A traditional Individual Retirement Account (“IRA”) is an account where taxes are deferred until the earnings are withdrawn at retirement. It was introduced to help people save. Traditional IRA’s can be “rolled over” to self directed accounts for more flexibility. A 401K is similar to an IRA except it is done on a group level, most often sponsored by an employer. The major disadvantages of 401 K’s are that the funds are locked in until retirement and few of these plans offer rollovers to other types of IRA. 401K’s usually fall into one of two categories, defined benefit or defined contribution.
Recent political events have led to a lack of confidence in the dollar, American stability and by extension 401K plans. People under 60 are generally apprehensive about getting the full amount of their contributions, amid fears of a falling dollar and general inflation. The asset classes of 401K’s are generally held in mutual funds and Exchange Traded Funds, and the fear is that in the event of a market wide systemic collapse, none of these asset classes will be safe. Thus more and more people are moving towards physical possession of Gold and Silver, as having the physical at hand adds yet another layer of robustness to your portfolio. The next best thing it to have stocks in precious metal companies, followed by gold and silver derivatives on gold and silver, to hedge against inflation, currency devaluation and collapse.
Physical Possession of IRA Gold and Silver
Even if you are capable of holding paper gold and silver commodities, having the physical could be the only protection against a systemic collapse. And setting up an IRA gold and silver is not as difficult as it appears. What you can do to get physical possession of gold and silver is to use a self directed IRA. A self directed IRA allows investment in a variety of alternative asset classes, including gold and silver. The fee structure is different and cheaper than traditional IRA and 401 K structures, which make use of broker dealers, investment advisors and fund managers which all add to the expense.
It is important to note that all physical possession of the bullion ( as defined by the IRS to include gold and silver bars and coins) must be held by a trustee. The trustee is any institution, usually a bank, which satisfies the criteria outlined by the IRS. The self directed IRA has minimal setup and maintenance fees, and the main costs are storage by the third party/trustee. Trustees you can use other than banks include Regal assets, American Bullion and Lexi Capital and others.
A self directed account is sometimes called a checking IRA, as you need to set up an account in the name of the account owner to have access to the funds to make the investments. Gains made on the metals are tax free when using this investment methodology. A self directed IRA LLC works by purchasing the bullion in the name of the LLC which is owned 100% by the IRA. The bullion is held by your chosen gold IRA firm ( the trustee) in a safety deposit box on behalf of the LLC. This is a new investment strategy which can prove very cheap and effective if executed correctly. This is a subcategory of the self directed IRA mentioned above.