What is a Silver IRA Rollover

What is a Silver IRA Rollover?

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What is a Silver IRA?

Silver is one of the most in-demand metals available today. If you're looking for a way to diversify your retirement portfolio, investing in silver is an excellent choice. 

Most traditional IRAS include paper assets. A silver IRA, also known as a precious metals IRA, allows you to buy physical metals and have them delivered and stored with an independent IRA custodian you select. 

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Understanding a Self-Directed IRA

A silver IRA is a type of self-directed IRA account. A self-directed individual retirement account is a type of retirement account that enables account owners to hold various alternative investments that are typically prohibited from regular IRAs. 

A self-directed IRA does not mean that there is no one overseeing the account. A custodian or trustee administers the account. But it is directly managed by the account holder. This is why it is called self-directed. 

The Difference Between a Self-Directed IRA and Other IRAs

The main difference between a self-directed IRA and other IRAs is the type of investments that can be held in the account. As a general guideline, regular IRAs are limited to securities like stocks, bonds, certificates of deposit, mutual funds, and exchange-traded funds.

With a self-directed IRA, the owner has the opportunity to invest in a broader range of assets, which provides the owner with more opportunities to diversify. Self-directed IRAs allow investors to explore commodities, private placements, limited partnerships, tax lien certificates, real estate, and precious metals like silver. 

It's important to note that there are specific rules regarding taxes, withdrawals, and contributions when it comes to all self-directed IRAs. In 2023, contributions are limited to an annual amount of $6,500 for individuals under age 50 with a $1,000 catch-up contribution for individuals over 50. 

Once you start making withdrawals, you'll pay regular income taxes based on your income level if you begin withdrawing before age 59.5. Keep in mind that by making withdrawals before you reach 59.5 age, you'll owe a 10% penalty and pay income tax on the withdrawal. 

What Accounts can be Rolled Over to a Silver IRA?

Several types of accounts can be rolled over to a silver IRA. Here are three common IRA accounts that can be rolled over:

  • Traditional IRA: an account where you can contribute pre-tax or after-tax dollars. Contributions may be tax deductible depending on your situation, helping to give you immediate tax benefits.
  • Roth IRA: an individual retirement account similar to a traditional IRA to which you contribute after-tax dollars. There are no current-year tax benefits and your contributions and earning will grow tax-free. 
  • SEP IRA: a simplified employee pension is an easy-to-administer retirement plan for anyone who is self-employed, owns a business, employs others, or earns freelance income. 
  • Simple IRA: allows employees and employers to contribute to traditional IRAs set up for employees. 
  • 401(k): a company-sponsored retirement account to which employees can contribute income, while employers match contributions.

How Does a Silver IRA Rollover Work?

To start investing in silver bars and coins, you'll need to roll over funds from your existing IRA or 401(k) into your Silver IRA account. First, we're going to share how to open a silver IRA. Then, we'll explain how the rollover process works.

Opening a Silver IRA

Without the right guidance, opening a silver IRA can appear slightly complicated. Here are the steps you'll need to take to successfully open your new IRA account:

1. Choose a Self-Directed IRA Custodian

All self-directed IRAs are held by a custodian. A custodian can be a bank, trust company, or another entity approved by the IRS. Your custodian will enable you to invest in alternative assets like silver precious metals. 

2. Select a Precious Metals Dealer

To invest in precious metals, you'll need to choose a precious metals dealer. Once you've found the right dealer, you'll direct your IRA custodian to send money to the dealer to purchase your silver. 

Be sure to thoroughly research potential dealers though. Specifically, search for dealers that belong to industry trade groups like American Numismatic Association and the Professional Numismatists Guild.

3. Choose Your Metals

Next, select the precious metals you'll like to add to your new self-directed IRA. There are several silver bars and coins that can be included in your new IRA, such as American Silver Eagle coins, Australian Silver Kangaroo coins, Canadian Silver Maple Leaf coins, 100 oz Silver bar, and 1 Kilo Silver bar. 

4. Choose a Depository

Physical precious metals cannot be stored at your home due to IRS regulations. Therefore, these metals must be stored in an approved depository, such as the Delaware Depository.

You can coordinate with your IRA custodian to see what depository works best for your needs. They'll likely already have a few depositories that they partner with. 

5. Complete Your Transaction

Once you've secured your custodian, precious metals dealer, and depository, you are ready to complete your purchase. Your IRA custodian will handle all payments and the dealer will ship your metals to your chosen depository.

How to Rollover Funds to Your Silver IRA

The process to roll over funds from your existing IRA to your new Silver IRA is relatively easy. You can either decide to roll over your entire retirement savings or a portion of your funds.

If you decide to roll over all of your funds, you will be performing a direct rollover. 

Doing this type of rollover is tax-free since the IRS permits the rollover of all of your funds from one IRA to another without tax penalties. 

