(Pocket-lint) - Disclaimer: We may receive a referral fee from some of the companies featured in this article. This article does not constitute financial advice. Refer to a professional for financial advice, and only invest what you can afford to lose.
As your retirement is fast approaching, you might be looking for ways to protect the value of your life savings. After all, recent events have shown to everyone that not everything is as safe and secure as far as the economy is concerned.
Gold and precious metals have turned out to be rather stable investment options today and you can own them in bulk with the help of a precious metals Individual Retirement Account (IRA). Your choice of which IRA company to do business with will determine just how much of your IRA you can utilize.
And that does beg the question: how do you pick the best possible choice for the best precious metals IRA company? Choosing one is not exactly that difficult. All you have to do is to remember several considerations first.
Top 4 Precious Metals IRA companies at a Glance
- Augusta Precious Metals - Best Gold IRA Company overall and most trusted
- American Hartford Gold - Runner up
- Birch Gold - Best gold IRA staff overall
- Goldco - Excellent customer service
Having a precious metals IRA can get downright expensive at times. As such, any company that offers optimal pricing for their services and fees can make for an ideal option, especially for beginners. This is where Augusta Precious Metals comes into play by offering simple, straightforward, and downright transparent pricing.
This family-owned company has been in the industry since 2012 and has been rated consistently high by agencies such as the Business Consumers Alliance. What makes Augusta trustworthy is their insistence on laying down everything that you can expect expense-wise when doing business with them. From setup to annual maintenance, you will get acquainted with what you are paying for and for how much when doing business with the company.
Further bolstering their assurance of fair pricing is guarantees of giving your money back if you are not satisfied with their work as well as price protection for new IRA owners. They also feature a dedicated buyback program so you can get the funding you need in exchange for a portion of the gold that you own.
If there were any flaws with the company, it would be their limited options for platinum and palladium, as well as a high investment minimum.
- Few complaints with the company
- Cost-effective fee structure
- A high degree of transparency
- Fair pricing for all purchases
- Limited palladium or platinum options (if available)
- No online purchase option
- $50,000 minimum investment
This company has the trappings of a fairly dependable precious metals IRA company by offering a solid selection of silver, gold, and platinum coins and bullion, and reasonable pricing. However, where American Hartford Gold stands out the most is its customer service.
Various reviews have pointed out that the staff of the company is not only knowledgeable but highly personable. They have been known to take their time in listening to customer complaints, and then finding a solution that is quite responsive to the problem. It also helps that their support line is available on a near 24/7 basis. This way, clients can transact with the company regardless of which time zone they live in.
Apart from its customer service, American Hartford Gold has also made a name for itself with its investor education program. Instead of pushing you to do something like setting up an IRA or buying gold, the staff would rather provide you with the information you need to make a fairly-informed investment decision.
Topping things off is a variable fee structure. This means that whatever you have to pay for doing business with American Hartford Gold every year is directly proportional to how often you use your IRA.
- 24/7 customer support
- Excellent customer service
- Extensive investor education
- Low investment minimum at $10K
- No price list on their online pages
- Comparatively slow transaction speeds
- No shipping option outside of the US
When it comes to a precious metals IRA, you’d need a company that can be as transparent as possible with you. This is where Birch Gold can excel as they inform you of everything that you need to know as far as their expenses are concerned in the first instance.
You don’t even need to make a call to the company and ask an agent about fees and prices. All that you need to know as to how much an IRA with the company will set you back is listed on their webpage.
It also helps that the company uses a flat rate structure for their fees as opposed to a variable system. This is a huge advantage for people who buy gold in bulk as their expenses are the same regardless of how often they use the IRA. On the flip side, those who purchase gold infrequently and in small batches might find the fee structure to be disadvantageous to them.
