What is a silver IRA?
How to include this precious metal in your retirement fund
Investing in precious metals can be a good way to diversify your holdings. But did you know you can invest in metals like silver inside of a tax-advantaged retirement account?
Silver IRAs allow you to own physical silver inside your individual retirement account. You have all the same tax benefits as a regular IRA, but own precious metals instead of just traditional investments. There is additional risk to owning precious metals, but they offer some diversification outside of the stock market.
Key insights
- Silver IRAs allow you to own silver and other precious metals within a retirement account.
- Silver IRAs are tax-advantaged, allowing your precious metals investment to grow tax-free until retirement age.
- Silver is a speculative investment that has underperformed most long-term assets.
Silver and other precious metal IRAs are an investment and carry risk. Consumers should be alert to claims that customers can make a lot of money in these or any investment with little risk. As with any investment, you can lose money and past performance is not a guarantee of future performance results. Consumers should also obtain a clear understanding of the fees associated with any investment before agreeing to invest.
How a silver IRA works
Silver IRAs are self-directed retirement accounts that you can open through a precious metals IRA custodian. These companies help you set up the account and work with trusted partners to ensure your IRA is compliant with IRS regulations.
Inside a silver IRA, you can own silver, gold and other precious metals. While you can’t physically store silver yourself within an IRA, your metals are stored with a trusted custodian in a secure facility and insured against loss.
Investing in a silver IRA follows the same rules as a regular IRA. You can only invest up to $7,000 per year in the account (with an additional $1,000 if aged 50 years or older), and you must wait until age 59 ½ to withdraw funds without penalty.
Another rule that applies to silver IRAs is that your physical silver must be held with an approved custodian while in your account. Also, any precious metals in the account must be bullion only (no jewelry) and must meet purity standards set by the IRS, including:
- Gold must be at least 99.5% pure.
- Silver must be at least 99.9% pure.
- Platinum and palladium must be at least 99.95% pure.
» MORE: Gold vs. silver
How much should you invest in a silver IRA?
Investing in precious metals carries a bit more risk than traditional investments. With higher volatility and additional costs of storage and insurance, precious metals should not necessarily be a major holding in your portfolio.
Most financial planners recommend holding less than 10% of your total portfolio in alternative assets. Silver itself has not performed well as a long-term holding, and has also not acted as an inflation hedge in recent years. Silver prices tend to spike in times of crises, but not always.
The amount of silver you should own depends on your risk tolerance, investment time horizon, financial goals and personal preferences. You may want to meet with a financial advisor before opening a silver IRA to understand how investing in silver fits in your overall financial picture.
» MORE: What is a good investment?
Pros and cons of silver IRAs
Silver IRAs offer a tax-advantaged way to own silver and other precious metals. You can purchase physical silver with an IRA, let it grow tax-free and also save on taxes in retirement versus paying regular tax rates on collectibles.
Here are a few pros and cons to consider about silver IRAs:
Pros
- Tax-advantaged way to own silver
- Stored in secure, insured facility
- Portfolio diversification
Cons
- Silver has underperformed the stock market long-term
- Cannot store silver yourself, must be with custodian
- Access to silver restricted until age 59 ½
How to open a silver IRA
Here’s how to get started with opening a silver IRA:
1. Find a reputable silver IRA custodian
The first step is to find a reputable silver IRA custodian who has great reviews and is legally allowed to help you open an IRA. Most advertise as “gold IRA” companies, but also offer access to silver and other precious metals.
Warning: Some silver and gold IRA providers charge hidden fees and collect large commissions on sales of gold. Others employ high-pressure sales tactics to get you to roll over your existing retirement assets. Always shop around to find the best gold IRA company.
2. Choose the type of silver IRA
Most gold and silver IRA companies allow you to open a traditional or Roth IRA. Traditional IRAs allow you to save on taxes in the year you contribute to them, while Roth IRAs are after-tax retirement accounts that allow you to withdraw tax-free after age 59 ½.
3. Open your silver IRA account
To open an account, you’ll need to fill out an application (just like opening a bank account) and provide both personal and financial information, including:
- Full name
- Address
- Email address
- Phone number
- Social Security number
- Employment information
You may be asked for additional information to complete the application process.
4. Fund your account
Next, you’ll need to actually fund your account. You can fund your silver IRA in several ways, including:
- Transfer from a bank account (up to annual contribution limit)
- Transfer funds from an existing IRA
- Roll over from existing 401(k) account (from an old job)
5. Buy silver
Once your account is funded, you can select what types of silver to buy. Your selection will be limited to whatever is available from your silver IRA custodian, and may include silver coins, silver bars or other precious metals, including gold, platinum or palladium.
6. Store your metals
Your silver IRA custodian will work with an approved and insured depository to store your precious metals. Your precious metals will be stored until you choose to withdraw funds or sell silver within your IRA.
FAQ
Is a silver IRA safe?
Silver IRAs are regulated investment accounts that allow you to buy silver and other precious metals. While there are scam companies out there, legitimate gold and silver IRAs are IRS-approved. And the silver you purchase within a silver IRA is securely stored and insured against theft or loss.
What type of silver can you have in an IRA?
There are several types of silver you can purchase within a silver IRA. You can buy silver coins, silver bars or other types of silver bullion — as long as it meets IRS standards. This can include silver minted in the U.S., Canada and other countries.
How much money can you put in a silver IRA?
Silver IRAs are subject to the same account limitations as regular IRAs. This means there are annual contribution limits for how much you can put in your silver IRA. As of 2024, the annual contribution limit to a silver IRA is $7,000, with an additional “catch-up” contribution of $1,000 available to investors aged 50 and older.
Are silver IRAs FDIC-insured?
Silver IRAs are not insured by the Federal Deposit Insurance Corporation (FDIC), and many are also not insured by the Securities Investor Protection Corporation (SIPC). But the physical silver and other precious metals owned in your silver IRA are insured by the depository where it is stored. The insurance covers theft or other losses, so your silver investments are technically insured and safe. But if your silver IRA provider goes out of business, you may lose access to your silver, and there is no government insurance program that will pay you for the loss.
Bottom line
Opening a silver IRA can offer diversity to your retirement portfolio, but it also comes with risks. Silver is more volatile than most traditional investments, and has underperformed as both a long-term and short-term investment.
But if you want to add precious metals to your investment strategy, opening a silver IRA can save you on taxes while being able to physically own silver coins and other bullion.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- IRS, "Retirement Topics - Participant-Directed Accounts." Accessed Jan. 18, 2024.
- IRS, "Retirement Topics - Plan Assets." Accessed Jan. 18, 2024.
- STRATA Trust Company, "IRA Allowable Precious Metals." Accessed Jan. 18, 2024.
- LBMA, “LBMA Precious Metal Prices.” Accessed Jan. 18, 2024.