IRA Rollover

You can also roll over your funds tax-free if you have an employer-sponsored retirement plan account. You'll just need to request the rollover to initiate the process. All you need to do is request the rollover by phone which your current controller of funds will release control. This enables your current custodian to transfer it to your new custodian. 

Let's take a closer look at what it means to perform a direct and indirect IRA rollover:

Direct vs Indirect IRA Rollover

There are two options when it comes to rolling over your funds to your silver IRA. With a direct IRA rollover, you are essentially moving funds directly from one account to another. 

Many investors choose this option because it is much simpler and comes with less risk of IRS penalties. If you're concerned about receiving penalties, performing a direct IRA rollover is usually the best option. 

With an indirect rollover, you have 60 days from the date you receive the funds to transfer the money to your custodian. Keep in mind that these funds become a taxable withdrawal if you fail to complete the transfer in the 60-day period. Additionally, if you are 59.5 years old or younger, you will face a 10% early withdrawal penalty. 

This can eat away at your money and defeats the purpose of growing your wealth with a self-directed IRA. For this reason, many people avoid rolling over using this method. 

However, 60 days is a generous amount of time to roll over your funds and most people can make their indirect transfer with ease. Use your discretion when deciding whether to do a direct or indirect transfer. 

The Benefits of a Silver IRA Account

There are several benefits of a silver IRA account. Here are some key benefits to consider:

Increased Demand for Silver

Silver has increased in demand for several reasons. For starters, silver is an affordable precious metal that has the same benefits as more expensive metals like gold. 

Silver specifically has a lot of properties, such as it being strong and it having good electrical and thermal conductivity. As a result, silver is a great precious metal that is widely used in several industries.

Excellent Hedge Against Inflation

Even when the economy falls, silver will act as a hedge against inflation compared to paper assets. 

In terms of value, Silver has remained stable throughout the years. For this reason, investing in precious metals like silver is a great way to protect your wealth. 

Cheaper Than Gold

Compared to gold, silver is more affordable. This means that investors can grow their retirement accounts at a cheaper price point when investing in silver products. Investing in silver is also a great way for investors who are new to the precious metals industry to get their feet wet. 

Taxes

Owning a silver IRA means that you won't be subject to any tax penalties. Whatever you gain on silver won't be taxable until it is distributed to you in cash. Even more, you'll get the same tax benefits that you would receive with an individual retirement account. 

Control Over Assets

Silver IRAs are self-directed accounts. This means you'll have greater control over your assets. If you're an investor looking for more freedom that you can't receive from your current IRA or 401(k), a silver IRA is the right choice. 

Silver IRA FAQs

Why do I need to transfer/roll over my IRA to buy silver?

Major custodians like Merill Lynch and JP Morgan Chase do not offer physical precious metals as an investment option in a standard IRA. Most traditional custodians are set up in a way that only allows investors to hold paper assets. 

Physical precious metals require a self-directed IRA. For this reason, investors must transfer or roll over their funds to a silver IRA account to buy metals.

How long does it take to roll over my funds?

If you decide to indirectly roll over your retirement assets, you should receive the assets from your old retirement account immediately and must transfer them to your new custodian within 60 days.

A rollover is coordinated between your old custodian and new custodian and typically takes two to four weeks to complete.

Am I only allowed to invest in silver with my Silver IRA?

The name "Silver IRA" can be confusing to some investors. Many investors believe that silver is the only type of precious metal that can be included in their new account. Luckily, investors have the opportunity to invest in all types of precious metals, including gold, platinum, and palladium.

Will I owe taxes on my rollover?

There generally shouldn't be any tax implications when you perform a rollover. If you complete a direct rollover, you won't actually touch the money as it will go directly to your new Silver IRA account.

Even if you decide to transfer the money yourself, you'll have 60 days to complete the transfer.

What are the fees associated with my self-directed IRA?

Self-directed IRAs typically have higher fees but are more powerful than a traditional IRA or 401(k). Self-directed IRAs offer investors better diversification and a greater opportunity to build wealth.

Here is a quick overview of common fees associated with self-directed IRAs:

  • Setup fee: a one-time fee that covers the facility of the self-directed IRA by the custodian.
  • Transaction Fees: a fee charged by the custodian for performing transactions on your behalf.
  • Asset-based fee: a quarterly or annual fee that is charged based on the total value of assets being held in the account.
  • Annual Account Fee: a fee charged by the custodian for maintaining the IRA
  • Asset holding fees: Precious metals are charged a storage fee by the depository. This fee is typically passed along to the account holder.
  • Asset Purchasing fee: If the self-directed IRA company provides the asset being invested in, the company often charges an increased markup on the purchase.

Keep in mind that fees vary depending on your custodian and what depository you work with. But these are some general fees you can expect when opening your silver IRA.

Diversify Your Portfolio with a Silver IRA

A silver IRA is an excellent way to diversify your assets and grow your retirement portfolio. While the process of opening a silver IRA can seem overwhelming, the rollover process is quite simple. 

With the help of your custodian and precious metals dealer, investing in silver can be a seamless experience.

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