What is a Silver IRA? Everything You Need to Know about Investing in Silver
Disclosure (full version- https://nikolaroza.com/affiliate-disclosure/): Some of the links you’ll encounter are affiliate links. If you click and buy something, I may get a commission. Thank you!
What is a silver IRA?
Is investing in physical silver a good way to diversify your savings and retirement portfolio?
Learn below everything you need to know.
Table of Contents
What is a Silver IRA?
A silver IRA is a specialized type of IRA (individual retirement account) that lets American savers and investors include physical silver bullion in their retirement portfolio.
Most US IRA companies offer both silver and gold for investment and some offer platinum, palladium and even rhodium (very rare though as rhodium is not an IRA-approved precious metal).
Any precious metal you buy must be IRA-approved and must satisfy the strict purity and weight standards set forth by the IRS.
The main benefit of including silver and other precious metals in your retirement portfolio is diversification.
By owning physical silver coins and bars (and other precious metal bullions) you’re ensuring that at least a part of your savings will be resistant to high inflation and drastic economic swings and downturns.
What are the Different Types of Silver IRAS?
There are three types of silver IRAs.
They are:
- Traditional silver IRA. Traditional silver IRAs let savers and investors make tax-deductible contributions, but they’ll need to pay taxes upon withdrawal in retirement. The contribution limit for 2023 is $6,500 or $7,500 for those ages 50 or older. If investors withdraw funds before age 59 ½, they’ll need to pay a 10% penalty tax.
- Roth silver IRA. Roth silver IRAs allow investors to contribute after-tax dollars with withdrawals in retirement being tax-free. The contribution limit for 2023 is $6,500 or $7,500 for those ages 50 or older.
- SEP silver IRA– SEP (simplified employee pension) silver IRAs are best suited for self-employed individuals. They offers a way to save for retirement while taking advantage of tax-deductible contributions.
| Type of IRA | Traditional Gold IRA | Roth Gold IRA | SEP Gold IRA |
|---|---|---|---|
| Best for | People who expect their retirement income to be lower than their current income. | People who expect a higher income in retirement | Self-employed individuals and employees of small businesses. |
| Eligibility | Eligible if you've earned income | Your income must be under a certain limit ($228,000 for married couples filing jointly for tax year 2023 and $153,000 for individuals) | self-employed individuals, small-business owners and employees of small businesses. funding method- pre-tax dollars |
| Funding method | pre-tax dollars | after-tax dollars (the money you contribute is taxed) | pre-tax dollars |
| Contribution method | $6,500 or $7,500 for those ages 50 or older for the tax year 2023 | $6,500 or $7,500 for those ages 50 or older for the tax year 2023 | Up to 25% of your self-employed compensation or $66,000 (whichever is greater) for the tax year 2023 |
| Tax-deductible contribution | Yes | No | Yes |
| Are withdrawals taxed | Yes | No | Yes |
| Early withdrawal rules | If you withdraw funds before age 59 ½, you face a 10% penalty+ taxes | You can withdraw funds at any time penalty-free and tax-free | You can withdraw money from a SEP gold IRA without penalty once you reach age 59 1/2. If you withdraw funds before then, you'll need to pay taxes on the money withdrawn and face a 10% penalty. |
| Required minimum distributions | once you turn 73 | None | after you turn 73 |
Note: You need to know that most IRA custodians do not work with precious metals and will not help you invest in silver, gold or any other precious metal bullion.
So you’ll need to do thorough research to find a specialized custodian by yourself. Or you can get help from a professional gold IRA company that can connect you with a custodian, and do tax work and paperwork for you. All you’ll need is to sign and you’re a proud owner of silver bullion.
I recommend Augusta Precious Metals as your first choice of a reputable gold IRA company operating in the US.
They’re the only gold IRA company on the market that insists potential customers get educated on the pros and cons of gold and silver IRAS before placing an order.
Other companies just try to sell to you as fast as possible, and they often use pressure tactics to get you to buy quickly and without thinking.
You can read my Augusta Precious Metals review to learn more about this IRA company and precious metals dealer.
How Does Silver IRA Work?
Silver IRA is a self-directed IRA. This means the investor (that’s you) picks the specific IRA investments to hold within the account, and the value of your silver IRA is determined by the market value of the metal held in the account.
With silver IRA, instead of owning mutual funds bonds and stocks, you own physical silver, gold (and sometimes platinum and palladium) bullions.
