For several years, precious metals such as silver, platinum, and gold have been considered economic assets. As one begins to plan retirement, it becomes important to figure out one’s financial assets.
There are various methods through which your retirement can be funded, and in recent times, people are tilting more towards Individual Retirement Accounts. Precious metals IRAs are fast taking over the limelight. This popularity can be largely attributed to some economic factors especially the fluctuating value of dollars.
There are several advantages of adding precious metals to your IRA portfolio. Therefore, it is no wonder you are considering doing this. However, before you do, you have to consider some important factors. In this article, we will be discussing some of these factors.
Let us get right into it…
1. Your Reason
First, you need to consider why you want to be involved in this retirement plan. Sure, several benefits can be gotten from having a precious metal IRA. However, if your reason is unclear to you, you may very well miss out on all these benefits.
For most people, the main reason for choosing this path is diversification. A properly diversified IRA portfolio will serve as a protection from the pitfall of having one’s eggs in just a basket.
Furthermore, precious metals aren’t as volatile as other assets like cryptocurrencies which are known to have very drastic fluctuations in their price. Visit https://www.cnbc.com/2021/05/19/why-is-bitcoin-so-volatile.html to learn why Bitcoin (the number 1 cryptocurrency) value is volatile.
One way some people make this investment is by investing in companies that mine or process precious metals. This way, they can make capital gains, but, with this type of investment, the company stocks are what decides the value and can be quite different than when investments are made with the real metals.
So, before you get involved with this type of Individual retirement account, ensure you properly consider your reason for it.
2. What Type to Buy
When most people think of precious metals investments, all that comes to mind are silver and gold. This is very untrue as there are other options from which you can pick.
The Internal Revenue Code allows only some valuable metals to be included in an IRA. Therefore, according to this code, only palladium, platinum, silver, and gold can be added to an individual retirement account.
Also, whichever metal you select to add to your account from the above-mentioned four must meet some requirements.
3. Restrictions
Certain restrictions should be considered. For instance, the purity of the metal has to meet certain requirements according to Internal Revenue Service (IRS). You can read this to know more about IRS.
As we have already said, you can only add 4 types of precious metals to your IRA and the purity requirements according to IRS are different from one metal to the other. Gold has to have a purity level of 99.5%, palladium and platinum 99.95%, and silver 99.9%. You can also only have your metal in rounds, coins, and bars form.
4. Costs
The costs you would be paying with this plan are different from those of a conventional IRA requires. So, the cost that would be involved in getting and maintaining the account should be something you must properly consider.
You would have to pay a setup fee, this is mandatory; however, it is paid just once. The amount of this fee is often determined by the financial institution opening the account. You would also have to pay a custodian fee and this is often charged annually. Storage fees should also be considered.
What we are saying is, you may be paying a lot of fees at the end of the day. Therefore, properly learn all you can about the fees required. Then, use what you learned to decide if the cost and the reward of the investment are okay by you.
5. A Trustee or Custodian
A custodian or a trustee is essential if you choose to add any precious metal in your IRA since they would be the ones to take care of most of the procedure. The custodian or trustee must have a depository that is approved.
After you buy your metal, you will transfer them into your custodian or trustee’s account. Therefore, who you choose for this job has to be properly considered.
Your custodian could be a brokerage firm, trust company, bank, loan and savings association, or credit union. But, the federal and state regulatory agencies need to have approved any company before they can act as a custodian or trustee. Take your time to evaluate several companies before you settle on one.
Figure out the difference between an ideal precious metals IRA company and one that may not be right for you. Knowing this difference will help you with your decision-making.
You would be entrusting the future of your finances to the company, so you have to be sure that they will be there even if things get rough. Things like promotions offered, their custodian fees, and minimum investment should be what you look out for.
Aside from making proper research on the company you wish to use as a trustee, we recommend you ensure they are well versed in the field. This way, you would be certain that you are entrusting your retirement into able hands.
Conclusion
In this article, we have discussed some important factors that everyone has to consider before adding any precious metal to their individual retirement accounts.