- Multiple options for depositary facilities and custodian companies
- Fees and costs are easily seen online
- Sizeable product list for both palladium and platinum
- Flat structure is ideal for frequent and bulk purchasers
- A flat rate might not work well for small, infrequent investors
- Long process waiting time that can last up to 1 month
Learning all that you can about what you are investing before you make an investment is always a welcome advantage. This is where Goldco stands out the most as its investor education program can provide investors with information in an organized yet easy-to-understand format. In theory, this should make any client more confident with their decisions.
Founded in 2006, Goldco has developed a uniquely academic approach to IRA investments. They call this a “white-glove service” where the company assigns a specialist to every client to guide them through each step of a process or with their investment decisions. Aside from that, every client is given access to an entire library of content including guides, e-books, videos, and seminars to help them get the hang of investing in precious metals with their IRAs.
That being said, Goldco is not exactly as forthcoming when it comes to its fees. If you want to know exactly how much their services and products will set you back along with fees and other charges, you will have to contact them through the company hotline. Despite that, every other service offered by Goldco is seamless and can be completed within days. That includes 401K rollovers and other funding alternatives.
- Extensive investor education program
- Competitive pricing
- Promotions for those that perform qualified transactions
- High investment minimum
What is a precious metal IRA?
You must understand that there are several ways for you to protect your savings once you enter the retirement age. You may have heard of individual retirement accounts where you can store a bit of your money while still working so you can use the same once you retire. In essence, IRAs are like savings accounts that you can only use once you meet certain age-related requirements.
A precious metals IRA works under the same concept but with an added purpose: diversifying your investment portfolio. Where retirement accounts are meant to store “paper” assets like money, stocks, bonds, transfer certificates of tile, and other valuable contracts, a gold IRA or any specific precious metal IRA is meant to store highly valuable rare earth elements to your name.
But make no mistake. IRAs do not physically hold gold. Only the depositary facility attached to your IRA company of choice can do that. Also, precious metals IRAs are subject to stricter rules and guidelines set by the IRS. After all, the government wouldn’t want this financial product to be an avenue for tax-related violations and abuses.
Also, precious metals IRAs are quite expensive to manage. You can expect to spend as much as $300.00 every year for account maintenance, storage, and management fees. This does not include the transaction fees for every purchase you make along with shipping. All in all, an IRA is much of a financial burden as it is a privilege.
Advantages of precious metals IRAs
So, why bother going through a lot of effort for setting up an IRA? Here are a few reasons.
A precious metal IRA makes asset diversification possible
With a precious metals IRA, you can store at least four types of precious metals that come in two distinct forms: coin and bullion. So, that should mean eight distinct asset types to be stored in your IRA, right? The answer is no.
Each precious metal product has its own market value, depending on its purity rating, mint date, and other inherent qualities. Each IRA company also sources its coins from different mints around the world.
So, if you know where to look, you can have your IRA store American Eagles, Canadian Maple Leaves, various collector’s coins, and bars of different minting dates. Some IRA companies even offer “digital” options like crypto coins to further diversify your assets.
All in all, you can have a rather diverse asset pool within your IRA. This is provided, of course, that you time your investments right.
Beyond diversity, a precious metals IRA provides opportunity
If you are creative with your investments, you can also explore other avenues to further diversify your investment portfolio. For example, you can purchase stocks in companies that mine precious metals. Alternatively, you can have some of the gold you own “rented” to the government which, in turn, will provide you with a bond. These are special contracts that bind the government to pay you back for the gold plus interest after a certain period.
With these additional paper assets to diversify your portfolio, your IRA can earn passive income for you. And the best part is that this income is either tax-deferred or tax-free, depending on whichever privilege the IRS grants to you.
A precious metals IRA provides safety
There is no denying that the economy is in a precarious position right now. There is no telling if the spending power of your hard-earned cash will be the same in a few years. Sure, the amount might remain the same but what you can purchase with that money might considerably decrease.
This is all because of the dependency of fiat currencies on an economy that is quite volatile. Precious metals, however, are completely immune to this volatility and have their own intrinsic value. They can even perform well under adverse economic conditions.