Your silver IRA will be self-directed, but that doesn’t mean you won’t need a custodian. You’ll need a specialized custodian who’ll hold and manage your physical assets in an IRA-approved depository.
Here are specific IRS regulations for investing in a silver IRA.
- The silver held in your account must meet certain purity standards (99.9% purity).
- You must also adhere to an annual contribution limit to be considered IRS-approved.
- You can start withdrawing from your silver IRA (without penalties)once you reach age 59 ½.
- Once you turn 73 you’ll be able to either liquidate your silver or have it shipped to your address.
- Silver IRAs offer tax advantages like differing taxes on contributions and earnings until retirement.
Pro tip: however, the tax treatment of physical silver differs from other assets held in traditional IRAs. It’s crucial to understand the tax implications of investing in a silver IRA. That’s why you need to get advice from a tax professional before making any large investment decisions.
As a shortcut, you can also go with a gold IRA company like Augusta Precious Metals which does all the work for you and you only have to sign and become an owner of your new silver IRA.
Silver IRA Pros and Cons
Silver IRA Pros
Silver is a safe-haven asset. This means it retains its value even during recessions, economic downturns and periods of high inflation. Having silver in your retirement portfolio protects your savings from market volatility and from your hard-earned money losing value to inflation.
Investing in a silver IRA comes with tax benefits. Contributions you make to traditional silver IRAs are tax-deductible.
This means the amount you contribute reduces your taxable income and your earnings are tax-deferred until you start withdrawing and liquidating your silver bullion.
Meanwhile, with Roth silver IRAs, withdrawals you make after you turn 59 ½ are tax-free, but you still have to pay taxes on contributions.
Silver IRA Cons
The silver market is relatively smaller and less liquid compared to the gold market. As a result of its lower trading volume, silver is more prone to volatility and may exhibit more significant price fluctuations than gold.
Silver doesn’t generate any income in the form of dividends or interest. If you want to earn money quicker from interest payments consider investing in stocks and bonds.
A silver IRA comes with some fees not present with the more traditional forms of IRAs. Expect to pay fees for opening an account with an IRA company, account maintenance, storage fee insurance fee, yearly custodian fee…
Additionally, if you want to liquidate your silver in the future, you may have to sell it for less than it’s worth. This is because you’re required by law to begin taking distributions once you turn 73. If silver’s price is at a low point you will lose money.
The IRA company you originally went with will have a buyback program, but you’ll be selling your silver at a loss.
How to Invest in a Silver IRA?
Here are the requirements you need to meet to be able to open a silver IRA.
To open a silver IRA, you need to be the spouse of someone who has earned taxable income, or you need to have earned taxable income.
Next, you need to find a reputable precious metals IRA company to open a silver IRA account.
Note: since you want to invest in silver, you need to make sure the IRA company you pick sells IRA-approved silver bullion (coins and bars).
This is because gold is the predominant precious metal sold in the US and many precious metals dealers don’t offer silver to investors.
Below are the two examples from Augusta Precious Metals and American Hartford Gold (you can read my Augusta Precious Metals vs American Hartford Gold guide here)
Once you’ve chosen an IRA company, the account setup is relatively straightforward but the process will vary depending on the company you picked.
You’ll need to provide personal information and select the type of IRA you want to open. Then, you’ll need to fund the account by transferring funds from an existing 401(k) or IRA, or by making a contribution (the IRA company makes this easy for you).
The company will then purchase physical silver bullion (or other metals) on your behalf and store it in a secure facility (precious metals depository).
What are the Requirements for Opening Silver IRA Acconut?
It’s crucial to note IRS has specific requirements for the type of silver that can be held in a silver IRA.
First, silver needs to have 99.9% purity. Second, only certain silver coins are IRA-approved and can be bought for a silver IRA.
Note: here are the silver coins you can have as part of your silver IRA:
- Australian Striped Marlin
- Canadian Silver Soaring Eagle
- Canadian Silver Eagle with Nest
- American Silver Eagle
- Australian Silver Kangaroo
- Canadian Silver Maple Leaf
Note: Silver coins that are “slabbed,” certified, or “proof coins” are not allowed in a precious metals IRA. You also can’t add numismatic coins as part of your silver IRA.
For example, Augusta Precious Metals offers common silver bullion you can buy online and have it delivered to your home.
