Items to Research before Purchasing Precious Metals with your Self-Directed IRA
Self-Directed IRAs allow various investment options, all at the direction of the account holder. Your IRA can invest in real estate, a privately held business, and physical precious metals. Self-direction allows diversification in your retirement portfolio. If you are considering diversifying your IRA portfolio with gold, silver, or other bullion meeting the IRS criteria, there are a few things to consider.
Due diligence is an important factor with self directed IRAs. It is the responsibility of the account holder to research and understand what your IRA is investing in and the rules associated with that asset. It is common to see coins and bullion are advertised. It is up to the IRA account holder to research and determine what they will hold in their self directed IRA.
The IRS has minimum fineness requirement for precious metals held by an IRA. The minimum fineness for Gold is .995, Silver is .999, and Platinum or Palladium is .9995. Popular bullion items held in IRAs are Gold, Silver, or Platinum American Eagle Coins, Gold Kilo Bars, Silver Canadian Maple Leaf Coins, and many more including Proof coins. These coins are a great place to start your research, and determine what will be best to hold in your Self-Directed IRA.
Once you have decided what type of bullion you would like to hold in your IRA, the next step is to find a reliable metals dealer. The dealer sets the price your IRA is paying for the metals; part of your due diligence is finding out what the dealer is charging via commissions, and agreeing on a fair price. When deciding on a dealer, ask questions, look up any reviews, question them about their procedures, and even ask if there is a specific depository that they require you to store your metals.
Depositories play a large role in the process of purchasing physical bullion to hold in your IRA. The IRC states that metals owned by an IRA must be held in a non-bank trustee, or a depository that meets IRS regulations. There are many things to consider when choosing a depository for your IRA held metals. You may consider a depository that is close geographically to where you reside, if you want to be able to personally view your metals, or if you want to pick them up for an in-kind distribution. You may prefer your metals are held at an off shore depository. There are multiple depository choices to consider. Make sure to know what the policies of each storage option are, what kind of insurance they hold, and if the depository is on your IRA administrator’s approved list.
There are two types of storage within most depositories: segregated and commingled. Segregated storage refers to a vault or locker system used to store the purchased metals, segregated from other metals in the depository. The bullion or coins placed in a segregated facility will be exactly the same coin or bullion bar removed from the depository. Commingled storage refers to a general vault that holds metals owned by multiple owners. The bullion bars or coins removed from the commingled facility will have the same value as the ones deposited, but may not be the exact bars or coins initially stored. The account holder decides which type of storage to choose for their IRA owned metals.
Storage pricing is something else to consider. Pricing can range from a hundred dollars annually to thousands. You should discuss with your IRA custodian and the depository what price the storage will be. Are the fees assessed annually or quarterly? Are the fees fixed, or do they adjust depending on the value of the metals held? Be sure to understand the fees on behalf of your IRA.
Investing in precious metals is a great way to diversify your financial portfolio. While it does require research to find the best dealer, metal asset, and storage option for you, it can often result in greater returns. Most importantly, self-directed IRAs allow you to invest your retirement funds in the asset you choose and create your own financial plan. Owning physical precious metals is a great tool. Be sure to take the time to do your research and ask all the questions you need to make sure this asset class is right for your Self-Directed IRA.