles.

Kindly note, you don’t “need” a precious metals IRA. Oftentimes, standard IRAs that offer the option to invest in assets such as stocks, bonds, ETFs, CDs, REITs, etc., will take you over the finish line.

But as the famous investment adage goes, it’s advisable to have your eggs in as many baskets as possible. A precious metals IRA is that “golden”, “silver”, or “platinum” basket that you should not leave empty.