And they offer IRA-approved coins which you can buy and have shipped to the depository of your choice.
Third, remember that there are contribution limits in place when opening your silver IRA. For 2023, the contribution limit is $6,500, and $7,500 if you are 50 or older and want to make “catch-up contributions.”
Finally, all precious metals IRA companies have minimum investment requirements when buying gold and silver for them.
For American Hartford Gold minimum investment is $5000 for cash purchases and $10 000 for IRA purchases.
For Augusta Precious Metals the requirement is much steeper. It’s $50 000 for both cash purchases and IRA purchases.
Things You Need to Know and Do Before Opening a Silver IRA Account
It is easy to open a silver IRA account. You just go to the specialized IRA company and have them do the paperwork for you and you just sign.
And that’s it.
But the hard part is picking the right silver IRA company to give your business to.
I’ve already talked about Augusta Precious Metals a lot in this guide, so I won’t be repeating myself here.
In my opinion, they’re simply the best.
Pay attention to this when picking a silver and gold IRA company:
- Each company’s setup and account management fees.
- Minimum investment requirements.
- History of the company, and reputation on the market (BBB score and scores on other trustworthy consumer watchdog websites).
- Honest customer reviews on Reddit and Quora (be careful with Quora as it’s full of spam and you need to know to recognize it).
- The speed and efficiency of customer support.
- Buyback and refund policy.
Finally, you also need to know that silver price is volatile and while it can definitely rise in the near future it might also sharply drop
Don’t be scared if that happens and understand that investing in silver with the aim to profit is a medium to long term game.
What is a Silver IRA (FAQ)?
Is Silver IRA Safe? Does it Help Protect Against Recession?
Silver IRA is safe because silver as a precious metal can never be worth zero. This means there will always be value to your silver bullion no matter what’s happening in the world. Especially during recession and lean years, your silver bullion will serve as a hedge to keep you afloat.
In fact, there’s a higher demand for silver (and other precious metals) during recession because they are tangible assets that investors can physically hold onto and can help diversify one’s investment portfolio.
That said, silver prices are highly volatile and while they tend to rise during high inflation and recession they can also drop during “peaceful” times.
What is an IRA-Approved Silver?
IRA-approved silver is silver that meets specific purity and other standards.
- Silver coins- silver coins must be at least 99.9% pure, and the silver IRA-approved coins are: Australian Striped Marlin, Canadian Silver Soaring Eagle, Canadian Silver Eagle with Nest, American Silver Eagle, Australian Silver Kangaroo, Canadian Silver Maple Leaf.
- Silver bars- silver bars must be produced by an approved mint and be at least 99.9% pure. They also must be accredited by COMEX, NYMEX, NYSE/Liffe/CBOT, TOCOM, LME, LBMA, LPPM, and ISO-9000 or a sovereign mint (for example Royal Canadian Mint).
Can You Add Platinum and Palladium Precious Metals to Your Silver IRA?
You can add both platinum and palladium products to your silver IRA. Just because it’s called “silver IRA” doesn’t mean you must invest in physical silver bullion only. Platinum, palladium and gold are common alternative choices.
Can I Add Rhodium to My Silver IRA?
You can’t add rhodium to your silver IRA. Rhodium is not an IRA-approved precious metal.
What are the Contribution Limits for Gold IRA?
The contribution limits for silver IRA are set by the IRS.
The IRS set contribution limits to $6,500 for 2023. You can contribute an additional $1,000 if you are 50 or older for a total of $7,500 in 2023.
What are the Ways to Fund a Silver IRA Account?
There are three ways to fund a silver IRA account.
Transfers– When you open a silver IRA your original IRA custodian can transfer funds directly to your new custodian on your behalf. These transfers do not require government reporting and you can make them without penalties.
401 rollover- You can roll over your 401(k) balance or other qualified retirement plan into a precious metals IRA. You can do a direct rollover or an indirect rollover.
Cash purchases- you can use cash to fund your new silver IRA account. It’s easy to do either by yourself or with the help of a silver IRA company. Before making a cash contribution, you should refer to the IRS’s guidelines for the latest limits and rules, but if you go the company route they will tell you everything you need to know.
How Much of My Retirement Portfolio Should Be in Silver and Other Precious Metals?
You should own between 5% and 10% of your retirement portfolio in silver and other precious metals. This percentage allows you to effectively diversify your portfolio while still being able to invest in stocks and bonds which can pay you dividends and interest over time.
