Investing in precious metals is becoming increasingly popular as a way to diversify your portfolio and hedge against market volatility. A precious metals Individual Retirement Account (IRA) is a tax-advantaged account that allows you to invest in gold, silver, platinum, and palladium.
With a precious metals IRA, you can enjoy the potential safety and stability of a diversified portfolio, as well as the potential for strong returns over time. Here we will discuss the benefits of investing in a precious metals IRA.
We will also discuss the different types of precious metals IRAs available and how to set one up. By the end of this post, you will have a better understanding of how a precious metals IRA can potentially benefit you.
What is a Precious Metals IRA?
A precious metals IRA is a type of Individual Retirement Account (IRA) that allows you to invest in precious metals, such as gold, silver, platinum, and palladium. Also, a precious metals IRA is a self-directed IRA, meaning that funds can be invested in a variety of assets, including real estate, stocks and bonds, and commodities such as gold and silver.
Unlike a standard IRA, a precious metals IRA allows you to invest in a wider range of assets, and unlike a 401k, there are usually no contribution limits or minimums. A precious metals IRA is a great option for those who are looking to diversify their portfolio, hedge against market volatility, and take advantage of tax benefits.
The Benefits of Investing in a Precious Metals IRA
There are many benefits of investing in a precious metals IRA, including traditional investment diversification, providing insurance for retirement accounts, the prospect of growth, tax advantages, greater control, and hedging against market volatility. Let’s take a closer look at each of these benefits in more detail.
1. Diversification
Precious metals IRAs can help you diversify away from traditional investments. The market for stocks has historically been quite volatile, whereas the market for precious metals has been more stable. Investing in a diversified portfolio can help you mitigate risk and reduce the chance that your portfolio suffers significant losses.
It is never a good idea to just have one type of asset in your retirement portfolio. Often, conventional IRAs are almost entirely based on stocks, and as you are probably aware, the stock market is often subject to downtrends and corrections. This is not usually the case with precious metals.
2. It is like having Insurance
When some of your retirement savings are in the form of precious metals, it is similar to having a form of insurance. There is no way that silver and gold can suddenly “shut down” and be worth nothing. But this can happen with company stock.
History has proven that precious metals consistently surpass inflation and this is very important given what is happening right now. The WGC (World Gold Council) supports the fact that the returns on gold have been mainly positive over the years. They also say that gold will usually always retain its purchasing power over the longer term.
3. Greater Control
You are in control with a self-directed precious metals IRA. Every decision about the assets in your account, the allocation of those assets, and the redistribution of them. For example, with distribution you can decide if you want to sell some of your precious metals to raise additional cash, or have them delivered to your home.
With a self-directed precious metals IRA, you have no restrictions in the type of assets that you can hold in your account. What this means is that you have control over the element of risk in your IRA as well as any gains and losses that may accrue.
4. Tax Advantages
With a precious metals IRA, it can help you defer taxes and increase the overall amount of money you have for retirement. Unlike traditional IRAs, precious metals IRAs allow you to defer taxes until you withdraw funds from the account.
When you do retire, you will owe taxes on the full amount you withdraw, but you also have more money to live off of because you didn’t have to pay taxes on it when you put it in. With other forms of investment, you will not have these tax advantages.
5. Hedge against Market Volatility
If you are looking for a hedge against market volatility then a precious metals IRA can provide you with this. When the stock market is unstable, precious metals often rise in value, providing an added level of stability to your portfolio. Inflation can be a big problem, and having a precious metals IRA account can help to hedge against inflation.
The value of precious metals such as gold and silver is completely independent of the government that is in power. Conventional fiat currency such as the US dollar has no commodity backing. This means that its value is susceptible to the practices of the government. Precious metals are immune to such practices.
Types of Precious Metals IRAs
There are two types of precious metals IRAs available:
- Traditional Precious Metals IRA
- Roth Precious Metals IRA
A traditional precious metals IRA is funded with pre-tax dollars, which means that you will pay taxes when you withdraw the funds during your retirement.
However, a Roth precious metals IRA is funded with after-tax dollars, which means that you already paid taxes on the funds when you put them in. When you withdraw the funds in retirement, you will not owe taxes on them again.
How to set up a Precious Metals IRA
First, you will need to open a precious metals IRA account with a reputable company that specializes in them such as Augusta Precious Metals. Once the account is set up, you can transfer funds from your existing IRA to your new Precious Metals IRA. In addition to this, you can transfer your existing 401k funds to your new IRA account.
You can also purchase precious metals directly through the company that is managing your account. Companies like Augusta Precious Metals allow you to make purchases of gold or silver for example which can then be allocated to your precious metals IRA. They will organize storage of the precious metals for you too.
How to choose the right Precious Metals IRA Company
Before you open an account and start investing, you need to make sure that the precious metals IRA you choose is the right one for you. There are several things to keep in mind when shopping around for the right precious metals IRA. First, determine how much you can invest and how much you can afford to contribute to your account.
You will also want to find a company that offers the type of assets you would like to invest in, such as gold, silver, or platinum. Next, make sure that the account is held at a financial institution that you feel comfortable with. Find a company that is reputable, has low fees, and offers quality customer service.
We recommend the Augusta Precious Metals company for the best precious metals IRA account. Their knowledge and levels of service are second to none and they will guide you every step of the way. Find out more about opening your precious metals IRA account with Augusta Precious Metals here.