June 16

Silver IRA: How to Add Silver to Your Retirement

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Adding silver to a self-directed IRA can help add diversification to your overall retirement portfolio. This potentially reduces overall volatility and increases your retirement portfolio’s ability to hold up during bear markets and other periods of uncertainty.

Precious Metals IRA Information

Discover how to add physical silver bars and coins to your retirement...

Why Own Silver?

Silver is a valuable precious metal that derives its value from its scarcity and beauty, as well as its many uses in industry. It is a superb conductor of electricity, and is in demand for a variety of industrial uses such as the manufacture of integrated circuits, catalytic converters, fuses, switches and contacts.

Industrial use accounts for about half of the global demand for silver at present, which helps provide a floor of price support for the metal.

Silver, and precious metals in general, have historically served as a store of value and helped protect investor’s wealth against times of economic turmoil and uncertainty since antiquity. Empires have risen and fallen, and entire civilizations have collapsed. But silver and gold have generally retained value through all kinds of economic conditions. Any given stock or bond can theoretically go to zero. Silver and gold won’t.

Silver has traditionally been used along with gold as a hedge against inflation, deflation and economic dislocation.

Silver is currently trading at around $17 per ounce. But it is capable of wide price swings, and has traded as high as $50.00 per ounce, which it reached in 2011, amidst the U.S. debt crisis and the downgrading of U.S. treasury debt.

As the U.S. grapples with COVID-related debt and increasing fiscal pressures, we could see another resurgence in the price of silver and other precious metals.

Diversification

Silver is not highly correlated with the stock market, so it has a substantial diversification benefit when combined with a portfolio that already includes stocks and bonds.

Historically, it is much more volatile than gold, so a small amount of silver can help offset stock and bond market volatility.

The Gold-Silver Ratio

Silver is much less expensive than gold per ounce, which allows investors to purchase much larger coins and bars. The current gold to silver ratio per ounce as of mid-June 2020 is just under 100. That’s well below the long-term average ratio of about 60, which indicates that silver may be an excellent value relative to gold at current prices.

Restrictions on Silver in IRAs

While you may own silver, as well as certain other precious metals within an IRA, the law imposes some restrictions:

You may only hold silver bars, coins and rounds that meet the following requirements:

  • Minimum purity of 99.9% or higher (Exception: American Silver Eagles).
  • Must come from a COMEX/NYMEX-accredited mint.

Only bullion is eligible for IRAs. By definition, bullion is manufactured to be valued only for the silver content, and not for artistry, craftsmanship or rarity.

That excludes silver collectibles, numismatics and bars that are bought and sold at a premium for artistry or beauty.

Currently, you may hold the following types of coins and rounds within a silver IRA:

  • American Eagles
  • Austrian Vienna Philharmonics
  • Australian Kookaburras
  • Canadian Maple Leafs
  • UK Silver Britannia coins (2013 and later)
  • Sunshine Mint silver rounds
  • Canadian Silver Arctic Foxes

Related Article: Review our list of top Silver IRA dealers for 2020

Precious Metals IRA Information

Discover how to add physical silver bars and coins to your retirement...

Taxes on Silver IRAs

When you hold silver within an IRA, you can generally buy and sell as much as you like without current year capital gains tax liability.

If your income falls below certain thresholds, you may be able to deduct some or all of your IRA contributions for the year.

As of 2020, the IRA contribution cap is $6,000 for single IRAs, and up to $12,000 for spousal IRAs. Taxpayers age 50 and older may contribute an additional $1,000 in “catch-up contributions.”

The taxes on any gains or income within a traditional IRA or other tax-deferred retirement account are generally deferred until you take money out of the account, when it’s taxable as ordinary income.

You must have earned income during the year in order to contribute to an IRA. However, married couples can contribute up to double the single IRA limits in a spousal IRA, even if one spouse doesn’t work.

Earned income includes wages, salaries, tips, bonuses, commissions, and income from self-employment. You can only contribute up to your amount of earned income for the year.

Earned income does not include:

  • Rental property income
  • Alimony and child support
  • Social Security benefits
  • Retirement income
  • Unemployment benefits
  • Investment interest
  • Dividends
  • Pay received while an inmate in a jail or prison

Silver in a Roth IRA

You can hold silver within a Roth IRA, as well. Generally, all gains on all Roth IRA investments (except that attributable to borrowed money) are tax-free.

Roth IRAs are also not subject to RMDs. While traditional IRAs and 401(k)s generally require you to begin taking required minimum distributions after you turn 72 years old, Roth accounts allow these assets to continue compounding, tax-free, for as long as you or your spouse are alive.

This makes Roth IRAs a powerful vehicle for long-term investment – especially for younger taxpayers and those who expect to be in a higher tax bracket in retirement than they are now.

