A gold IRA is a self-managed individual retirement account that invests in both physical gold and other precious metals. A gold IRA often has higher fees than a traditional IRA or Roth IRA, which invests exclusively in stocks, bonds, and mutual funds. A precious metal IRA is a special form of a self-managed individual retirement account. With self-directed IRAs, you can invest in a wide variety of unconventional assets, including precious metals, real estate, and even cryptocurrencies.
These options go beyond the usual options of a conventional IRA, although they otherwise have virtually identical features, including the same contribution limits. In general, an IRA investment in a metal or coin is considered an acquisition of a collectible item. Therefore, the transaction is characterized as a taxable distribution by the IRA, followed by a purchase of the metal or coin by the IRA owner (you). In fact, this general rule prohibits IRAs from investing in precious metals or coins made from precious metals.
A precious metal IRA is simply a traditional IRA, ROTH, SEP, SIMPLE, Rollover, or Inherited IRA that owns precious metals and may include gold, silver, platinum, or palladium. Since they involve buying and storing valuable physical metals, there are a few additional things you need to consider when considering precious metal IRAs. If you want easier exposure to these investments without having to open a specific type of IRA or find custodians, dealers, and depositories, consider investing in securities such as exchange traded funds (ETFs) or mutual funds that track precious metal indices or prices. The IRA custodian bank processes the payments and the dealer sends your precious metals to the custodian.
When buying precious metals through a precious metals IRA, there are IRS rules and restrictions on which metals are allowed in the IRA. Self-managed IRA custodian banks allow investors to invest in alternative assets such as precious metals and real estate. For example, you could have an IRA that is invested in precious metals and another IRA that invests in liquid assets such as publicly traded stocks and mutual funds. When you choose a reputable custodian bank and warehouse, you can rely on the safety of your IRA precious metals.
Physical precious metals are a self-directed investment and usually require a custodian bank that offers self-directed IRA investments. The practical problem is finding an IRA trustee who is willing to set up a self-governing IRA and facilitate the physical transfer and storage of precious metals assets. Given today’s stock market valuations and historically low interest rates for fixed-income investments, some IRA owners may be interested in switching some funds from low-risk stocks and securities (such as government bonds and money market funds) to precious metals. Precious metals IRAs could be a viable option for some investors who are concerned about inflation and market volatility.
Opening a self-directed IRA and investing in precious metals is a bit more complicated than opening a traditional IRA or Roth IRA. If you have a precious metal IRA, your IRA directly owns physical bullion bars or coins, which you select and order directly. Willing trustees can be found via an Internet search and ensure the physical storage of precious metal assets owned by IRAs.
