Much time, energy and money is spent by companies advertising Gold and Silver Individual Retirement Accounts. They often cite an upcoming currency or stock market crash or other calamity, all of which serve to hide a very simple fact: These companies make a fortune selling these accounts. After all, someone has to pay for those ads! And they are not for everyone.
While PM IRA’s (Precious Metals IRA’s) have many advantages, those benefits are much greater for some people than for others, and for some, they are not advisable at all. What criteria should you look at to determine if a PM IRA is right for you?
First, let’s look at the structure of PM IRA’s. You need three parties, a precious metals dealer, an IRA administrator, and a certified storage facility. When you open a PM IRA, you first set up the account with the IRA administrator, usually by rolling over or transferring funds from your existing IRA or other eligible retirement account. You then work with your precious metals dealer to purchase the materials that go into your PM IRA, and place them physically in a certified depository in your segregated account. Often, the precious metals dealers act as the facilitator for the entire transaction. You the customer never touch the metals purchased.
While the dealer makes his money on the purchase and sale, both the IRA administrator and the storage facility charge an annual fee (usually around $100 and $150 respectively. That $250 per year is not a lot per se, and on a large account, it is negligible. However, on a small account, those fees can represent a hefty percentage. For example, on $10,000, the $250/year represents an annual 2.5% load, heavy for an IRA.
More important than the fee is the question of whether precious metals fit properly into one’s overall financial plan. This is a more complex and completely personal determination, and relies on such questions as to whether it’s better to hold metals in an IRA, or buy them with after tax dollars, so as to have one’s metals in possession, where they are liquid without tax penalty. One’s age and retirement goals also come into play. Many people use both methods.
There is also a numismatic trap in precious metals IRA’s. Some dealers encourage their customers to buy certain IRA eligible mint and proof sets using the logic that these will appreciate more than the actual gold or silver. While a small percentage of modern coins become truly collectible, most do not, and the high premiums usually charged for such coins can make them losers, even if metals prices push upwards. For this reason among others, I usually recommend that only gold and silver American eagles be used for IRA’s.
If a dealer pushes too hard, or is unable or unwilling to address these concerns, they may be thinking more about their commission than about your welfare. In such cases, find another dealer.
Lawrence D. Goldberg is the author of What Color Are Your Assets? An Insider’s Guide to Rare Coins and Precious Metals (Zyrus Press) and CEO of Customized Numismatic Portfolios, Inc. (cnpcoins.com) Sign up for the complimentary print version of the Rare Coin Report, published three times a year and delivered to your home or office. Cnpcoins.com/contact.html
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