By leveraging a portion of your assets into these metals, you can cast a safety net wide enough to protect your savings from inflation and other economic downturns.
A precious metal IRA offers a level of control not present in other retirement solutions
This might not come as a surprise to you but you actually have little to no input or control whatsoever when it comes to your typical retirement plans. The regular contributions are already fixed and automatically deducted from your salary. And once you are ready to use the money, the amount you can withdraw regularly is also limited.
With an IRA, however, you have full agency as to what you can put in and withdraw from them. If you only want your IRA to store X amount of gold, then there is nothing that prevents you from doing so. And if you want to withdraw a portion of your wealth to sell it, then most companies offer an easy buyback process.
The only limit with IRAs is the amount that you can annually contribute to them. The IRS would rather not have you contribute your entire annual income to your IRA as this is tantamount to tax evasion.
What precious metals can you invest in for retirement?
So, what exactly can you store in your precious metals IRA? With an IRA, you can own coins and bullion in gold, silver, platinum, and palladium coming from various sources across the globe. It used to be that only American gold and silver eagle coins were allowed to be stored in US-based IRAs. However, times have changed and the IRS has allowed for internationally-sourced metals to be circulated in the country.
Today, you can fund your IRA to purchase all sorts of precious metal products. However, there is a catch: these coins and bars need to be approved by the IRS. One of the requirements that these coins and bars have to pass is their purity. Essentially, all gold products need to be 99.95 per cent pure while other metals have to be at 99.99 per cent purity.
Of course, the government would rather not have you deal with counterfeit coins and bars. The only way that you can prevent owning such is by transacting with a legitimate IRA company.
You can also use your IRA to store rare coins. However, as the IRS cannot directly monitor the movements of these items, you have to make sure that you secure copies of these coins from truly legitimate sources.
How much of your IRA should include precious metals?
In as much as a precious metals IRA is designed to store gold, silver, platinum, and palladium, it would still be better on your part if you can remain conservative with your purchases. Depending on your situation, the percentage allotted to precious metals for your investment portfolio should be from five per cent to 10 percent.
There are three reasons why you should remain within this range. First, asset diversification is still the best method to protect your investments. This means your best bet of surviving inflation will involve not investing in one type of asset.
Second, precious metals might have a stable price trend but they still lag performance-wise when it comes to paper assets like stocks. They won’t even earn money for you except if you have to sell them to someone else. If your entire asset portfolio is filled with nothing but precious metals, you may end up shortchanging yourself for the rest of your retirement.
Third, precious metals are not exactly immune from price drops. There have been instances when their prices did drop below profitable levels in the past. There is no telling when the same might happen within the foreseeable future.
The point is that filling your IRA with only one type of asset, even if such an asset was meant to be stored there, is never a good idea. You should spread your investments smartly, covering multiple asset types and industries. The wider your safety net is, the less likely it will be for all of your investments to drop in value.
How to open a precious metals IRA
There are some key differences in opening a precious metals IRA from your traditional IRA. As such, the process might confuse you. Don’t worry, though, as here is a quick run-down of what you are going to do to have a gold IRA set up.
Select a self-directed IRA custodian
The IRA Company is not the one to handle your IRA directly. That duty belongs to a custodian, which can come in the form of a bank, an equity trust company, or any similar institution as approved by the IRS. In turn, these custodians can invest in several assets that will include precious metals.
Your choice of a custodian determines the fees that you have to deal with for the management and maintenance of your IRA every year. The rule of thumb here is to pick the company that you can trust the most while offering features that meet your needs and budget.
Choose a precious metals dealer
The dealer is the one that receives money from your custodian to purchase precious metals. So, what should you look for in a dealer? Your best solution here is to do some research.
What you have to look for is legitimacy by way of membership in some industry groups and monitors. For dealers, they have to be affiliated with the American Numismatic Association, Industry Council for Tangible Assets, and the Professional Numismatists Guild as they set the standards by which all dealers have to abide.
