Prices of Precious Metals have been a major story this year. Not only is gold approaching record prices, often above $1,800, but silver has seen some impressive moves as well. And given the volatility of the stock market, it only makes sense for certain investors to look at Precious Metals and wonder why more personal finance experts don’t recommend allocating a certain portion of their portfolio to them. A Self-Directed IRA administration firm like American IRA doesn’t make specific recommendations about what to buy or what percentage of your portfolio should be in metals, but we do know one thing: why people think about Precious Metals in the first place.
Why Precious Metals?
Precious Metals like gold and silver can be considered “nontraditional” retirement investments, in that they’re not stocks or bonds, but they’re still acceptable within an IRA, especially a Self-Directed IRA. There are some specific limitations, of course. For example, “gold bars hallmarked by a NYMEX- or COMEX-approved refiner/assayer with a purity of 0.995+ fineness) are considered acceptable for investing within a retirement account. You can read more about Precious Metals in IRAs by visiting our Precious Metals section right here at American IRA.
People flock to Precious Metals because they’ve been a source of financial stability for a long time. For one thing, these are assets that you can’t find on the New York Stock Exchange. They’re a different asset class, as well, which means that including them in a retirement portfolio provides asset class diversification. The same is true of real estate.
Precious Metals are also known as an inflation hedge, in that they tend to retain to their value over the long-term, even in spite of what may happen to the strength of currencies. For this reason, many people add Precious Metals to add to the diversification and stability of their portfolio.
Why Self-Directed IRAs?
With a Self-Directed IRA, investors find it easy to access nontraditional assets within their retirement plan. Technically speaking, the rules of retirement plans mean that investors already have a wide range of latitude when it comes to choosing investments. However, in many plans, such as employee-offered plans, the options are limited. An investor may only have certain stock funds to choose from, for example. That severely limits the abilities of the retirement investor to do what they want with their money, even as they plan for their retirement.
With a Self-Directed IRA, the investor is in the driver’s seat. An investor who works with a Self-Directed IRA administration firm can direct them to make the purchases they had in mind. For example, when it comes to Precious Metals, a Self-Directed IRA administration firm will know about insured storage facilities/depositories that investors need for valid retirement investments with Precious Metals.
The Advantages of Using a Self-Directed IRA
It’s also important for investors to understand the inherent advantages of using a retirement account for investing in Precious Metals. While the advantage of investing in Precious Metals has been thoroughly documented—and we’ve listed some of those reasons here—but it’s when pairing Precious Metals with a retirement account that investors may truly realize some benefits. For example, using a Roth IRA means that investors can use after-tax money to invest in their retirement account. This reduces the strain on the back-end, since investors can enjoy tax-free growth within the account. Upon retirement, with a Roth IRA, because the taxes were paid on the front end, the investor enjoys a tremendous amount of freedom.