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How Can I Include Precious Metals in an IRA?

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How Can I Include Precious Metals in an IRA?
precious metals ira

As people move towards retirement, financial instability and its capacity to harm one’s savings becomes increasingly worrisome. Gold and other precious metals are known to be effective hedges against inflation as stores of value that tend to track in value inversely with currencies, meaning that they provide some measure of security during times of economic turbulence. Unfortunately, many retirement accounts do not allow precious metals and other tangible investments, but there is an exception for those interested in including precious metals in their savings: the self-directed IRA. So-called “precious metals IRAs” are really just self-directed IRAs (Individual Retirement Accounts), which present an alternative to traditional IRAs in that they allow investors greater freedom in determining which investments they wish to include.

Wait! What is an IRA Anyway?

An IRA is a retirement account that allows individuals to save and invest a portion of their income before it is taxed. IRAs are funded by account holders allocating money to the account for investment into a number of different stocks or funds. Generally, individuals do not exercise direct authority over normal IRAs, and instead leave them in the control of a custodian who can invest money from the IRA on behalf of the account holder. When the account holder decides to withdraw money, the withdrawn amount is taxed as income and may be subject to other penalties if withdrawals are made too early. Essentially, an IRA allows an individual to save and invest more money for retirement by providing a means by which to store wealth in the long-term and postpone taxation. Standard IRAs are generally restricted to investing in stocks and bonds. Conversely, a self-directed IRA does allow precious metals, but there are some important restrictions to what can be included.

What Precious Metals Products Can I Include?

Physical Precious Metals

To clarify, a self-directed IRA is not for the inclusion of all tangible assets. Things like collectibles and other items with a high artistic, historical, or other form of value are not allowed. This means that numismatic coins cannot be included in a self-directed IRA, but some bullion coins as well as bars and rounds can. In fact, the U.S. Mint’s Gold, Silver, and Platinum Eagle coins were created with inclusion in a self-directed IRA specifically in mind. In fact, even proof versions of the American Gold, Silver, and Platinum Eagles can be included in an IRA, so long as their original packaging and paperwork is included, despite the high premiums they obtain over the value of their metal. As with a standard IRA, account holders must first allocate funds to their account and then direct whoever manages the fund to purchase precious metal with the account’s funds.

Another restriction on the inclusion of precious metals in an IRA involves the purity of the metal, commonly determined in terms of “fineness.” Fineness is essentially the percentage of a bullion product that is pure precious metal; 99.9% purity is the same as a fineness of .999. Most historical and numismatic coins were minted with either .900 fine or .917 fine (22-karat) gold or silver, but coins included in an IRA must have a fineness of .999, thus effectively excluding most numismatic coins and even some bullion coins, such as the South African Krugerrand. An important exception to this is the American Gold Eagle, a .917 fine gold coin which may be included. The standard for gold bars is slightly lower, with a minimum required fineness of .995. For reference, most bullion products possess a fineness of .999 or .9999. Platinum and palladium coins and bars of a minimum fineness of .995 may also be included.

Below is a list of coins and the specification for bullion products allowed in an IRA.

gold ira

Gold:

American Eagle
American Buffalo
Australian Kangaroo/Nugget
Austrian Philharmonic
Canadian Maple Leaf
Bars and rounds produced by an accredited refiner/assayer/manufacturer or national government mint and meeting minimum fineness standards (.995)

silver ira

Silver:

American Eagle
Australian Kookaburra
Austrian Philharmonic
Canadian Maple Leaf
Mexican Libertad
Bars and rounds produced by an accredited refiner/assayer/manufacturer or national government mint and meeting minimum fineness standards (.999)

platinum ira

Platinum:

American Eagle
Australian Koala
Canadian Maple Leaf
Isle of Man Noble
Bars and rounds produced by an accredited refiner/assayer/manufacturer or national government mint and meeting minimum fineness standards (.995)

palladium ira

Palladium:

Bars and rounds produced by an accredited refiner/assayer/manufacturer or national government mint and meeting minimum fineness standards (.995)

*Some IRA custodians may impose additional restrictions.

"Paper" Precious Metals

Some account holders opt to buy shares of precious metals ETFs (exchange-traded funds) instead of physical precious metals. Another alternative to investing in physical precious metals is to purchase shares in mining companies who extract precious metals. While these options do not provide the account with any physical metal, they do track in value with the price of a particular metal to which they are tied. For instance, using the funds in an IRA to invest in a silver ETF or in a silver mining company means that the investment will likely increase in value when the price of silver rises and decrease when the value of silver falls. Of course, stock performance involves a number of factors and is not usually possible to accurately predict, so some precious metals stocks may not always track with the price of a precious metal as expected. The only way to ensure that your precious metal investment directly follows the prices of these metals is to purchase physical gold, silver, platinum or palladium.

Conclusion

As with any investment, deciding where to put your money depends on your individual goals. While some see the value in buying shares of precious metals ETFs and mining stocks, others want physical precious metals as a measure of security against currency shortages or other crises. In either case, the value of the investment is at least related to the value of a particular precious metal. All investments carry risk and the potential for loss, so it is recommended that all prospective buyers obtain a professional opinion by speaking to a financial adviser before deciding to open a self-directed IRA for the purpose of investing in precious metals.

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