Funding your retirement is a challenge with so many different options and a prevailing environment of low interest rates making savings accounts an unattractive option, which is why some investors are looking into the potential of a precious metals IRA.
However, you can't actually buy gold bars and leave them in your safe at your house to count as an IRA. You need to open a specific account at a company that can handle precious metals AND can handle them in an IRA.
There are a lot of companies that offer this – APMEX is one of the largest and we've reviewed them here.
If you're interested in this asset, here's how it works.
Understanding How an IRA Works
Trying to get to grips with a new idea or investment vehicle can sometimes be a complex and even potentially expensive exercise, if you don’t gain a full understanding of what is involved before committing any of your cash.
Precious metal IRAs have been steadily growing in popularity in the last decade or so, but there are still plenty of people who might be wondering whether it would be better to have a precious metals IRA than a 401K account, or if both scenarios together are possible.
The first fundamental point to consider and confirm, is whether your current IRA plan allows you the option of being able to invest in precious metals like gold or silver, in the first place. If you discover that this is not an option with your current plan, you always have the choice of doing a rollover of your funds into an IRA that does support this type of investment.
You should be looking for a multifunctional IRA that supports precious metals investments, and there is often great diversity across a range of retirement plans, from a traditional IRA to a Roth IRA or a SEP, for example.
In basic terms, what you are doing with a precious metals IRA, is exchanging dollar-based assets such as stocks, bonds and mutual fund investments, for precious metals like gold and silver, in a cashless transaction.
If you had a gold backed IRA for example, this would be run by an account administrator and supported by a suitable custodian, who holds the physical precious metals in a vault, in order to comply with IRS regulations.
Doing it the Right Way
Compliance is an important factor for a number of obvious reasons.
It is suggested that you do some research and search out some recommendations from trusted sources regarding your choice of custodian, who you will need to appoint as part of the IRA setup process.
Staying on the right side of the law is absolutely vital if you are going to derive the benefit from your investment and enjoy an element of peace of mind, that everything is in order. You are required to keep the gold or silver that you acquire in a safe place, which means keeping the physical asset safe in a storage facility that is a separate location from your IRA custodian’s address and one that is approved by the Federal Reserve or other relevant authority.
Reasons for Investment
As well as understanding how a precious metals IRA works and what is involved, you also need to consider the reasons why you might want to look at investing in one.
By investing in precious metals such as gold and silver you are putting some of your money into something other than dollar-backed assets, such as stocks. This provides you with some useful diversification in your attempts to build a pot of money that will see you through retirement.
Gold is often used a hedge against stock market uncertainty and when there are perceived geopolitical risks that are impacting on market valuation and investors outlook. Silver also serves a more than useful industrial purpose and is used extensively in a growing number of manufacturing processes, including solar energy panels for example.
What you are potentially getting when you invest in a precious metals IRA is an opportunity for diversification.
This means that you might have a better chance of having all the bases covered, enjoying a growth in value of the base price of gold or silver from a variety of different scenarios and you may just find that your precious metal IRA provides you with an element of protection against inflation.
This is why these IRA’s are being used by a wide range of investors who are seeking out ways of matching their investment objectives and see this chance of diversity as a great way of helping them to reach their retirement goals.
Take suitable advice before investing in a precious metals IRA, so that you can also see why this is a retirement strategy that could provide you with the diversification that you are looking for.