For decades, the average individual had no chance to invest in precious metals like gold or silver. All that started to change in 1997 when the Taxpayer Relief Act was signed into law, allowing you to diversify your retirement savings through a gold or silver IRA.
Since 1997, precious metal IRAs have been a growing trend. But their popularity began to soar after the 2008 financial crisis. For many investors, the crisis showed them just how volatile our economic system could be. They started looking around for a means to protect their retirement savings against economic uncertainty. Precious metal investments were one solution.
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The most popular way to invest in precious metals is with a gold IRA. But you can also open an IRA focused on other precious metals, including silver.
In fact, silver offers several specific benefits. It’s cheaper per ounce than gold, which means it’s easier to get started investing, as well as easier to liquidate if you need to cover a small expense. Silver also has a very high level of industrial demand.
By now you might be wondering, “What is a silver IRA?” If so, you’ve come to the right place. In the article below, we’ll lay out exactly what a silver IRA is, how one works, and answer some frequently asked questions.
What is a Silver IRA and How Does a Silver IRA Work?
A silver IRA is an individual retirement account that is tax-deferred and allows you to hold physical silver coins and bars in the account. A silver IRA is in the form of a self-directed IRA and in most ways, it is identical to a traditional Individual Retirement Account (IRA) except it is funded with physical assets instead of paper assets like stocks and mutual funds.
As the name indicates, a self-directed IRA is one in which you make all the investment decisions. You decide what type of assets you buy, as well as the quantity of each. In addition to greater control, this means that you can also invest in “non-traditional” assets such as silver and other precious metals.
It is important to note that there are a number of important rules and regulations you should know if you want to avoid taxes or penalties. Your silver IRA can only hold IRS-approved silver bars or coins, which generally means the bar or coin is at least 99.9% pure.
In general, you will not store the silver yourself or purchase it directly. Instead, you will tell the silver IRA trustee what bullion you want to purchase, and then they will invoice you and ship the items to a secure location.
What are the Benefits of a Silver IRA?
Diversifying your portfolio is vital to safeguarding your retirement savings. If you only own stock, and the stock market crashes, all your money disappears. But, if you own a little stock, a little real estate, some precious metals, and so on, it’s extremely unlikely that every single asset is going to fail all at once.
Silver diversifies your account and also protects your savings against inflation and the declining power of the US dollar. As the dollar loses value, the buying power of your retirement money goes down. But when the dollar drops, the value of precious metals like silver typically increases. So instead of losing money, you essentially transfer value from one investment to another.
Silver also has a strong industrial demand. It’s strength, conductivity, and ability to endure extreme temperatures make it vital in innumerable industrial applications, including film, microwaves, batteries, solar panels, and medical instruments.
But while silver is vital for these technologies, the ability to mine it is limited. Silver will always be in demand. Because of this demand, banks and governments have less influence on its worth than something like cash or stocks. During turbulent economic times, the value of silver is only expected to rise, making it a popular investment vehicle throughout the world.
Are Silver IRAs Safe?
Silver and other precious metals are often seen as volatile during times of economic expansion, but an asset class that holds its value during times of economic recession.
The purpose of investing in silver is to preserve your wealth and as a hedge against economic uncertainty, not a way to make a quick return.
As long as you realize this and don’t sell your silver during a period of economic expansion (when it is undervalued), a silver IRA is a perfectly safe option.
Of course, the world being what it is, there are some unscrupulous companies out there. Always do some research on a company before investing with them. You can check out our list of trusted precious metal IRA custodians here.
How Can I Set Up a Silver IRA?
As mentioned above, a silver-backed IRA is simply a traditional IRA that contains physical precious metals like silver coins or bars. Once you have found a reputable company for your silver IRA, they will guide you through the process of creating a silver-backed IRA.
About the Silver IRA Rollover
If an individual is an owner of a retirement plan like a traditional IRA, Roth IRA, 401(k), 403(b), or annuity, they have the option to rollover this account into one that is backed by precious metals like silver or gold via a self-directed IRA.
A rollover is the easiest and most common way to get started investing in precious metals. You can transfer a portion or all of the funds from one of your existing accounts. When done properly, this process will be completely tax-free.
Want to Know More?
There’s plenty more to know about the world of physical silver-backed IRAs, including a lot of information available on our website.
When you want to know more, you can try our free gold IRA investment guide. Don’t be fooled by the word “gold” in the title—our book is just as relevant for silver.
The guide will tell you more about the most trusted precious metals IRA company, the history of gold and silver, and more details on how to proceed with setting up your account. A representative from Advantage Gold will also be in touch with you to answer any questions once you have had time to digest all of the information.