Also, your IRA Company is going to be familiar with these dealers themselves. If you are not sure which dealer to choose, pick the one that your IRA agent will recommend.
Decide what products to buy
This is a rather simple step. As to which items you have to choose, it is best to pick the ones that you are most familiar with. As an American, your best bet here are coins like the American Eagle or the Gold Buffalo as they have safe bid-ask spreads while maintaining a fairly stable price trend.
Once you are confident with your purchases, you can then branch out to international mints. Again, the one closest to what you are most familiar with will work here so some Canadian Maple Leaf coins or some British coins might be most recommended.
Again, your options are going to be dependent on what is currently available. Inquire first to your agent for availability and price so you do not waste time.
Choose a depository
All the gold that you will own will have to be stored in a depository facility approved by the IRS. As far as the United States is concerned, there are only 3 recognized depositories which are Brinks, the International Depository Service, and the Delaware Depository Service.
The IRA Company can recommend a service, but you can always pick the one that meets your needs the most. If possible, pick the one that meets your budget, as well as your storage preferences (segregated or non-segregated).
Complete the transaction
Now that you have chosen your custodian, dealer, and depository while also selecting the best possible products to invest in, your order is now complete. So as long as your IRA has the funding, the company will handle all the expenses involving the shipping of your order to the depository of your choice.
Also, the custodian will handle the task of updating the item list in your IRA. All that you have to do once your precious metals have been moved is to constantly monitor the movement in their values. You will never know when you might need to make a withdrawal.
How do you make a withdrawal from a precious metal IRA?
For a precious metal IRA, you are given two withdrawal options. The first is an In-Kind Distribution where the precious metals you requested for withdrawal will be shipped to your address. From that point on, you can do whatever you want with the withdrawn gold.
The second option is a Depository Purchase. Here, the depository in possession of your precious metals will buy the gold from you at a price that both parties will find to be the most convenient. This might be the better option for you if you want to maximize your investment in that gold.
Either way, the withdrawal of precious metals from your IRA is subject to special tax laws. If you withdraw anything from it, you will have to pay for penalties and specific tax items depending on how much you withdrew.
And when you reach the age of 72, the IRS will require you to take required minimum distributions for every metal that you own. The RMD for each piece might be small but they do stack up if you own more than a handful of coins and bars.
Lastly, you have to sell your gold as quickly as possible. If you fail to sell the gold within 60 days, you will be subjected to withholding tax and other penalties.
As such, before you make a withdrawal, you must consult with an accountant, financial adviser, or lawyer. The complicated nature of withdrawals can make it easy for you to attract the attention of the IRS for all the wrong reasons. But with the guidance of a specialist, the chances of you making a mistake and incurring unwanted tax obligations might be lessened.
Conclusion - Precious metals IRA
Before anything else, it is best to answer this question:
Should you open a precious metals IRA?
On one hand, they make for suitable protection against inflation and market instability as you can now own assets that can maintain stability even under adverse economic conditions. On the other hand, IRAs are expensive, and the chances of you becoming liable tax-wise are high if you make a mistake with your transactions.
Aside from that, there is the fact that you’d rather want to keep your investment portfolio as diverse as possible. You cannot solely rely on an IRA to protect your savings from whatever is happening in the economy right now.
Thus, the answer to the question above depends greatly on your current finances and your entire investment strategy. Gold and precious metals should be a part of your entire strategy and not your sole tactic to stave off inflation.
And if you do decide to set up a precious metals IRA, which of the IRA companies should you choose? Without a doubt, the best option for beginners right now would be Augusta Precious Metals. With their ability to remain transparent with you from setting up to purchasing, you can be certain that there will be no surprises in your transactions, especially with the fees.
And think of it this way: every other company offers roughly the same set of features, perks, and advantages. So what you will need more is a company that can guide you through every step of the process while being as honest as possible with you about the fees. A company that offers the highest level of transparency possible will help you prepare for your IRA expenses while making you confident with every purchase that you make.