Finance

5 Things To Consider Before Opening A Silver IRA

IRA Individual Retirement Account written in a notebook on white table

Precious metals such as gold, palladium, and silver are often seen as a safe haven during an economic crisis and when the stock market is rough. This view among investors is brought about by the fact that silver and other precious metals have maintained constant growth for many years and remain relatively stable. And because having a solid retirement portfolio is a necessity these days, it’s best to open a silver individual retirement account (IRA) in order to preserve wealth and hedge stock market volatility.

But while opening a silver IRA is an attractive way to diversify your retirement account, there are certain matters you first need to consider, and this article will discuss some of them. Keep reading to find out what they are.

What Is A Silver IRA?

This is a special type of self-directed individual retirement account. It allows you to buy silver, other precious metals such as gold, and unconventional assets such as art and real estate. Basically, it’s an IRA that contains some silver investment.

While a silver IRA has identical guidelines and tax advantages to other kinds of IRAs, such as traditional IRAs, it’s different in that you’ll be purchasing physical assets and not exchange-traded funds (ETFs) and paper stocks. These physical assets will be stored safely by a third-party depository and managed by a custodian on your behalf.

With silver IRAs, you’re given the freedom to manage your investments. Therefore, you aren’t limited to the list of investments offered by your broker and enjoy total freedom when it comes to what goes into your account.

What Factors Should You Look Into Prior To Opening A Silver IRA?

Before you open a silver IRA, it’s advisable to learn more about it by checking resources such as oxfordgoldgroup.com/how-to-invest-in-a-silver-ira/. Also, you have to take the following essential factors into account:

1. Reasons To Add Silver To Your Retirement Portfolio

You first need to understand the benefits that opening such an account would bring to your retirement portfolio. That way, you can determine if doing so would help you reach your specific financial goals. These are some of the advantages of having a silver IRA:

  • Diversify your portfolio: One of the main reasons people get a silver IRA is that they’ll use it for diversification purposes. Because you don’t want to place all your eggs in one basket, a silver IRA allows you to spread your risk.
  • Hedge against inflation: Market volatility has been especially prevalent in recent years, leading to currencies losing their value. Fortunately, opening a silver IRA protects the value of your investment and your purchasing power. 
  • Preserve your wealth: A silver IRA is also an excellent way to preserve your wealth if you aren’t a risk-taker. This is the case because the value of silver today is much higher than it was 100 years ago. Therefore, you can expect considerable growth of your silver IRA in the long run.

2. Type Of Account

Another thing you need to consider when opening a silver IRA is the kind of account to open. This is crucial because self-directed IRAs can either be Roth IRAs or traditional IRAs. The difference between the two is in how your money gets taxed.

With a Roth silver IRA, you’ll be paying taxes when making contributions to the account. However, you won’t be taxed when withdrawing from it if you wait until you reach your retirement age. As for traditional IRAs, tax payment is deferred, which means you’ll start paying taxes once you start making withdrawals.

3. Fees 

When setting up a silver IRA, you should factor in the fees you’ll need to pay. Doing this is critical because of the additional expenses you’ll incur when creating this account that aren’t present in traditional IRAs. These costs include the one-time and mandatory setup fee, and how much you’ll pay would depend on the financial institution providing your silver IRA. What’s more, you need to pay a storage fee to ensure that your precious metal is protected.

Another expense you’ll have to deal with is the yearly custodian fee charged by the custodian for delivering depository services. There also a cash-out fee should you decide to liquidate your investment.

4. IRA Restrictions

It’s a must to familiarize yourself with IRA restrictions before opening a silver IRA. The requirements that must be met so you can use the IRA to invest either in silver or gold depend on the precious metal. For instance, the purity levels of silver to be stored in the IRA must be 99.9%, while gold has to be 99.5%. The purity of palladium and platinum, on the other hand, needs to be 99.95%.

The silver in your IRA can either be in rounds, coins, and bars. All of those should also be assayed, manufactured, or refined by a company with accreditation from COMEX, NYMEX, LBMA, ISO 9000, TOCOM, LPPM, LME, and NYSE/Liffe.

5. A Trustee Or Custodian 

After opening a silver IRA, your next action should be finding a custodian or trustee with an accredited depository. This is necessary because you have to transfer your silver with the help of the custodian to their depository. Establishments that qualify as custodians include banks, credit unions, trust companies, loans and savings associations, and brokerage companies.

Due to the high number of precious metal custodians out there, searching for one who’ll be responsible enough to safeguard your silver can be somewhat tricky. Therefore, you need to learn how to differentiate between a reliable precious metal IRA company and a dodgy one. Check their custodian fees, the minimum investment they require, and whether they offer any promotions. Make sure to take your time when doing this so you can be certain that your silver will be in safe hands. 

The ideal custodian for your silver IRA would have an excellent grasp of the workings of investing in precious metals rather than a traditional IRA. And if you’re confused about where to start, don’t hesitate to consult your precious metal dealer for advice. After all, they’ve worked with such professionals before and can pinpoint several dependable choices, albeit for a small fee.

But even if you get recommendations from a trusted source, do additional research before choosing the depository that’ll store your silver. Otherwise, you might end up compromising your retirement savings.

Takeaway 

Silver, like other precious metals, has been seen as a valuable economic asset for thousands of years. This is why today, investing in it as still seen as a great way to fund one’s individual retirement account. If you’re looking to take that same route, you should consider all the factors discussed above so you can figure out whether a silver IRA is right for you.

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