What is a precious metal IRA? The quick answer is it’s a way to add tangible assets like gold, silver, platinum, and palladium to your retirement portfolio. This is a great way to diversify your investments and protect your wealth against economic instability.
When it comes to the economy, there’s nothing for certain. Just look at the last four years: a global pandemic wrecked our finances, inflation shot up, and interest rates spiked harder than we’ve seen in decades. Now E&Y warns growth will slow to 2.0% 2025 and drop even more to 1.6% 2026.
It’s no wonder people turn to gold and other precious metals to help protect their wealth. That’s where a precious metals IRA comes in.
This type of IRA gives you all the tax benefits of a retirement account and lets you buy physical gold or other metals. You don’t have to rely on the stock market as your only option. You win by diversifying your portfolio and taking control of your financial future.
This article covers how a precious metals IRA works and everything you need to know to get started.
Understanding precious metal IRA
As we just shared, this type of IRA account allows you to hold physical gold, silver, platinum, and palladium with retirement funds.
It follows the same IRS rules for how much you can add each year, retirement age requirements, and penalties for taking money out early.
Types of precious metals allowed
You’ll need to purchase approved precious metals to get started with your IRA. The IRS creates guidelines for which metals you can buy with your individual retirement account. You can buy:
Gold: Gold metals must meet a purity standard of at least 99.5%. Eligible items include gold coins like the American Gold Eagle, Canadian Gold Maple Leaf, and the Australian Gold Kangaroo. You can also buy bars from well-known refiners like PAMP Suisse, Perth Mint, and Credit Suisse.
Silver: Silver has to be at least 99.9% pure. Common coins include the American Silver Eagle, Austrian Silver Philharmonic, and Canadian Silver Maple Leaf. Bars from makers like Sunshine Mint and Johnson Matthey also meet the IRS standard.
Platinum: Platinum bullion must be at least 99.95% pure. Approved coins include the American Platinum Eagle and Australian Platinum Koala. If you’re buying bars, metals from approved refiners like PAMP Suisse and Valcambi qualify.
How a Precious Metals IRA Works
Here are the three easy steps to get started investing in precious metals with your IRA.
1. Choose a custodian
To open a precious metals IRA, you’ll need to find a custodian who specializes in these accounts and has a track record of reliability. Look for one with strong customer reviews and easy-to-understand fees, so you know the costs involved.
2. Fund the account
You have several options to fund your precious metals IRA. You can set up a new one and make cash contributions directly to the account. You can also transfer money from an existing IRA to your new account without incurring tax penalties.
Another option is to roll over funds from an employer retirement account like a 401(k), 403(b) or TSP.
3. Buy and store precious metals
Once you fund your account, you’ll direct your custodian to purchase the metals on your behalf from reputable precious metals dealers. Your custodian will handle the shipping and storage logistics for you.
After the purchase, your custodian stores your metals in an IRS-approved depository to protect them and comply with tax regulations.
Tax Advantages
This type of account provides many tax benefits including:
Traditional precious metal IRAs
Think of this type of account as a tax-saving triple play.
First, you put money in before taxes come out of your paycheck. This shrinks your taxable income, so you could owe less to the IRS each year.
Second, your investments grow without getting hit with taxes along the way.
And finally, when you take money out in retirement, you might be in a lower tax bracket than you are now, so you could pay less in taxes than if you’d kept the money in a regular account.
For example, say you contribute $6,500 in the 24% tax bracket, you could save $1,560 in taxes upfront.
Roth precious metal IRAs
You add money to these accounts with after-tax dollars, and your investments grow tax-free. You also can take completely tax-free withdrawals in retirement which means you won’t owe taxes on any gains.
gr538, a Reddit user on the r/Bogleheads forum, shared a useful perspective on Roth IRAs and early retirement:
“The Roth IRA is still a great option if you want to retire early. You can only contribute $7k per year, so you will need other accounts in addition to it to retire early. You can withdraw the Roth IRA contributions at any time penalty and tax free. So if you contribute $7k for 20 years you would be able to withdraw $140k. You just can’t withdraw the earnings until age 59.5.”
