Investing in silver is a smart move to protect your wealth from inflation. While inflation can decrease your money’s purchasing power, the value of precious metals like gold and silver can retain (or even spike) during a crisis. With the volatility of economies, it is a good idea to include assets whose value can survive the test of time in your portfolio. Before you start looking for ways to make a silver investment, you need to know these rules first.
Investing in Silver: 5 Key Rules
In this article:
- Silver IRAs follow the same governing rules with standards IRAs
- There is a fineness requirement and only selected bullions are eligible
- An approved custodian must store your silver
- Permissions for eligible rollovers
- You may not add your own silver
1. Silver IRAs Share the Same Governing Rules with Standard IRAs
Opening a silver IRA gives you the same tax advantages as that of a traditional or Roth IRA. This also includes the $5,500 (under 50) and $6,500 (50 and older) contribution limit. Depending on what type of retirement account you establish, your account also shares rules on required distribution minimum, withdrawals, and penalties.
2. There Is a Fineness Requirement and Only Selected Bullions Are Eligible
The silver you place in your IRA should meet pure silver fineness requirement of .999 (or 99.9% purity) as prescribed by the law. Due to this, not all silver coins around the world are eligible for silver IRAs. Here are some IRA-approved silver investors need to consider before you buy silver:
- American Eagle Silver Coins & Proof American Eagle Silver Coins
- Australian Koala Silver Coin
- Australian Kookaburra Coins
- Austrian Vienna Philharmonic Coins
- Canadian Maple Leaf Silver Coins
- Mexican Libertad Silver Bullion Coins
- Chinese Silver Panda coins
- Various Silver Rounds and Bars .999
3. An Approved Custodian Must Store Your Silver
It is an IRS rule to have precious metal investments managed and stored by approved custodians. This means you cannot store physical silver or silver bars in your own safe at home. Some try to convince the IRS to let them keep their silver at home through a limited liability corporation. This circumstance is very rare, though. Taking your silver home without IRS approval is considered distribution. You’ll pay the income taxes for that distribution. On top of that, you’ll receive a penalty of 10% if you are under the age 59 1/2.
4. Permissions for Eligible Rollovers
— Inside Your IRA (@insideyourIRA) September 14, 2017
It is possible to roll over your existing IRAs into a silver IRA. You just need to qualify for the eligibility requirements set by the IRS. Other retirement accounts like 401(k)s and 403(b)s are silver-IRA-rollover-ready, too.
5. You May Not Add Your Own Silver
Silver investors cannot add their own silver to their silver IRA. Also, the only exception to this rule is if you are rolling over an existing silver IRA into a new account.
Know the Difference Between Bullion and Numismatic Coins
Bullion coins such as gold bullion and silver bullion are purchased for several reasons including as an investment hedge towards inflation, etc. The weight of a bullion coin is measured in even amounts (troy ounce) for example 1-ounce, half an ounce, or even grams. This is what they call the spot price. Bullion bars, gold, and silver bars commonly measure in grams. One example of a bullion coin is the U.S. Silver Eagle. For the junk silver quarters, around 90% are no longer produced. But the basis of their value is still on the content of the silver coin instead of its condition.
These are mainly collectibles and mining companies no longer produce them. Because they are rare, their value depends on scarcity and not the actual content of the metal. Their worth, however, is more than the metal content but typically not used as an investment.
Consider Other Options in Investing in Silver
You can also have silver mutual funds inside your silver IRA. This also includes an ETF or an exchange-traded fund. These ETFs allow investing in precious metals such as silver (silver ETFs) or silver futures contracts. Also, the same rule applies wherein you can sell silver inside your IRA when there is a demand for silver. This is possible as long as the profit remains in your account.
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Investing in silver may not be the best option for retirees or people close to retirement. While silver can retain its value, in the long run, there will also be ups and downs with the silver prices. Also, this requires decades of riding through price increases and decreases in the silver market. However, by conducting due diligence, a precious metals investment such as investing in gold or buying silver can help diversify your portfolio.
Do you think investing in silver is a good addition to your portfolio? Let us know why in the comments section below!
Editor’s Note: This post was originally published in September 2017 and has been updated for quality and relevancy.