A silver IRA rollover is not as common as a gold IRA rollover however it is still as important.
What is a silver IRA?
A silver IRA is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.
Silver IRA History
After the financial crisis in 2008, which brought a recession, investors became interested in silver IRAs. The reason for that was the significant drop in the stock market and real estate, which took place between the years 2007 and 2009.
During those two years, the stock market lost 50% of its value and that loss was reflected in people’s retirement portfolios. Although there were significant losses in almost any type of investment, the price of silver moved in the opposite direction reaching record highs, as all other precious metals did. (gold, platinum, palladium)
Reasons for You to Invest in Silver IRAs
1-Diversification. There is no doubt that IRAs are suited for portfolio diversification in case, economic and world news cause another drop in the stock market.
2-Protects your investment from inflation. Silver is a hedge against inflation. Although silver is subject to volatility, it has always performed well during times of high inflation.
3-Silver is a tangible asset. Traditional investing is putting money in the stock market, buying certificates of deposit, or buying bonds. These are not tangible assets. In fact, it could take time for you to convert these investments into cash. For example, if you invest in CDs or bonds you may have to wait for a number of years before you receive a return. If you want to terminate your CDs investment and wish to withdraw early, you might have to pay a penalty.
This is not the case with gold or silver as you can convert your coins or bars into cash immediately, as the demand for precious metals is constant.
4-Increasing demand for gold and silver industrial use. Both precious metals have a growing demand for industrial use. In particular, they are used in smartphones, computers, medicine, and nanotechnology. And if we consider the massive precious metals demand for jewelry, only then do we get the full picture.
5-Silver is not a claim on someone else’s liability. Silver has never lost its value for mismanagement, corruption, theft, war, etc. Stocks have. Also, there has never been and never been a haircut to silver as it’s been happening with debts and savings.
6-Geopolitical uncertainty. Geopolitical tensions are growing, the Middle East is still in turmoil. Syria and Iran are under Russian control, with the United States has lost its credibility. Hong Kong tensions never stop, Brexit deal and North Korea continues to be upset with its unruly behavior.
7-The US-China and the US-EU trade war. Although it seems like the Chinese and the Americans are coming to their senses and trying to close a new trade deal, the Americans and the Europeans are now just about to start a new trade war themselves.
What is a Rollover IRA
A rollover IRA is an account that allows you to shift funds from your former employer-sponsored retirement plan, (401k) or another type of retirement account.
Rollover IRA Benefits
1-A rollover IRA will keep your retirement dollars safe from taxes when the process is done properly.
2-A rollover IRA can provide a wider range of investment choices that may meet your goals and reduce risk.
3-Gold IRAs tend to have low fees compared, to some 401k plans which have high administrative fees. Although these high fees are not enough to make contributions to the fund a bad deal, if you can get a better deal by paying lower fees, then it makes sense to switch from a 401k account to an IRA account.
4-As you switch from one job to another, over the course of your career, then it makes sense to keep rolling over your plans to a single rollover IRA account.
There is a large difference between a rollover transfer and a rollover. According to the IRS, there is a clear distinction between the two. A rollover is when the money being moved is paid directly to you and then you deposit the money in the account that you want.
A transfer is when the custodian transfers the money directly to the new custodian. In this case, you never see the money.
I personally recommend the IRA transfer. It is easy, you will not have to worry about a thing and the possibility of getting penalized by the IRS is zero.
How to Initiate an IRA Account
To initiate a gold IRA account is simple. First, you need to find a custodian. It is important to have a custodian because it is illegal to hold the silver yourself. The custodian’s task will be, to hold the silver you invest via your IRA.
If you have trouble finding a custodian, you can ask your bank for a reference, your trust company, or even your credit union. You also have to do your own research, to make sure he has a long history of solid silver performing IRAs.
The next step is to find a precious metal broker, who will actually sell you the silver. In most cases, the custodian will be able to provide you with a list of brokers. After you find a suitable broker, then you will have to open your new account and buy your precious metals. That’s all.
When the time arrives for you to retire, you can choose either to collect the precious metals or, to liquidate them into cash. The IRS will tax either task as an allocation as it always does. Remember, two things are certain in life, death, and taxes.
Silver IRA Rollover and Silver IRA Transfer Rules
If you decide to go ahead with an IRA rollover, then you will have 60 days to deposit the money to the custodian. Failing to keep that deadline, the money will become a taxable withdrawal and you will have to pay the 10% early withdrawal penalty.
If you decide to go ahead with an IRA transfer, you will not have to worry about the 60-day rule. The money will be wired directly from the old custodian to the new. This is the best way to invest in silver, through your IRA because, the process will take part in the background, without you having to worry about a thing.
What Percentage of my Portfolio Should I Rollover to my Silver IRA
A serious investor never puts all eggs into one basket. For example, you do not want all your savings invested in stocks, bonds, real estate, etc.
During the 2008 crisis, the stock market dropped 50% and real estate suffered heavy losses. On the other side, silver stood its ground and reached record highs.
