I Have an IRA. How Can I Invest in Gold and Silver?
Deviant Investor
Deviant Investor
September 21st, 2012
Reader Views: 1,028
It is quite easy! Yes, I am talking about actual physical gold and silver, not “paper” gold, or certificates, or paper promises.
Question: Why gold and silver in an IRA?
Answer: The simplest explanation is that gold and silver will protect your purchasing power. There are many other reasons including safety in the event of another economic melt-down such as what happened in 2008.
Question: Why not buy ETFs (Exchange Traded Funds) that invest in gold and silver, such as GLD, SLV, PSLV, and PHYS?
Answer: You certainly can. They are more convenient to buy and sell, and the annual fees are less. But, if you are looking for maximum safety, purchase metals in your IRA and have them stored in a secure, insured, private vault.
Question: Why can’t I store them in my personal safe deposit box instead of a private vault?
Answer: Per the IRS code, you can’t take delivery until you pay taxes. Don’t fight the IRS.
Question: How do I open an account?
Answer: Find a self-directed IRA custodian who will allow precious metals in your account, complete the paperwork, send it and the initial fee to the IRA custodian, and they will open the account.
Question: How do I find a self-directed IRA custodian?
Answer: Go to your favorite metals dealer – there are many – and look at their recommendations. My preference is Apmex.com but there are many fine choices for metals dealers, and they can recommend IRA custodians. Apmex currently suggests seven IRA custodians on their website.
Question: Once I get the account, how do I fund the account?
Answer: You can fund it with a non-taxable (partial or total) roll-over from an existing IRA, 401k, or 403(b) account, or by contributions under the current IRA rules.
Question: Then what?
Answer: The IRA is open, the money arrives from the rollover or contributions, and the IRA custodian asks you what you want to purchase with the funds and what dealer (such as Apmex) you wish to use. You tell the dealer what combination of silver and gold coins and bars (there are a few restrictions regarding what coins and bars are acceptable in IRAs) that you wish to purchase.
Question: Then what?
Answer: The metals are purchased and shipped to a bonded, insured, private storage facility in Delaware (or wherever) and stored. They are not in a bank. The IRA custodian sends periodic statements showing transactions and estimated fair market value of your gold and silver holdings.
Question: What does this cost?
Answer: It depends on the custodian, the size of your IRA, and the storage facility. Assume $200 – $400 per year as an estimate.
Question: Why so much?
Answer: Fees, IRS regulations, accounting, profit, and expenses. Gold and silver have increased 15% to 20% per year for the past decade. How has your money market account performed in that time? How have your brokerage accounts and mutual funds performed in that time? Did you feel safe or vulnerable during the crash of 2008? Would you feel safer if your IRA funds were not held in the banking or financial system? After considering these questions, the fees may seem quite reasonable. If not, then stay with what has been working for you.
Conclusion
An IRA that invests in physical gold and silver is NOT for everyone, but it may be appropriate for a portion of your retirement funds. It will probably be safer in the event of another financial meltdown, but it will be more expensive than a traditional IRA, and it is less convenient and flexible. Choose what works for you.
Delivered by The Daily Sheeple
Contributed by Deviant Investor of Deviant Investor.
About Deviant Investor: I am a retired accountant who has 30 years of experience following markets, investing, and trading both futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me much about markets, timing, risk, inflation, and crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs. I offer opinions and commentary, but not investment advice.
Years ago I did graduate work in physics (all but dissertation), so I strongly believe in data, analysis, objective facts, and rational decisions based on hard data. I currently live in Texas.
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Ask those people at MF Global how their custodial accounts worked out. If you don’t hold it you don’t own it. Pay the penalty 70% is better than 0%
This is useful if rolling over an IRA or other investment. However, to simply invest in gold or silver, you don’t need to go through anyone. Spend some time to educate yourself a little about the different types of physical metals, visit your local coin shops, and make smart purchases. You become your own broker and get to enjoy controlling your own financial destiny. Like any market, metals certainly have their ups and downs, but as our country and others continue to print more currency, the metal prices will certainly continue to go up in value. Collecting metals has been a great investment for myself and become a facinating hobby as a byproduct. I also highly recommed investing in a good safe to keep them in. Bullion coins are a great investment, but if antique gold and silver coins are what you like, I would recommend the uncirculated grades that are closest to melt value. I would definately stay away from commemoratives and anything that has a high (intangible) premium attached with it. Talk with your local coin dealers. Most of them are honest and are very helpful. Do some research before you buy. I’ve been collecting/investing for years and it has been a really great experience. Hope this helps someone.