Physical precious metal assets can pay off when you reach retirement age — if you invest and prepare to utilize those assets wisely, says Kevin DeMeritt, founder and chairman of Los Angeles-based precious metals firm Lear Capital.
Directly investing in physical precious metal assets — such as gold, silver, or platinum coins or bars — typically involves setting up a self-directed IRA.
“If you had a 401(k) or an IRA, and you’d like to take a portion or that and move it over to a self-directed gold-backed IRA, you can do that,” Kevin DeMeritt says. “[It] takes you about five, 10 minutes to put the paperwork together, and then it’s just moved over to that physical gold or silver IRA.”
Generally, traditional IRAs and other qualified retirement accounts, such as a Roth, SEP, or SIMPLE IRA, 401(k), 403(b), 457(b), pension plan, or Thrift Savings Plan account, are eligible to be rolled into a precious metals IRA — a type of investment that can offer a few notable advantages.
Physical Precious Metal Savings Options
Gold, silver, and platinum can be beneficial investments in part because those resources are limited; you can’t mine or print endless amounts of the metals like you can with paper money, which helps gold retain its value.
Gold prices, in particular, have also been more even-keeled, historically, than investments like the stock market, which is often susceptible to economic and other conditions. Although the stock market’s average yearly returns are about 10% — 7%, when you factor in inflation — that amount isn’t guaranteed.
As we’ve seen during the past year, the market can bear the brunt of civil and financial issues. By the end of 2022’s second quarter, as the Federal Reserve raised rates to try to slow the economy and the conflict between Russia and Ukraine waged on, Americans had lost $9 trillion due to the market.
Even if the U.S. experiences continued economic challenges in the coming year, if gold and silver’s traditional performances are any indication, they may fare better than some other investment vehicles, given precious metal assets have a tendency to be less wildly unpredictable in times of distress.
Prices for gold and silver have, in fact, steadily grown in the past 20 years, according to National Mining Association data.
“Gold has an inverse relationship to stocks and other types of assets,” Kevin DeMeritt says. “In times of war or terrorism, usually you’re going to find the markets become extremely volatile. Nobody knows what’s going on from day to day. What’s the asset that gives you some stability while all of those things are happening? Typically, that’s gold.”
Preparations To Enable Future ROI
Although some investors may view cost as a significant deterrent to investing in precious metal assets, with gold trading at more than $1,900 per ounce in February, there are other options for consideration, according to Kevin DeMeritt.
“Silver is even less,” he says. “You could start with silver, which is a great option right now, and then move your way up to gold as you accumulate enough silver.”
Precious metal assets don’t need to be your sole investment choice; Lear Capital actually recommends holding around 20% of your portfolio in precious metals. If you’re closer to retirement, however, Kevin DeMeritt suggests potentially adjusting that equation to take a less aggressive investing approach that will still allow precious metal assets to potentially provide helpful balance.
“If you’re 65, 70 years old, gold is not going to produce an interest payment or rent,” the Lear Capital head says. “But it will help you offset losses with the drops in other assets. If you’re looking for income, we want to push that 20% down to maybe 5% or 10% to make sure you have enough income.”
If you opt to invest in precious metal bars or coins, to ensure you’ll be able to reap the benefits during retirement, you need to adhere to a few key regulations.
Items have to possess a certain fineness, for instance — for gold bars and rounds, at least 0.995; for silver, 0.999, according to the Internal Revenue Service. Until you reach an age when you can legally start to take a distribution, precious metal assets also need to be kept at an IRS-approved and insured, private storage facility, such as the Delaware Depository, the facility that Lear Capital utilizes.
The Delaware Depository, which has safeguarded precious metal items since 1999, backs its storage services with a comprehensive insurance policy — another important aspect of storing assets remotely — that’s underwritten by renowned insurance provider Lloyd’s of London. Metals held at the depository are insured for their full value if any fire, flooding, or other physical loss or damage were to occur.
Making the Most of Your Precious Metal-Based Retirement Savings
As with numerous traditional IRA or 401(k) plans, you can begin to take distributions from a physical precious metal asset-based IRA when you reach the eligible age — typically 59 and a half — without any penalty. If you access the associated assets or funds before then, you could be subject to a 10% tax.
When you are ready to tap into your gold, silver, or platinum-based investments, you can choose to either have the assets shipped directly to you, or you can instead opt to liquidate the items and receive cash for them.
With investments that have been placed with Lear Capital, which has successfully processed more than $1 billion IRA-related transactions, once you let your IRA specialist know which option you’d prefer, the corresponding arrangements will be made for you. A liquidation-related cash distribution generally takes about one day to process. You can have the amount wired to a specific bank account or sent as a check.
Investors who are nearing retirement age are sometimes thought to have a more conservative portfolio outlook, because they’re focused more on retaining capital rather than aggressively earning it. While precious metal asset investments may seem like a better fit for investors in that age group, younger consumers, too, can benefit from considering them.
“You don’t really have to reach retirement age to invest in precious metals,” Kevin DeMeritt says. “The gold market has actually outperformed the stock market since 2000. You can be in complete control of your metals and hold them physically within an IRA. If people get educated about precious metals, they’ll find it’s a great time to add at least some portion of their portfolio into this asset category.”