As of 2020, Roth IRA contribution eligibility is limited to those with adjusted gross incomes as follows:


2020 ROTH IRA INCOME ELIGIBILITY LIMITS

Filing Status

Modified Adjusted Gross Income

Annual Contribution Limit

Married filing jointly (and qualifying widow(er)s for up to two years following death of spouse

< $196,000

$6,000

+ $1,000 for those age 50 or over

$196,000 to $205,999

Allowable contribution is gradually reduced

$206,000 and up

You may not contribute to a Roth IRA

Single, head of household, married filing separately (and you did not live with your spouse during the year)

Up to $123,999

$6,000

+ $1,000 for those age 50 or over

$124,000 to $138,999

Allowable contributions gradually reduced

$139,000 and up

You may not contribute to a Roth IRA.

Married filing separately (and you lived with your spouse at some point during the year)

Up to $10,000

Reduced

$10,000 and up

You may not contribute to a Roth IRA.

Source: IRS.gov

Silver IRA Custodians

IRA rules prohibit investors from taking physical possession of their own IRA assets. Don’t pay any attention to those people on the TV ads posing with stacks of gold and silver coins on their kitchen table. That’s not how silver in IRAs is held.

Instead, you must have an IRS-approved custodian/trustee to hold the silver on your behalf.

It’s a good idea to work with a custodian that specializes in silver and other precious metals. These vendors will be aware of silver IRA-related laws and regulations, and will help prevent accidental prohibited transaction violation.

If you work with an established gold IRA company that specializes in this market, they can help you set up your account with a custodian to hold the silver on your behalf. They will also have relationships with approved vault storage companies with sophisticated security systems and insurance.

You can expect to pay a small vault storage and custodian fee. This means that holding silver or other precious metals within an IRA does have a non-zero cost of carry.

Precious Metals IRA Information

Discover how to add physical silver bars and coins to your retirement...

How to Open a Silver IRA Account

  • Open an account with a third-party administrator/custodian. This should be a specialized firm that handles silver IRAs and gold IRAs on a regular basis. Generally, garden-variety Wall Street investment companies and wirehouses are not set up to deal with the direct ownership of precious metals within an IRA. Look for a vendor that deals specifically with self-directed IRAs as the focus of its business.
  • Fund the Silver IRA account. You can fund the new silver IRA account either with new cash contributions (subject to annual contribution limits and caps), or conduct a once-a-year rollover from another eligible retirement account.

    If you do a rollover, you can have your old firm mail you a check, in which case you will have up to 60 days to complete the rollover and get that money into your new account. Otherwise the IRS will consider you to have taken a distribution, and you’ll have to pay any applicable taxes and penalties.

    Alternatively, you can direct your old IRA custodian to do a trustee-to-trustee transfer. With this option, your old IRA custodian will wire the funds directly to your new self-directed IRA custodian/administrator account.
  • Buy your silver. Provide your new administrator/custodian written instruction to buy whatever IRA-eligible silver bullion you like, from whom and at what price.

A reputable precious metals specialist/broker can help guide you through this process.

In most cases, you can get your new silver IRA up and running, and owning silver, within a week.

Prohibited Transaction Rules

In addition to the rules restricting silver IRA holdings to certain forms of bullion, all self-directed IRAs have certain prohibited transaction rules you should be aware of:

Per U.S. Code 26, Section 408, your IRA may not buy or borrow from, nor sell or lend to:

  • Yourself or your spouse;
  • Your children, grandchildren and great-grandchildren or those of your spouse;
  • Your parents, grandparents or great grandparents or those of your spouse;
  • Any advisor who works with your retirement accounts;
  • Any corporations, trusts or other entities any of the above individuals' control.

Additionally, silver IRAs, like all IRAs and 401(k) accounts, are prohibited from holding investments in life insurance, collectibles, alcoholic beverages, jewelry and gemstones. These are in addition to the restrictions on holding non-bullion forms of precious metals and coins and bars of insufficient purity.

Click here for more information on IRA prohibited transaction rules and penalties.

Common Silver IRA Scams

While scammers in the silver IRA market are few and far between, there are a few of them out there. Watch for these warning signs:

  • Silver selling for way below the current silver spot price. Silver often sells for a premium compared to the market spot price. But it will almost never sell for more than a 5% discount to spot price. Beware of deals that seem too good to be true.
  • Collectible coins being marketed as approved for IRA investments. The only IRA-approved collectable is the American Silver Eagle. If a dealer is pushing other special strikes, collector’s editions or other limited-edition premium coin as specially-approved for IRAs, be very cautious: Either it’s not an IRA-approved investment, or it's not a real collectible.

Silver IRA Questions?

Get in contact with a company that specializes in setting up silver IRA accounts. Review our list of top silver IRA companies here... Request an investor guide. Account reps from any of our top recommended dealers should be able to answer questions and steer you in the right direction.

Precious Metals IRA Information

Learn more about gold & silver’s unmatched properties for protecting wealth, either as part of your investment portfolio or inside a retirement account.


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silver, silver IRA


About the author 

Ilir Salihi

Ilir is passionate about personal finance, digital currency, and digital marketing. He's been writing about precious metals and cryptocurrencies since 2013. When he's not publishing new content, he's spending time at home in Washington, D.C. with his family.

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