Opinions expressed are those of our guest contributor. This is not financial advice, and is for informational purposes only.
As retirement nears, many investors begin seeking more stability in their portfolios. Low-risk assets like gold and silver can typically serve as a hedge against market volatility, helping to preserve your hard-earned savings during uncertain economic times.
A Self-Directed IRA enables you to invest in precious metals in a tax-advantaged retirement account so you can diversify your assets and potentially set yourself up for retirement success.
Below, we’ll give you all the details you need to know to diversify your retirement portfolio with precious metals.
What Is a Self-Directed IRA (SDIRA)?
An SDIRA is a specialized type of IRA that allows you to diversify your retirement savings and invest in assets beyond stocks and bonds. Standard IRAs are typically limited to investments like ETFs and mutual funds, but with an SDIRA, you can invest in alternative assets like private equity, real estate, and precious metals.
An SDIRA functions similarly to a Traditional IRA or Roth IRA when it comes to tax benefits. However, it requires a custodian to administer the account, hold custody of the IRA’s assets, and ensure it complies with IRS rules. The tradeoff? You gain more control over your investment choices and the opportunity to own tangible assets like gold and silver.
Benefits of Investing in Precious Metals
Precious metals, such as gold and silver, have long been great ways to diversify and protect retirement savings. While paper currencies can potentially be affected by recessions or government policies, gold and silver have generally maintained their worth over time.
Hedging Against Inflation
Gold and silver have tangible and intrinsic value unlike stocks, which can potentially lose value depending on the market conditions. Historically, gold and silver have retained their value over time, and during these economic uncertainties, they generally perform well compared to paper currency.
Diversifying Your Portfolio
Any time you diversify your assets, you generally reduce risk in your portfolio. When your other investments might be struggling, gold and silver can perform well and balance out your portfolio performance.
Seeking Safe-Haven Stability
Those who are close to retirement can have peace of mind knowing that their retirement savings aren’t entirely at the mercy of the stock market. You won’t have to worry as much about economic crises, geopolitical instability, or financial uncertainty.
Tracking Long-Term Value Growth
Despite short-term price changes, metals like gold and silver have demonstrated long-term growth. Their resilience over time makes them a trusted store of wealth.
Protecting Against Market Volatility
When the stock market is going through a period of volatility, the precious metals market tends to perform well. Adding metals to your SDIRA can help stabilize your returns and mitigate the impact of market swings on your retirement savings.
How to Invest in Precious Metals Through an SDIRA
Investing in precious metals through an SDIRA is simple. Let’s walk through the steps to set you up for potential success.
Choosing an SDIRA Custodian
After thorough research, select a reputable company with a strong record of managing SDIRAs and offering transparent fees. Not all financial institutions provide SDIRAs, so it’s important to find a custodian with experience handling precious metal investments.
Funding your SDIRA
Once you’ve selected a custodian, you’ll need to fund your SDIRA. You can do this by rolling over funds from a 401(k) or another retirement account, or transferring from an existing IRA. . You can also make direct contributions as long as you’re within the annual contribution limits.
Selecting your Precious Metals
Once your account is set up and funded, you’ll need to invest in precious metals. The IRS has regulations on which type of metals can be held in an SDIRA, and the approved metals are:
- Gold that has a 99.5% purity or higher
- Silver that has a 99.9% purity or higher
- Platinum or palladium that has a 99.95% purity or higher
If you want to invest in coins and bars, they also must meet the IRS requirements, but some popular investment options include:
- American Gold Eagle coins
- Canadian Maple Leaf coins
- PAMP Suisse gold bars
- Silver American Eagle coins
Purchasing Through a Compliant Dealer
Typically, you’re required to purchase metals through an IRS-compliant dealer. You can’t buy precious metals personally and transfer them into your IRA; the transaction must be done through your custodian.
Storing in an IRS-Approved Depository
The safest approach to keep the tax-advantaged status of your self-directed account is for your precious metals to be stored in an IRS-compliant depository; you can’t keep them in your possession. These facilities have secure storage and follow all IRS regulations. If you do store your assets at home, they could be disqualified from your IRA.
Monitoring and Managing Your Investment
Precious metals can provide stability, but over-allocating them may potentially create an imbalance. It’s considered best practice to review your portfolio regularly to maintain a diversified investment strategy that aligns with your long-term goals.
Risks and Considerations
As with any investment, precious metals come with potential trade-offs:
- Higher Fees: Custodial and storage fees for physical metals can impact overall returns.
- Lower Liquidity: Metals aren’t as easily bought or sold as stocks or ETFs.
- No Passive Income: Unlike dividend-paying stocks, metals don’t generate interest or income.
Even with these considerations, precious metals remain a valuable low-risk addition to a retirement strategy focused on preservation and protection.
Start Diversifying with Precious Metals Today
Diversifying your IRA with precious metals can potentially protect your retirement savings from inflation, economic uncertainty, and market volatility. You can invest in these precious metals by opening an SDIRA, selecting a reputable custodian, and complying with IRS regulations.
Following the steps above may allow you to confidently invest in gold, silver, and various other precious metals while still enjoying their long-term benefits.
Daniel Gleich brings to Madison Trust over twenty-five years of entrepreneurial experience. As a hands-on President and CEO, Mr. Gleich is responsible for setting the vision, tone, and culture of our organization. Leveraging his keen financial acumen, entrepreneurial know-how, and creativity, Mr. Gleich is constantly propelling Madison Trust forward and maintaining its position at the forefront of the financial services industry.
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