Self-directed IRAs are increasingly popular as investors discover they can use them to escape the ring fence represented by traditional IRA accounts.
Banks and brokerages successfully cultivated the idea that IRAs should contain only conventional securities – stocks, bonds, and mutual funds. The truth is that they get paid handsomely for selling those paper assets, so that is all they put on the menu.
But word is getting out that it is perfectly legal and easy to own tangible assets, including real estate and precious metals, in an IRA. Investors just have to leave Wall Street and find a custodian who specializes in self-directed IRA plans. Today, several firms are offering this sort of plan, so it is worth covering how an investor might go about choosing one.
You’ll want to start by evaluating the basics. Choose a firm with a reputation for providing great service at competitive fees. You might give extra points to a firm that is well-established in the industry. There has been a fair bit of consolidation and changes in the space recently.
We would not recommend custodians charging more than $150 in annual fees or those charging more than $50 for each transaction. There are some very good firms with fees significantly below those levels.
The capability to enroll, view and manage transactions online should be a big consideration if you prefer the convenience of managing affairs electronically. Those people who prefer to deal in person should inquire by phone to see if they can reach a service rep easily and get good care.
Storage of your IRA metals is also an important consideration. Custodians will require you to store in a Depository they have vetted and approved. Each will have limited options, so keep that in mind.
Many clients may want to store metals closer to where they live. Others will want to store with a specific depository they know to be reputable and secure. Make sure the custodian you choose has a depository option that works for you.
If you would like to store your IRA metals with Money Metals Depository and take advantage of zero shipping costs and instant delivery from Money Metals Exchange, you’ll want to choose New Direction IRA in Colorado. Our new Depository in Idaho will be approved by additional custodians shortly.
But New Direction IRA is going to be hard to beat. They come very highly recommended by our IRA clients for low fees and great support.
We also recommend segregated storage, which is the only type offered at Money Metals Depository.
Pooled or unallocated storage presents risks. One of those risks is that you buy and store metals that are in good condition, but when you remove metals from storage the depository staff can arbitrarily select scratched, dented, or tarnished items from the pool to send.
If you don't use segregated storage, you may wind up with metals which will be discounted based on condition when it is time to sell. It happens more often than you might think.
You should avoid custodians who want to steer you into particular products or programs. Some “rare” and “proof” coin dealers have special arrangements with custodians to steer people into high-premium coins.
Those over-hyped coins generally do not perform well for anyone but the dealers selling them and should be avoided like the plague. The Wall Street Journal just published an extremely damning article about the proof coin market.
Likewise, we would steer well clear of any custodian pushing “self-storage” metals IRAs and downplaying the risks associated with that program. Taking possession of metals held inside an IRA means taking significant risks that the IRS will disqualify your IRA down the road, subjecting you to taxes and penalties on your entire IRA balance.
IRS officials are already signaling their disapproval. If they decide to clamp down on self-storage (or LLC IRAs) it will be YOU holding the bag, not your custodian – despite the handsome fees you paid for the set-up and administration.
If you need a specific recommendation on an IRA custodian based on your circumstance, please just give one of our Specialists a call at 1-800-800-1865. We will be happy to make a recommendation based on your preferences. To get started with a precious metals IRA, visit this page.
About the Author:
Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.