Precious Metals IRA

It’s a matter of concern to some people that all of their retirement investments are, when you get right down to it, pieces of paper. Even cash is comprised of paper-pieces, and even cash can lose its value on the world market or with inflation. How much more precarious does a stock or bond seem, if you’re wary of the ability of papers to maintain their value?

There’s a solid solution for you, in the form of Precious Metals IRAs. Sure, there are pieces of paper involved here, but there’s a precious metal holding the value of the IRA, and the IRA itself essentially serves as a title of ownership of that precious metal. Here’s the breakdown on the ins and outs of the Precious Metals IRA.

How It Works: the Precious Metal IRA

There are four metals that are permitted to serve in an Individual Retirement Account, or IRA. Gold, Platinum, Silver, and Palladium can all be held in IRAs. In order to qualify, the metal itself must be physically formed in bullion bars or coins that are recognized by the Internal Revenue Service. Precious Metals IRAs are considered to be Self-Directed IRAs, because you can invest in your choice of a selection of approved products.

The metals must also be stored specifically in the manner set out by the IRS, often in a specialized facility or metals depository. In other words, the metals themselves are not in the physical custody of the IRA owner, but are held by a custodian or trustee. That custodian has to be a bank, a savings and loan association, a credit union that’s federally insured, or another approved entity, such as an approved depositories. You can choose to have your precious metals stored in a non-segregated depository (where your metals and other people’s are all held together) or in a segregated depository (where your specific assets are kept separate from other people’s).

When it comes to taking distributions from the Precious Metal IRA, the IRA itself works the same as any Individual Retirement Account. You can liquidate the IRA precious metals in exchange for cash, or you can physically take possession of the metals yourself. Either way, you are considered to be taking a distribution from the IRA, so you will be taxed the same as any other IRA distribution.

Coins & the Precious Metal IRA

There is a whole market for collectors’ coins. Depending on their rarity and other factors, collector coins can often be sold for amounts far higher than the mere value of their metal. They have cultural or historical value, sometimes aesthetic value, and always a value higher than what their melted-down metals would bring. These coins are referred to as numismatic coins, and they are generally not the types of coins you’re looking at for a Precious Metals IRA.

In contrast to the numismatic variety, “bullion coins” are valued for their content of the precious metals that make them up. As coins, they are recognizable units of a sort, but their value would be virtually unchanged if they were melted down. They do not derive their worth from historic or “rarity” value; their worth is measured instead in ounces of gold or silver.

The underlying reason for using bullion coins in IRAs is the fact that their values do not change based on unstable collectors’ markets. In an economic downturn or crisis, the market for collectors’ coins would likely drop to the lowest common denominator, which is ultimately the precious metal content of those coins. With that in mind, it is unwise to spend your premium on value that might falter, when you can straight up buy coins whose precious metals determine their worth.

For those who are concerned about the government tracking their purchases, it is worth noting the reporting requirements. The IRS requires reporting of coin purchases that could fulfill a futures contract, which is essentially a financial gambit of contracting to sell at a specifically set time in the future, and at a specifically set price. Coins that fit this definition are limited to bulk purchases of twenty-five or more Mexican Onzas, Canadian Maple Leaf coins, or South African Krugerrands; or U.S. coins that are 90% silver and purchased in amounts of face value (not their higher precious-metal value) of five thousand dollars. Bullion coins don’t require any reporting by the dealer, and bullion coins are specifically exempted from being considered as “cash” in the context of cash reporting.

Bullion coins used in Precious Metal IRAs include:

• Gold or Silver or Platinum Eagle (U.S.)
• Gold or Silver or Platinum or Palladium Maple Leaf (Canada)
• Gold or Silver Philharmonic (Austria)
• Gold Kangaroo/Nugget (Australia)
• Gold or Silver Panda (China)
• Gold Buffalo (U.S.)
• Silver Kookaburra (Australia)
• Silver Libertad (Mexico)
• Platinum Noble (Isle of Man)
• Platinum Koala (Australia)

 

Bullion Bars & the Precious Metal IRA

Some people prefer to work with coins rather than bullion bars because the coins are less difficult to sell, but for larger scale investments bullion bars are often preferred. Whether the metal in question is gold, silver, platinum, or palladium, the bars or rounds must be produced by a government mint or a refinery approved by NYMEX (New York Mercantile Exchange) and COMEX (Commodity Exchange).

For those who are concerned about the government tracking their purchases, it is again worth noting the reporting requirements. As with some bullion coins, the IRS requires reporting of bullion purchases that could fulfill a futures contract. This includes 100-ounce gold bars and kilo gold bars, thousand-ounce silver bars, fifty ounces of platinum, or one hundred ounces of palladium.

Why People Are Turning to Precious Metal IRAs

When the economy is stable and robust, stocks and bonds may be smart investments on which to base a retirement plan. In today’s less-than-stable times, however, more and more people are turning to the solid comfort of precious metals to hedge against inflation or market crashes. Unlike paper currency, gold and other precious metals are not subject to inflation; the government can’t just “print more.” In fact, it is (literally) the gold standard that determines the falling value of paper currency, because the supply of gold stays steady while the proliferation of paper money makes its own value drop correspondingly.

Instead of an intangible share in a company, the holder of a Precious Metal IRA actually owns gold or silver or a combination of precious metals. The IRA can be cashed out for the value of those metals, or the metals themselves can be physically removed from the IRA into the owner’s possession.

Bottom line: a Precious Metal IRA is just about the only type of IRA in which you actually outright own the assets represented by your piece of paper. And many people are finding that it’s a good trade to exchange a piece of paper for peace of mind.