Since you’re taking the time to read this article, you must already know that precious metals are a vital part of your investment strategy. However, there’s a way to start adding gold and silver to your portfolio using a tool you already have: Your Individual Retirement Account.
A lot of people already have an IRA account and they might think that they know how to use it to their best advantage. But what many don’t know is that you can—and probably should—use your IRA to invest in precious metals. After all, an IRA is designed to save for retirement, and there’s nothing that’s more likely to keep its value into your golden years then, well, gold! It’s easier than you may think to get started, too.
Setting Up Your IRA
First, you need to make sure that your IRA is self-directed. With a traditional IRA, the broker makes all the decisions. Especially if you initially set up your IRA through a job, you may have no idea who your broker even is or what the investment company’s investment strategy entails. Experts estimate that as many as 96% of people don’t branch out beyond what their custodial company offers. Some people may be content to sit back and “let the professionals do the work,” but as the financial meltdown of 2008 should have taught us all, this is not well-advised. Converting your traditional IRA to a self-directed IRA allows you to diversify your investments and put a portion—or even all!—of your retirement savings into precious metals.
For the first step, call your current broker. Begin by asking if you can add real gold and silver to your current IRA. You might be set up to do this already and not even know it, but if not, ask what needs to be done to convert your account. You’ll also want to ask how much it will cost to make these changes. Armed with that information, don’t be afraid to call around to other brokerages and ask about their rates. You may find a much better deal going with another company. Make sure you also inquire about annual fees and any maintenance charges, not just one-time conversion fees.
Gold (and Silver) Bullion
Once you’re set up to invest in real precious metals through your IRA, you might be confused about what you can actually buy. There are a few rules regarding the actual metal that you can invest in, so make sure you check carefully before you buy. Your broker can always help, but there’s a pretty straightforward list. Generic bars and rounds must be hallmarked by NYMEX- or COMEX-approved refiners and must have a purity of at least .995+ for gold, .999+ for silver, and .9995+ for platinum and palladium.
That’s simple enough, but if you have a real love for precious metals, you might be hoping that you can invest in something more exciting than simple bars. Thankfully, the rules allow for that, and you can add the following proof and bullion coins:
For gold, you can buy American Eagle coins (these are the only coins of less than 24 karat gold that are acceptable for addition to an IRA portfolio), Australian Kangaroo/Nugget coins, Austrian Philharmonics, Canadian Maple Leaf coins, Credit Suisse Gold, PAMP Suisse Gold, and U.S. Buffalo Gold (uncirculated). If you’re wondering why investor favorite, the South African Krugerrand, isn’t on the list, it’s because it’s a 22 karat coin, and your investment coins must be 24 karat to qualify (except the aforementioned Gold Eagle exception, of course).
As far as silver, you can buy Australian Kookaburra coins, American Eagle coins, Austrian Philharmonics, Canadian Maple Leaf coins, and Mexican Libertad coins. If platinum strikes your fancy, you can fill your IRA with American Eagle coins, Australian Koala coins, Canadian Maple Leaf coins, or Isle of Man Noble coins. So as you can see, it’s definitely possible to have a diverse collection of precious metals in your IRA.
Exchange Traded Funds
There is another way to add precious metals to your IRA, but it’s less direct than buying actual gold or silver. Exchange Traded Funds (ETFs) are funds that purchase and store the actual, physical metals equal to the amount of money that you spend on shares of the fund. That means that these funds mirror the prices of gold and other metals reasonably accurately, but because they are traded like stocks, they’re more liquid than physical coins or bars.
However, you probably already realize that it’s preferable to have the actual metal, because its intrinsic value is always there. ETFs, like stocks, are only pieces of paper. The one time you might find it more beneficial to own shares of an ETF in your IRA is if you plan to do a lot of quick, day-trade-type maneuvering with your money and you need the liquidity that ETFs can provide. If this sounds like your situation, just make sure that you select an ETF that is actually backed by the metals it claims to buy. For gold, SPDR Gold Shares (Ticker: GLD) and ETFS Asian Gold Trust (Ticker: AGOL), are both pretty highly rated, as are iShares Silver Trust (Ticker: SLV), and ETFS Physical Silver Shares (Ticker: SIVR) for silver.
Those are some you can start with, but do your homework before buying any ETFs. Unlike physical gold and silver that are very straightforward to buy and own, there is ample speculation that the funds do not actually own enough gold and silver to back their shares.
In conclusion, it’s easier than you may think to add physical gold and silver to your existing IRA. It might take a few phone calls and it might cost you some money in fees, but most goldbugs and silverbugs will agree that it’s totally worthwhile, especially if you’re one of the 96% who just lets their existing brokerage company manage their IRA with the same “safe” strategies they use for everyone, making minimum profits, if any. If that’s the case, take the initiative and put your money in an investment that you really believe in: precious metals.