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Interested in a silver IRA? Because of how intertwined the two metals are, gold and silver are often bundled together in more ways than one. It's true that silver follows gold's price action, though not wholly. And both precious metals have earned their status as the safest of havens.
A quick look into what drives the two proves that they're fairly separate investments. Silver isn't just a cheaper alternative to gold. There are many "gold bugs" with heavy interest in gold and little interest in silver.
Likewise, many silver investors aren't that interested in gold. Take, for instance, an everyday person with a belief that silver is undervalued on the physical market due to manipulations of the paper market.
The considerably lower price entry point is definitely a perk, though. And since it's a safe-haven asset with long-term value, lots have taken a look at silver as a retirement savings tool.
Like gold, silver can be part of a self directed IRA, where it can appreciate in value over many years and decades. Despite its status as an alternative asset in the sphere of retirement plans, silver is one of the safest investments to make.
What is a Silver IRA?
A silver IRA is a self-directed individual retirement account that allows for the investment of precious metals and other assets. Normally, retirement accounts and employer-sponsored plans can be a bit prohibitive when it comes to the assets available. Stocks and bonds tend to be the norm, even when precious metals have a much better track record.
The trend is changing, though. Gold and silver are shaping up to become synonymous with retirement investment. A silver IRA isn't unlike piling silver for your retirement years in a safe or vault, really. But there are many benefits to having a silver IRA compared to doing this.
While different IRA types have different tax benefits, tax-deferred growth of the portfolio is a primary appeal of precious metals IRAs. However much profit the assets turn, it won't be taxed. There are also tax-deductive benefits when it comes to both funding the IRA and taking out distributions.
"Early distributions", or withdrawing from the precious metals IRA before the age of 59 1/2, generally comes with a 10% penalty as a minimum. In other words, IRAs are ideal vehicles for long-term oriented assets, a category that silver very much falls under.
How does a Precious Metals IRA Work?
Your silver IRA is generally managed by three separate entities. The first is the silver IRA company you'll have open the account. So long as we're talking the cream of the crop, these companies know everything there is to know about IRAs and precious metals.
They're sometimes referred to as brokers, and with good reason: they'll broker-out the account custody, the storage, serve as your precious metals dealer and everything in-between. Some of the hallmarks of good silver IRA brokers include…
- Top-notch grades by consumer watchdog companies
- Top reviews by consumers
- Little to no negative reviews that seem of consequence
- Outreach, be it on review sites or on their website through information and advice
- A wide selection of physical precious metals to choose from with good pricing
Even as you single out the best companies, you could still find yourself with a dilemma. The right choice for you will be the company that offers a specific kind of benefits as their bottom line, or simply rubs you the right way.
After all, these are people you'll be interacting with years and decades from now, provided there aren't any upheavals to your financial plans.
It's not like choosing a clothing store in the mall: your silver IRA company should consist of people that are a pleasure to deal with and can cater to a wide variety of individuals. You do not need to, nor should you be, an investment expert to have a well-functioning precious metal IRA.
Best Silver IRA Companies
There are a number of businesses ready to help precious metals investors like you buy silver or gold with your retirement funds. Some of our top dealers for your silver IRA rollover include:
- Augusta Precious Metals: In business since 2012 with top reviews, ratings and excellent customer reviews.
Read our full Augusta review here.
Request more information from Augusta's website here. - Goldco Precious Metals: Helping Americans buy tangible assets via self-directed IRAs since 2006. Highly rated with low annual fees.
Read our full Goldco review here.
Request more information from Goldco's website here. - Birch Gold Group: With a wide selection of silver, gold, platinum, and palladium Birch Gold has been serving Americans since 2003. A top rated firm
Read our full Birch Gold review here.
Request more information from Birch's website here. - Advantage Gold: Rated the “Best of TrustLink,” Advantage specializes in converting your existing IRA account into a physical gold and silver IRA.
Read our full Advantage Gold review here.
Request more information from Advantage Gold's website here.
This is not an inclusive list. Research a few of the more reputable firms you find online and request more information. Any of these top silver and gold IRA companies can review your current retirement plan, check if you qualify for a silver IRA rollover, and help facilitate the opening of precious metal IRAs.
They can help decide if you should open a traditional IRA or a Roth IRA, explain the tax advantages of each, and answer pretty much any question you might have about adding silver coins or bars to your new IRA account.