Can I Own Silver Outside of My Silver IRA?
You can own silver outside of your silver IRA. And you can store those coins and bars in your home. You don’t need a custodian and you don’t need to store your precious metals in a depository or a bank.
Where is the Silver in Silver IRA Stored?
The silver in your silver IRA is stored in IRA-approved depositories or specialized banks.
The biggest IRA-approved depositories are:
- Delaware Depository Service Company (DDSC), Wilmington, DE
- International Depository Services (IDS), New Castle, DE, Toronto, Canada, and Ontario, Canada
- Brink’s Global Service, Los Angeles, CA, Salt Lake City, UT, and Springfield Gardens, NY
- CNT Depository, Bridgewater, MA
- First State Depository, Wilmington, DE
Is Silver IRA a Self-Directed IRA?
Silver IRA is a self-directed IRA.
A self-directed IRA is an individual retirement account that allows alternative investments for retirement savings.
In a self-directd gold IRA, a custodian administers the account, but the account’s holder makes the investing decisions. That’s why it’s called a self-directed IRA.
Can You Own Silver in an IRA?
You can own gold in an IRA. You can buy IRA-approved silver coins and bars, but you must store these in an IRA-approved depository.
What are the Best Silver IRA Companies?
The best silver IRA companies are:
- Augusta Precious Metals;
- American Hartford Gold;
- Patriot Gold Group;
- Birch Gold Group;
- Solver Gold Bull Inc;
- Oxford Gold Group;
- Advantage Gold;
- Noble Gold Investments;
- Regal Cinemas;
- Lear Capital, Inc;
- American Bullion, Inc;
- Noble Gold;
- Goldco Direct LLC.
Is it Hard to Find a Custodian To Manage My Silver IRA?
It is hard to find a custodian to manage your silver IRA.
Primary custodians will not receive your silver or take steps to facilitate the purchase and transfer of silver bullion or other precious metals.
This leaves you with the option of either searching for specialized custodians by yourself or employing a gold IRA company that can connect you with the right custodian through their already established network.
I suggest you do the latter.
Gold IRA companies specialise in helping American savers invest in gold and silver and their job is to ensure all documents are completed properly and in order.
These companies are also really affordable. For example, if you go with Augusta Precious Metals you’ll pay just $200/yr management fees.
And Augusta will do all the work for you and everything will be done to a dot.
Can I Own a Silver IRA Without a Custodian?
You can’t own a silver IRA without a custodian. The IRS don’t allow it. It’s only possible to own a gold IRA without a custodian.
But to do it you’ll need to open what’s colloquially known as a “checkbook IRA,”
Checkbook IRA is a self-directed IRA that doesn’t require custodial management.
However, setting up a checkbook IRA is complicated because you need to have a business checking account and you must be registered as an LLC (limited liability company) (LLC).
On a checkbook IRA you’re allowed to purchase and hold gold American Eagles, a U.S. Treasury–minted coin.
What is a Better Investment Than Silver?
Gold is often considered to be a better investment than silver. This is because the market for gold is several times larger than the one for silver and this makes the prices more predictable and far less volatile.
What Kind of a Penalty Will I Need to Pay for Withdrawing Silver Early?
You will need to pay a 10% penalty for early withdrawals from your silver IRA. Early withdrawals are those before you turn 59 1/2. The reason for this 10% penalty is that retirement funds are invested from your pre-tax income (this means they’re not taxed).
However, sometimes it pays to make an early withdrawal despite the penalty.
In this Reddit thread, some former silver IRA owner explain how they calculated it’s more profitable to them to withdraw their silver early, pay the 10% penalty, take their silver than to pay the storage fees year after year.
Can I See the Precious Metals in My Silver IRA?
What is a Silver IRA (Conclusion)?
Investing in silver and opening a Silver IRA is an effective way to diversify your retirement portfolio and regain peace of mind ahead of upcoming economic turbulence
If you have any questions, LMK in the comment section below.
Nikola Roza
Nikola Roza is an affiliate marketer and blogger behind Nikola Roza- SEO for the Poor and Determined. He writes for bloggers who don't have huge marketing budgets and who still want to carve out a niche online and a better life for themselves. He's also passionate about precious metals IRAs and how to invest in gold and silver for a safer financial future. Learn about Nikola here, or read his blog posts and guides here.