Many people are aware of the use of traditional and Roth IRAs for retirement planning. These types of retirement accounts can be powerful tools for helping create financial security for the future. However, many other variations of IRAs can also be helpful in this process. Today, we look at information from U.S. Money Reserve to better understand one such account type—the self-directed IRA. One of the things that sets this type of retirement account apart from others in the IRA class is its ability to hold silver and other physical precious metals to help further diversify a retirement portfolio.
Let us first use information from U.S. Money Reserve to better understand the details of a self-directed IRA. Unlike traditional or Roth IRAs, which typically hold conventional assets like stocks, bonds, and mutual funds, a self-directed IRA provides the account holder with many other asset options. These IRAs can hold a variety of assets, including real estate, franchises, and precious metals. Importantly, however, the account contributor must open a self-directed IRA with a qualified custodian.
Self-directed IRAs allow contributors to take advantage of the benefits of specific asset classes. This is important for individuals who may not want to keep all of their retirement savings in paper-based financial assets such as stocks. A self-directed IRA gives you increased flexibility when it comes to safeguarding your future by putting you in complete control of your asset mix.
Precious Metal Benefits
Precious metals, such as silver, have long been considered a safe-haven asset for their history of maintaining—and even increasing—their purchasing power, especially in times of great financial volatility or uncertainty. U.S. Money Reserve provides an analysis of this ability with a look at the metal’s price during the financial crisis of 2008. As the company notes, four months before the start of the crisis, in August 2007, the precious metal sat at $11.95/oz. The metal then experienced a few fluctuations in price before hitting $13.94/oz. near the end of the Great Recession. By the end of April 2011, silver had risen to a price of $48.70/oz. While silver is currently lower than its all-time high, now could be an opportunity to buy silver before prices possibly move higher once again.
This price trajectory helps illustrate an important point about the ability of silver to weather an economic storm. In the above case, while other assets such as real estate were experiencing price drops, the metal realized a price increase by the end of the recession. Examples of silver’s performance during economic storms help explain the benefits of adding silver to a retirement plan.
It is important to take note of eligibility requirements when selecting silver for use in a self-directed IRA. For starters, the silver in question must be “highly refined,” according to the IRS. That means that it must meet a minimum fineness of 0.999. It must also be produced by a government mint or accredited refiner, assayer, or manufacturer. Types of approved silver for use in a self-directed IRA include:
- American Eagle bullion coins
- Australian Kookaburra coins
- Canadian Maple Leaf coins
- Select silver bars (such as those minted by the Royal Canadian Mint)
The IRS requires any silver purchased through an IRA to be stored in an approved third-party off-site depository. There are a variety of benefits to using a depository, such as ensuring secure storage and safekeeping of your physical silver. These facilities also often have extensive insurance to reimburse individuals should something happen to their metals. Being intentional about metal storage is an important consideration when it comes to utilizing a self-directed IRA.
About the Company
U.S. Money Reserve is a Texas-based precious metals provider. The company’s team of Account Executives assist customers looking to diversify their savings with physical precious metals. The company’s president, Philip N. Diehl, is a former director of the U.S. Mint. As such, Diehl has an extensive background in both public policy and personal financial security.
Disclaimer: This content does not necessarily represent the views of IWB.