Related: Silver Investor Guide - How to Diversify Your Retirement with Silver and Gold
Funding the Account
Rollovers and account transfers are the primary method of funding a silver IRA. Your self directed IRA provider will be delighted to hear that you have one or several 401(k) plans, or retirement accounts, that could be liquidated and have the IRA funds transferred to the new account.
Contributions, often tax-deferred, are then made on an annual basis. Some things to keep in mind:
- Inactive 401(k) and other employer-sponsored accounts are easier to rollover than active ones
- Any common type of IRA can be rolled over into your new silver IRA
- Not all rollovers are quick, which is why some IRA companies can take up to three weeks to set up the account
- Rollovers and transfers refer to the same thing, with the main difference being that the first isn't custodian-to-custodian and therefore generally takes more effort
While not all companies require a minimum to fund your IRA, many do, with $20,000 being a standard figure.
Since your contributions on an annual basis have limits, rollovers are a convenient method of funding the account for both you and the silver IRA company.
Silver IRA Custodians
While the account is self-directed, your management of it will hardly be that. For starters, the silver IRA company leases out most of the management, or "custody", to a third party. Undoubtedly, this is done to comply with IRS regulations, which state that a silver IRA must have a licensed IRA custodian.
But there are other reasons. Managing the paperwork behind an IRA is no small thing. Even a legal enthusiast with a lot of free time on their hands can quickly get overwhelmed if they attempt self-custody. There are simply too many rooms for error and oversight, and too much requirement for one to already be familiar with regulations.
The IRA custodians that the silver IRA company works with tend to be the best in the business. They are usually, but not necessarily, a large specialist company that works with many IRA providers and manages thousands of IRAs.
Having a professional manage your retirement account is part of the package when it comes to silver IRAs, and it's a very useful part to have. Between the silver IRA company and the IRA custodian, you'll have the option of choosing anything between full insight into what's going on with your silver IRA account and barely knowing it's active. In case you’re among the latter variety, having someone keep you up-to-date on your retirement savings is great.
Silver IRA Depositories
Not unlike as in the case of custody, the silver IRA company leases out the "custody" of bullion to a vault. Brink's, the Delaware Depository and International Depository Services (IDS) are some of the depositories you'll hear mentioned most often in the sector.
All three providers offer the choice of segregated or commingled bullion storage. In my opinion, segregated storage can be overrated when talking bullion within a self directed IRA.
If you don't plan on taking out the bullion in the short term, segregation shouldn't concern you, and even then, it's more of a collector's thing. Commingled storage is fine for your IRA needs and means you're not paying as much for your precious metals IRA storage.
The important thing to look for with these three depositories, as well as any other you might come across, are security and insurance. The vault must come off as truly impenetrable. And if it gets breached, the insurance policy has to cover all of the items in the vault.
Like custody and management of the account itself, the difficulties of silver bullion storage is another weight lifted off your shoulders when opening a silver IRA. While some have preferences when it comes to depositories, the truth is that any top-notch facility will offer you full peace of mind in this regard.
IRA Approved Silver Bars & Coins
IRA-eligible bullion is usually advertised as such, though there are many exceptions. In the case of all four of the precious metals, IRA eligibility depends primarily if not entirely on purity. In the case of silver, the item must have a purity grade of 0.999 or higher, meaning it consists of 99.9+% silver. The purity contents are more stringent than in the case of gold, but less than in the case of platinum and palladium. Common items include:
- American Eagle Silver Coins
- American Eagle Silver Proof Coins*
- Canadian Silver Maple Leaf Coins
- Australian Silver Koala Coins
- Australian Silver Lunar Coins
- Silver rounds that meet the purity requirement of 0.999 or higher and come from an ISO 9000 approved mint
- Silver bars that meet the purity requirement of 0.999 or higher and come from an ISO 9000 approved mint
*The IRS does not allow collectibles to be held in an IRA, but has made an exception for the gold, silver, and platinum American Eagle Proof coins.
Some believe bullion coins and bars are the only investment one should hold in an IRA. Bullion trades closest to the spot price of the underlying metal content.
Others believe these American Eagle proofs have more room to increase in value over the long-term and are worth the additional markup on their price. Discuss your options with a trusted advisor to decide what coins you want to purchase with your precious metals IRA.
There are many more examples, including those you probably haven't heard of, that can make it into an IRA. Likewise, there are many excellent collector's coins that have had their alloy reinforced with other metals and therefore can't be a part of your IRA.