Diversification and protection
In our forty years of working with investors, here are the main reasons people purchase precious metals:
Hedge against inflation
Gold and other precious metals’ core value is that it can’t be created out of thin air like government currency.
When central banks print more money, each dollar loses strength. Meanwhile gold’s limited supply protects its value. This isn’t just theory. People have relied on gold to preserve wealth through currency collapses and market crashes for centuries. Since no single government controls gold’s supply, it holds value better any one country’s currency.
A Goldman Sachs study shows that commodities, like precious metals, do well when inflation is high. Historically, when U.S. inflation unexpectedly rises by 1%, commodities have seen an average return gain of 7%.
Adding precious metals to your IRA works like a shield against inflation to protect your savings.
Diversification
Metals usually don’t follow the same market trends as traditional assets like stocks and bonds. They can actually rise in value during recessions or market downturns.
Take the 2008 financial crisis. Gold increased by more than 25%, while the S&P 500 dropped by about 37%.
Gold can steady your retirement savings when stocks drop, helping protect your nest egg.
Liquidity
Gold and silver are always in demand, so you can turn them into cash quickly at market prices. This gives your retirement savings flexibility since you can cash out part of it without derailing your future.
Risks of a precious metal IRA
No investment is perfect. Here’s some drawbacks of these accounts to keep in mind:
1. Not generating cash flow
Precious metals don’t pay interest or dividends like stocks or bonds, so you’ll depend on the price increase of gold for profits.
If precious metal prices remain stable you might have lower returns. Retirees with a precious metal IRA might need to sell their metals to cover their expenses. This is different from traditional IRAs, where you might live off the interest from investments.
2. Associated costs
Precious metal IRAs come with various fees, including setup, storage, and custodian charges. You may also choose to pay for insurance to protect your metals from theft or damage. These fees can add up over time and can potentially lower your returns.
Withdrawal from a precious metal IRA
You can start withdrawing from your precious metals IRA penalty-free after age 59½. There are two main options to access your investments:
Take a distribution: Receive the physical metals, which the IRS taxes on their current market value.Sell the metals: Liquidate them through your custodian and withdraw the cash equivalent.
If you withdraw funds or metals before age 59½, you’ll pay a 10% penalty plus income tax on any gains. For traditional precious metals IRAs, Required Minimum Distributions (RMDs) must start at age 73 or age 72 if you reach that age before 2023.
Roth precious metals IRAs don’t have RMDs during your lifetime which is a key benefit of this account type.
Precious metals IRA companies
How do you choose the right precious metals dealer company to work with? Partnering with an established dealer like Swiss America offers these advantages:
Trustworthiness: Swiss America has been helping investors navigate changing markets since the early 1980s. Our decades of experience make us a dependable and knowledgeable partner for precious metals investments
Expert guidance: Swiss America provides expert advice on secure storage, precious metals IRAs, portfolio diversification, market trends, and gold-to-silver ratios. Our team makes sure that you have the information you need to make the best decisions for your situation.Customer satisfaction: Thousands of satisfied clients benefit from our prompt delivery of high-quality metals, responsive customer service, and ongoing support.
Precious metals IRA
A precious metal IRA is a smart way to diversify your retirement savings. It combines the stability of assets like gold and silver with the tax benefits of a traditional IRA.
Since we don’t know what’s coming, adding precious metals to your retirement plan can strengthen your financial future and give you peace of mind.
To learn more about securing your retirement, get your copy of our free Gold IRA kit today!
What is a precious metal IRA: FAQs
Is a precious metal IRA a good idea?
A precious metal IRA is a good option for diversifying your retirement portfolio and protecting against inflation.
What is the gold IRA loophole?
The “gold IRA loophole” is a tax rule that lets people hold physical precious metals in a self-directed IRA.
What is the truth about gold IRAs?
Gold IRAs let you hold physical gold in your retirement account, which can offer tax benefits and help protect against economic instability. They have fees and storage rules to consider, and the value of the investment depends on market value.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
