Stock market volatility is a major concern for those who are saving for retirement. If the market declines, people could lose a significant amount of their retirement savings. To protect from such losses, people look at options to spread out their savings across several accounts.
One such option is a self-directed precious metals individual retirement account (IRA). IRAs are essentially savings accounts that also provide a convenient and tax-advantaged way to retain control of your money. U.S. Money Reserve offers physical precious metals to clients who want to include them as part of their IRA.
First, take a minute to learn about the benefits of self-directed precious metals IRAs. Next, go over some guidelines. Then take the next step in creating your own self-directed precious metals IRA.
Benefits of a Self-Directed Precious Metals IRA
Choosing where to direct your funds for retirement is a big decision, so it’s important to understand the benefits of various options available. Self-directed precious metals IRAs come with an assortment of benefits you should consider.
Creating a Balanced Portfolio
Diversification is one of the most significant benefits of starting a self-directed precious metals IRA. People often make the mistake of putting all of their funds into one sector of the market. For instance, they might put their money heavily in stocks or put a lot of money in real estate.
That is often a mistake. If that sector of the market takes a downturn, you could lose a large portion of your money.
On the other hand, if you have different types of accounts, those can act as hedges against volatility in other accounts.
The stock market and gold offer an excellent example of hedging. When the stock market trends downward, gold’s price has historically increased. Thus, if you lose money in the stock market, you may make up those losses with your gold assets. Creating hedges helps you protect your portfolio against losses as a result.
Some people look at gold as a form of retirement insurance. This is especially true today, with volatile stock markets and business affairs. As companies go out of business, people are left wondering what could happen to their stocks. It’s possible that those stocks will become worthless. That’s a concern with any type of paper asset. It always has the potential of not being worth the paper it is printed on, which could cause a serious problem as people near retirement.
However, precious metals are physical assets. They don’t carry the same risk. Gold doesn’t go out of business, so it doesn’t run the same risk of being “worth” zero.
In addition to that, gold typically isn’t as prone to inflation as paper assets can be. Stocks and mutual funds are both vulnerable when it comes to inflation. They can rise in value quickly, but they can also decline significantly if inflation hits. That’s why some portfolio holders add precious metals to their self-directed IRA. Adding these assets can serve as an insurance policy to protect themselves in case something happens with a traditional IRA.
Have More Control
Many people like self-directed IRAs because these allow individuals to retain control of the funds. When you have a self-directed IRA, it is up to you to choose the asset class or classes in which to direct your funds. You don’t have to stick with traditional paper assets, such as stocks and bonds. While the fund custodian has the control with a traditional IRA, you personally have the control with a self-directed IRA.
That doesn’t mean you have to know exactly what to purchase. Your custodian can help with that, but the decisions are ultimately yours.
Guidelines for a Self-Directed Precious Metals IRA
As with any retirement account, there are certain guidelines you must follow with a self-directed precious metals IRA. Make sure you follow the guidelines so you get the most out of the account.
Use a Custodian
You must use a custodian when buying coins and precious metals for a self-directed IRA. You can’t just purchase the precious metals and put them in the IRA yourself. Instead, you take cash from the IRA and buy gold through the custodian you choose. The custodian handles everything. He or she buys the precious metals and arranges for the delivery to a third-party facility. You have control over the purchase, but the custodian must handle it for you.
You can’t just use any type of precious metal for a self-directed precious metals IRA. The Internal Revenue Service has set forth guidelines that dictate that precious metals must have a purity content of at least .995. There is an exception to this rule, though.
Gold proof coins can be included in a self-directed precious metals IRA, even if they don’t meet above purity standards. In addition to a certificate of authenticity, gold proof coins are normally put in a protective case that allows viewing but not touching.
You also need to know where the coins or bars were made. They must come from an accredited manufacturer, refiner, or assayer or be produced by a national government mint.
Store the Precious Metals Properly
You can’t simply purchase precious metals, store them at home, and call it a self-directed IRA. You can’t even keep the precious metals in your personal security deposit box. Instead, the coins and precious metals must stay at a bank or with an IRS-approved nonbank trustee.
Eligibility for Distributions
When you hit 59.5 years of age, you become eligible to take penalty-free distributions from your self-directed IRA. Funds withdrawn before that age could be taxed, and you may be penalized for withdrawing early. Once you are 70.5 years of age, distributions become mandatory.
Getting Started with a Self-Directed IRA
If you’re interested in setting up a self-directed precious metals IRA, you likely want to know where to actually buy the precious metals. U.S. Money Reserve can help you purchase them for your fund.
When you use U.S. Money Reserve, you get your own IRA Account Executive. He or she will work with you as you select and purchase your physical precious metals for your self-directed IRA. Then, after you choose the precious metals, U.S. Money Reserve will have them shipped to an approved storage location.
You might be surprised that U.S. Money Reserve offers this type of customer service. But U.S. Money Reserve is the only gold company run by a former U.S. Mint director, Philip N. Diehl. Diehl understands precious metals, and he has passed his knowledge down to his staff. That allows everyone on the U.S. Money Reserve team to help customers make wise decisions when building self-directed precious metals IRAs.
Read our previous post about U.S. Money Reserve: https://chronicleweek.com/2017/10/austin-disaster-relief-network-and-u-s-money-reserve-help-survivors-of-hurricane-harvey/