For many investors and stock market analysts investing in precious metals is often used to hedge against market volatility as well as times of long-term economic distress. This type of strategy can also provide a variety of the volatility of the tax benefits when it is associated with a retirement plan.
Indeed, a great number of investors choose every year to rebalance or to build their retirement through alternative assets in precious metals like gold, silver, platinum, and palladium. There are even a few semi-precious metals that can also prove to be helpful in implementing such strategies. For these investors, history has shown that precious metals and especially gold are an excellent tool for the preservation of wealth.
One of the more common and convenient methods for improving your gold exposure is through a self-directed IRA. This is a special type of retirement investing that has become increasingly popular for individuals who have previous experience with investing personal funds with precious metals. It is often used to generate tax-free or tax-deferred retirement wealth through the process of investing in qualified precious and semi-precious metals.
It’s also worth noting that some forms of precious metals and things like numismatic coins are considered collectibles. This means that they cannot be held in a retirement account. It is a regulation that the Internal Revenue Service, has provided with a limited number of exemptions. It includes certain types of gold, silver, platinum and palladium bullion.
It’s important to bear in mind that you specifically cannot be in physical possession of metals held that are in such a way in a retirement account. Regulations stipulate that physical precious metals must be stored in a special metals depository. Fortunately, there are many such depositories in the United States and in Canada as well as throughout the world. Each of these entities is insured and offers a secure storage environment as well as the ability to provide easy access for the physical delivery of the stated precious metals.
There are, of course, different ways that you can invest in gold, silver, platinum or palladium using a self-directed IRA account. The one that is right for you can depend on several different factors.
Direct Ownership Account
A Direct Ownership Account provides you with titled ownership of the physical metals through your IRA or some other type of retirement account, such as a 401 (k) with a portion allocated to a brokerage account.
Indirect Ownership Account
An Indirect Ownership Account provides ownership through a third-party entity associated with your IRA or some other type of retirement account management firm.
Are Their Different Types Of Custodians In The Precious Metals Market?
Over the past few decades, we have seen a significant amount of evolution in the precious metals market and how it has developed different types of custodians for each type of gold investment method. This essentially means that interested investors now have multiple Investment channels available to them.
The Precious Metals Broker Or Dealer
The Precious Metals Broker Or Dealer is authorized directly by you too to buy and sell specified amounts of precious metals. However, you must initiate the relationship with the broker or dealer, who will then coordinate the process of acquiring the specified amount of precious metals and arrange to have them delivered to the selected IRA-approved depository. For security and tax purposes trust operating the depository is considered to own the metals directly.
You should also bear in mind that some brokers and dealers have different procedures and liability rules. Be sure to put in your due diligence to fully understand their specific processes to avoid any excessive transaction issues or other unnecessary time delays.
An Online Trading Account
An Online Trading Account gives you the ability to invest in precious and semi-precious metals through an online dealer platform. They typically provide you with an online dashboard that you use as an interface for making transactions. It is then automatically linked to the specific online dealer as well as an IRA-approved depository. Any time that you purchase or sell an approved precious metal through their online platform, they also are considered to own the metals directly.
An IRA-Owned single-member LLC
An IRA-Owned single-member LLC is designed specifically to invest in precious metals for you indirectly through an IRA-owned single-member LLC. To do this you will need to have a legal team create an LLC specifically for this purpose.
Once this is done the LLC can then purchase the specific precious metals through an approved method. In a scenario like this, the LLC would be considered to have direct titled ownership of the physical precious metals. You should also note that assets which are held indirectly by an LLC inside a retirement account are still required to follow all the same the rules and regulations as those held directly by the account.
A Gold Exchange-Traded Fund
A Gold Exchange-Traded Fund, which is more commonly known as a Gold ETF utilizes an indirect precious metals investment process. In a scenario such as this, the account would not specifically be assigned titled ownership of the physical metals within the ETF.
A Precious Metals IRA has its own process. With this type of account, there are essentially three different entities involved. With these special investment accounts, there is usually a brokerage or some other entity that handles most of the complex components of the process. Once your account is fully set up your IRA custodian and your private precious metals depository will act as service companies.
Most have hand-picked these companies that they use for things like security measures and other technical legal procedures. If you are new to IRA accounts or IRA accounts that are heavily invested in precious metals, they will have a wide range of specialist who can help answer your questions, ease any concerns you have and generally streamline the process.
Do I Need A Financial Advisor To Increase My Gold Exposure?
There are a lot of ins and outs in the various regulations and investment strategies involved in increasing your exposure to gold and other precious metals like silver and platinum. If you are only looking to rebalance your portfolio with an extra percentage point or three shifted toward gold, then you might be just fine going it alone.
If you are looking to roll over a 401 (k) into a gold IRA, or make a more major play in the gold market, then you should strongly consider securing the counsel of a financial advisor or other specialists who are well-versed in what can sometimes be a complicated process.