Silver’s time to shine is here and now, and the benefits of investing via individual retirement accounts (IRAs) are growing.
The tax benefits can be numerous, as one would expect when dealing with a retirement account. Due to the nature of precious metals, the tax law is advantageous to those looking to set up substantial precious metal holdings on an ongoing basis.
These tax “loopholes” for the ownership of gold and silver incentivize investors to add precious metals into their retirement portfolio in a way that allows them to grow in value without incurring tax liability. These advantages have to do with asset transfers, exit costs, and the ability to use a specific type of IRA catering to metals.
Firstly, is the penalty-free asset transfer provision. Current retirement assets can be transferred directly into precious metals, without having to pay either a tax or early withdrawal penalty.
This can be done via any type of retirement account you currently hold quickly and painlessly.
Secondly, exit costs on distributions are offset. For tax purposes, all metals are assessed at melt value when you take a distribution. Melt value is the spot price of the actual precious metal content of a given piece. Silver prices change daily, so if you are selling at today’s price you are actually only being taxed on the melt value. The melt value measured per ounce is often lower than the current price of the precious metal holding upon exit. This can dramatically lower any exit costs associated with the transaction, according to custodial experts.
Lastly, storage and privacy are other reasons to consider the potential tax benefits of a precious metals IRA. The precious metals IRA allows investors to receive the holdings at home and store them close by, in an IRS-approved facility of your choice, such as a bank safety deposit box. That way in an emergency the metals are always close at hand.
IRA-held precious metals receive tax-deferred status. They appreciate in value without incurring an immediate tax liability. The investment stays private and in that way, the IRS also is not aware of the holding via a self-directed IRA account.
So now that we can fully appreciate silver’s potential for years to come, how can investors put money to work in a cost-efficient way? Silver bullion in the form of rounds, coins, bars, and “junk” silver are all ways to access the popular silver market. Each has its own pros and cons, which you can see below:
Depository IRA
- 100% insured by Lloyd’s of London, up to 1 billion dollars insurance coverage per account.
- Your existing retirement account is converted to a special IRA that can legally hold precious metals.
- Industry-leading custodians, such as Kingdom Trust, administer the IRA by handling all the asset purchases and liquidations while giving you complete control over the investments in the account.
- IRA-held metals are stored in a top-tier depository facility that is secured and insured.
- Documentation verifies ownership of each piece of metal in the IRA and the investor is allowed to visit the depository and see the metals.
- Metals are excluded from the depository’s balance sheet, so in the unlikely event of depository failure, the metals are never at risk of being seized in bankruptcy proceedings.
Home Delivery IRA
- Metals assets are directly shipped to you and stored near your home in an approved facility.
- If privacy and accessibility are concerns, this is an ideal option.
- A self-directed IRA is created to hold the precious metals and once it is created assets from your existing IRA can be converted with zero tax penalties or fees.
- An LLC can also be created in order to store metals outside a depository, such as in a bank safety deposit box, but it must be an external depository. A third option allows for the metals to be stored in your home if one buys all the shares of the LLC using IRA funds.
- Metals may also be delivered to your home and stored at your discretion.
- With the LLC option, those assets are disclosed to the IRS, but not the underlying LLC investments.
Want to create a precious metals IRA of your own? Contact us for a free one-on-one consultation.
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