Since your silver IRA company will act as your bullion provider, they'll make sure that no regulations are breached when it comes to what's being placed. Feel free to do some research into the various kinds of silver bullion to find the perfect items for your liking.
Why Invest in Silver?
Though perhaps not as much as in the case of platinum and palladium, silver is very volatile compared to gold. That's because of its strong industrial component that gives way to ups and downs for different reasons.
To be sure, silver still isn't nearly as volatile compared to most other assets. But silver investors, as opposed to gold, tend to be a lot more interested in the price upside. With this in mind, they also have a greater tolerance for volatility. We'll go over silver's case from both an investment standpoint and an industrial one, as well as covering some points that are unique to it.
Silver's Investment Side
The case for precious metals, like silver, is well laid-out. They are money, while sovereign currencies are IOUs. It has been the case for all of recorded history, and even now, in the age of instant digital transactions and heaps of wealth stored on USB drives, people want silver.
They want silver bullion, most of all, because they know what value means. Silver, like gold, is scarce, while paper is not. This was the reason it was used as money in the first place. And these days, it serves as a constant reminder of that.
You can call it inflation, wealth erosion or loss of purchasing power. But what it boils down to is that free-floating currencies have terrible track records. Most of them have been wiped out. Those that still linger have seen a massive drop in purchasing power. Attempts to justify what has happened with money over the past century have failed in stupendous fashion.
Holding your wealth in silver will not only preserve, but expand it. Holding it in currencies will erode it. Inflation is the central banks' preferred method of paying back their debt, but the citizens pay the price.
Related: Gold and Silver IRA Tax Rules: The IRS and Your Precious Metals
Silver's Industrial Side
All of the precious metals' industrial uses get played up, but silver is really a standout. Among many other things, silver is a key component in solar panels and the green energy sector in general. Right now, we are seeing an unprecedented bid towards green and renewable energy. Governments around the world would like to do away with petrol engines altogether by 2050.
Obviously, it's a contentious issue. But less so when you have silver exposure. It's unlikely that the government will reverse its green-energy bids anytime soon, so we're seeing a fairly straightforward increase in industrial demand over the long-term.
Demand on this side has already been increasing, and manufacturers are already exhausting their ways of "spreading the silver out" in solar panels and the like. When these methods of minimizing silver use run out and collide with sudden demand for this technology, the market could be in for some fireworks.
Is Silver Really Undervalued?
Silver has had a major correction in history when a short squeeze brought prices from around $6 in January 1979 to nearly $50 a year later. These days, the correction is ripe on the other end. A grassroots movement has spawned with a very firm belief that silver's price is being manipulated downwards.
A high-profile court settlement of $920 million by JPMorgan involving claims of price manipulation likely spurred things. Many are of the opinion that silver's price should be several times its current valuation.
The gold/silver ratio has been used to gauge silver's price standing in relation to gold. Over the past few centuries, something between 10-15 would have been considered normal. That is, 10 to 15 ounces of silver needed to buy an ounce of gold. These days, the ratio is hovering around a historic 80. Any time silver has had such a low valuation to gold, it caught up in explosive fashion. The latest such bout saw a 400% gain.
Pros & Cons of Adding Physical Silver to Your IRA
No investment is without its good and bad sides, and silver is no exception. Many of the bad sides tend to be mitigated when it's invested in through an IRA, however.
The benefits of investing in physical silver in an IRA include…
- Ownership of a tangible and time-proven asset that protects against wealth erosion
- Elimination of counterparty risk as one would incur when dealing with things like stocks and other paper assets
- A wide range of investment options that cater to your preferences
- Silver's affordability compared to gold makes this all the more pronounced
- With a silver IRA, your retirement account moves away from speculation and risk and towards security
- No need to hassle with storage and maintenance of the items
The cons of investing in physical silver in an IRA can include…
- Prolonged stretches of low price action and minimal movement
- It's volatile, though it has had a steady rise to from $4 to $22 between 2000-2010 and is now conspicuously dormant
- Less choices of silver items from mints to invest in due to IRS regulations
- Many precious metals enthusiasts don't like the idea of third-party storage
Like we said, silver's downsides are mitigated by placement in an IRA in such a manner that one can say the metal is tailor-suited for these accounts. Those with a long-term investment outlook will have a hard time being disappointed by choosing a silver IRA.
