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What is a Silver IRA?

Published on 3/29/2021 by APMEX

IRA-approved Silver

What is a Silver IRA?

Precious Metals IRAs are highly touted by some investors. Do you know how they work? What exactly is a Silver IRA?

Silver IRAs vs. Other Types of Precious Metals IRAs

An individual retirement account, or IRA, is a tax-advantaged retirement savings account. The IRS offers several incentives for IRAs that are designed to make saving for retirement easier and more appealing. There are several different methods including 401(k) and Roth IRAs, but the primary thing you need to be aware of for Precious Metals IRAs is the difference between regular and self-directed IRAs.

Every IRA has to be held by an IRS-approved organization. They have to abide by the regulations required for any custodian. An IRA custodian usually manages the funds for the customer, and the customer’s decisions are largely limited to which custodian they prefer and what level of risk they are comfortable with. They are also limited to certain types of investments, including stocks, ETFs, mutual funds and other similar financial instruments.

Precious Metals IRAs like Silver IRAs are a little different. Regular IRAs can’t invest in Precious Metals or other alternative options like real estate, so there has to be an alternative option. This is called the self-directed IRA or SDIRA.

A self-directed IRA is still taken care of by a custodian, but the person who owns the IRA makes their investment decisions themselves. It allows for much more flexibility and control than a traditional IRA with the downside that you have to really know what you’re doing and be willing to put in the legwork instead of handing it off to someone else.

Most of these IRAs are called “Gold IRAs” as a general term, but you may hear of Silver IRAs or other Precious Metals. They’re all the same structure. Precious Metals IRAs are not tied to any particular metal. They may hold more of one metal than another, but there’s no reason a Gold IRA can’t invest in Silver or another Precious Metal. At their core, they are all just self-directed IRAs.

How Does a Silver IRA Work?

Silver as a major asset in an IRA has some distinct differences from Gold. Though it is also a Precious Metal used to hedge in times of risk, Silver has greater speculative appeal than Gold does due to its higher volatility and the slowly-widening gap in the Gold-to-Silver price ratio.

Gold is the traditional investment when times are hard, used to hedge against economic risk. Silver has greater utility in other areas including its use as an industrial metal. Many green technologies and catalysts use Silver and other metals like Platinum or Palladium, giving these Precious Metals more factors that affect their price than just their financial uses. Gold sees limited non-financial use.

Silver IRAs can have certain shortcomings due to including physical Silver. You need to pay for storage and insurance. You cannot take delivery of your Silver yourself — it has to be held in trust by your custodian. Stocks, bonds and mutual funds may have brokerage fees but they don’t require storage fees and insurance the same way Precious Metals do.

Premiums can be an issue, too. Understanding the factors that go into the price of Silver will allow you to make the right decisions when it comes to your assets. Different Silver products may carry higher or lower premiums over the metal price — for example, a Silver Eagle will cost more than an equivalent Silver bar, and when you buy metals you have to be aware of the profit a dealer will take to make it worth their while.

What Can You Use in a Silver IRA?

Silver has to be at least .999 purity to be usable in an IRA. This means that some commonly bought Silver products like pre-1964 U.S. Silver coins are not eligible. High-purity investment coins like Eagles, Buffalos and other well-known issues can be used. So can high-purity bars.

Silver IRAs can be an effective means of saving for retirement, but you have to know what you’re doing. Do your homework and find an IRA custodian that can help you invest in the way that’s right for you. We have a number of IRA specialists that can help you with our IRA-eligible products. Make sure you discuss your IRA strategy with your personal financial adviser or IRA custodian.

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