How Do I Convert my IRA to Precious Metals?

precious metals ira

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If you have heard about the virtues of investing in precious metals, you may be wondering how you can convert your IRA savings account into various investments in silver and gold.

I know how frustrating the ups and downs of the stock market can be, and precious metals can be good investment options that are known to hold their worth over time.

Precious Metals IRAs allow investors to dedicate part of their retirement savings toward certain precious metals including gold, silver, and platinum. This type of IRA is classified as a Self-directed IRA, which allows you to dedicate your money toward various nontraditional investments.

You do not have to be a financial advisor to know the worth of precious metals, but determining how to open your precious metals IRA can require some know-how. 

Keep reading to learn more about how you can invest in precious metals, as well as some general tips to follow as you do so.

What is a Self-directed IRA?

Precious metals IRAs are made possible because they fall under the definition of a self-directed IRA. This type of savings account will allow you to focus your money across a broad array of investments. 

In a self-directed IRA, you will have more say over where your money goes and be able to choose from various investments that often go beyond those offered in a traditional IRA.

With a self-directed IRA, your money will still be under the management of a custodian, but you will have more opportunities to divert your investments into precious metals rather than the stock market. 

Keep in mind that metals must meet certain quality standards to be accepted as an IRA investment.

How to Open a Precious Metals IRA

A precious metals IRA is a useful investment option that will allow you to grow your savings in the form of precious metals. Many people choose to invest in the following metals:

  • Gold
  • Silver
  • Platinum
  • Palladium

The value of these metals is known to steadily grow over time and be resistant to the fluctuations of the stock market. With a precious metals-based IRA, you can take comfort in the knowledge that your money will have an added degree of safety.

As you consider opening a precious metals IRA, you will need to know a few key things.

Opening a Precious Metals IRA

If you have never had an IRA before, you will need to start the process by opening a self-directed IRA. As you do this, you will be in close communication with a custodian, and you can make your desire to create a precious metals-based account known.

Your custodian can help you identify precious metals dealers, facilities for storage, and the other details that you will need to keep in mind as you invest.

Converting a Current IRA

A traditional or Roth IRA can still be converted into a Self-directed IRA. Though you may need to find a new custodian for your funds, your current custodian should be able to help you with the process of rolling over your account and connecting you with a new retirement tax professional.

An IRA-to-IRA transfer is a very common occurrence, and you can rely on professionals to help you through the details of this step.

Should You Invest All Your Money in Precious Metals?

As you open your self-directed IRA, you can certainly choose to invest a significant amount of your retirement savings into precious metals. 

However, while precious metals are typically very reliable, it is not advisable to put all of your money into this one area. You should consider keeping a diverse self-directed IRA for the following reasons:

  • Slow growth: While it is usually true that precious metals increase in value over time, they usually do not increase at quite the rate that stocks do. They also do not pay dividends like many investments, which can also hinder the growth of your savings.
  • Safety is relative: Things can still happen when you invest in precious metals, and so you shouldn’t bank on total safety when investing in this area. Having money invested across different sectors will protect you from any sudden losses if precious metals devalue drastically.
  • Taxes: When you withdraw money from an IRA, you have to pay taxes on it. While there are some protections for income withdrawn from traditional IRAs, precious metals do not always fall under these jurisdictions and you may end up paying quite a bit in taxes.
  • Extra fees: Setting up and maintaining a precious metals IRA will require you to consider some added special fees. For instance, opening the account will include certain fees, and you will also have to pay for the storage of your precious metals. As per IRS law, you will not be able to store your precious metals in your own home, so designated storage space is a must.

So how much exactly should you invest in precious metals? While this number is ultimately up to you and what you feel comfortable with, many financial experts recommend allocating 5-10 percent of your retirement savings toward precious metals.

Before you start making purchases, you may wish to speak with your custodian to find the healthy investment amount for your account.

Final Verdict

If precious metals have caught your eye recently as a retirement investment with a lot of stability and potential for growth, you are not alone. Over centuries, people have invested money in precious metals such as gold, silver, and platinum to keep their savings safe throughout the years.

Whether you currently have a traditional IRA or not, you can create an IRA that invests in precious metals. This is known as a self-directed IRA. 

If you already have a traditional IRA, you will need to rollover your savings into this new account. If you do not, you will need to open an account through a financial institution or custodian.

Before you invest in precious metals, take some time to speak to your custodian or a trusted retirement investment professional. Once you find out how much you can comfortably invest in precious metals, you soon will have a safe and stable retirement savings account.

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