Nowadays, traditional forms of investment can bring investors high profits and heavy losses too. A down-to-earth investor should have a percentage of his savings placed in non-correlated assets. Silver and other precious metals are non-correlated assets.
Correlated assets are the assets whose value goes up when other assets’ value drops. Silver, gold, and other precious metals, always perform better in times of crisis and investors include them in their portfolios for security reasons.
Most investors invest in silver between 2% and 5% of their savings. However, some investors are aggressive and place silver as a larger percentage of their savings.
The money you wish to invest in your silver IRA is your own personal decision. All you need to do is set your priorities. Are you happy with your IRA returns? Is your IRA exposed to stock market instability? Are you happy with the way the economy is going? What about the dollar’s value, will it rise or fall? Do you believe silver has the potential to reach $30,00 or $40,00 per troy ounce?
If you want to diversify your portfolio with a non-correlated asset, then investing 5% to 7% of your savings in silver will be more than enough.
If you are not happy with the way the economy is going, the accumulating debt, and the performance of the dollar, then you could invest 7% to 10% in silver.
Furthermore, if you happen to believe all the above and that silver’s price is going to explode, then you could invest 10% to 12% into silver.
It is not advisable for the investor to hold a portfolio completely made out of silver. Furthermore, my advice to the investor is when investing in a silver IRA to include gold in his investment.
When times are favorable for one particular asset, then it is prudent for the investor to increase the percentage of its investment in that particular asset. For example, if times favor stocks, then the investor should place an extra 5% or 10% percent into stocks. If the market is bullish on silver, then it would be a good idea for the investor to increase the percentage of his investment into gold.
Is There a Safe Investment?
There is no safe investment whatsoever. Over the years, there has never been an investment whose value moved upwards and only upwards, year after year. Although all types of investments have their good and bad moments, in the long run, the investor ends with a substantial amount of profit.
There are high-risk investments, medium-risk investments, and low-risk investments. High-risk investments most of the time have high returns and low-risk investments have rather low profit margins but, low-risk investments give you a high level of security.
Silver is a medium-risk investment as it tends to do very well in times of crisis but, when the silver market is bearish then, silver’s value could drop substantially. This is the reason why a silver IRA should be combined with other precious metals such as gold.
When times favor metals we want to make the most of it and when the times do not favor metals, then we want to minimize our losses.
The next chart shows gold’s performance during financial turmoil.
|Black Monday1987||Iraq-Kuwait War1990||Dot Com Crash2001||Financial Crisis2008|
|Stock Market Decline||-38.9||-22.5||-27%||-34%|
|Gold Price Results||+5%||+7.5%||+1%||+5%|
|Gold Outperformed Stocks By Ratio||45:1||31:1||29:1||40:1|
IRS Approved IRA Coins and Bullion
When it comes to investing in IRA coins or bullion, not all coins or bullion are approved. That’s because the IRS has placed strict purity rules and requirements. Therefore, all coins and bullion approved, are those who meet the strict IRA rules. The IRA-approved gold should have a purity grade of at least 0,995, for silver 0,999, for platinum 0,9995, and 0,9995 for palladium.
Gold IRA approved
- 1-American gold eagle coins
- 2-American gold buffalo coins
- 3-Australian gold kangaroo nugget/coins
- 4-Austrian gold philharmonic coins
- 5-Canadian gold maple leaf coins
- 6-Credit Suisse golden bars
- 7-Johnson Matthey gold bar
- 8-Valcambi gold combi bar
Silver IRA approved
- 1-American silver eagle coins
- 2-Australian kookabarra silver coins
- 3-Austrian Philharmonic silver coin
- 4-Canadian silver maple leaf coins
- 5-Mexican silver libertad coins
- 6-Johnson Matthey silver bar
- 7-Royal Canadian silver bar
Shall I Include Other Precious Metals in my Silver IRA?
Silver IRA is a term used to describe an IRA invested solidly in silver. An IRA account invested solidly in silver is highly unusual, most silver IRA accounts contain also other precious metals, mainly gold. but rather an IRA consisting of various precious metals. There can be an IRA where gold is the only precious metal invested in and this is the usual case.
In a well-balanced precious metals IRA, the largest percentage of the investment is in gold usually 80% to 90%, with silver following with 10% to 20%, and platinum-palladium with 5%. Silver, platinum, and palladium are volatile and higher-risk precious metals than gold.
When times favor gold, all other precious metals follow including silver. During those times, they tend to have higher returns than gold therefore, it is sensible for an investor to have a small percentage from his/her portfolio invested there.
It is also sensible for the investor to invest small in those volatile metals because, when they suffer losses, their losses are heavier than those of gold. We want to take advantage of the rise and maximize profits and at the same time, minimize losses.
Investing in a gold-silver IRA is becoming increasingly popular for the modern investor, as gold and silver can offer a number of benefits to the investor. Gold-silver will actually act as a hedge to protect your life savings during bad times.
If we also take into account the geopolitical instability around the world, the recession we expect in 2020, the overvalued stock market, and the undervalued precious metals in general, now is the best time to invest.