What Is A Silver Ira?


Published: April 4, 2022

what is silver ira

Investing in an individual retirement account (IRA) can be an advantageous way to save for the future and reduce taxable income. The money you put into your IRA can be invested in paper assets such as stocks, bonds, and mutual funds, and it can also be invested in a wide range of hard assets like real estate, businesses, and precious metals.

However, in recent years investors have looked for IRA options that will be a better hedge against inflation than a traditional IRA.  One of the most popular options is an IRA backed by physical silver.

What Is a Silver IRA?

A Silver IRA is just like a self-directed IRA, except instead of investing in paper assets, you are investing in physical silver.  Historically, precious metals such as silver have been a safe haven commodity to invest in, especially in times of high inflation. 

Though they are not immune to occasional extreme market fluctuations, the overwhelming trend is that precious metals increase in value over time. Silver, which is most commonly purchased as bars or coins, is an ideal long-term investment.

What Is A Silver IRA Custodian?

By law, all IRA’s are required to have a custodian, also known as a trustee, who ensures that all investments adhere to the policies set by the Internal Revenue Service. The custodian, a highly regulated institution such as a bank or credit union, reports to both state and federal governing bodies. 

The IRA custodian completes and files all of the necessary paperwork to ensure that the IRS approves all investments.  This is how an IRA is allowed to retain its tax-advantaged status.

A Silver IRA custodian is an institution that can support a self-directed IRA portfolio with investments in silver coins and bullion.

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The Advantages Of A Silver IRA

Over long periods of time, markets are prone to extremes that are not always predictable. A diversified portfolio will include a broad range of investments into assets that perform differently under different market conditions. In times of inflation, paper assets tend to lose value quickly; however, precious metals like silver will typically perform better during these times.

An investment portfolio that includes investments in precious metals such as silver is protected, at least in part, against market fluctuations. Even if the cost of silver temporarily dips, its value has steadily increased for at least the past one hundred years.

Hedge Against Inflation & Downturns

Silver investments can be considered a hedge against volatile markets and inflation. One of the primary reasons silver retains its value so well is because there is a finite amount of it on earth. This makes silver a hard investment with intrinsic value. 

The value of currency is constantly falling, while the value of precious metals has historically increased over time.  The value of the silver dollar has increased tenfold in the past hundred years, which is a 1000% return on the initial investment.  By comparison, the value of a paper dollar has fallen over 90%. 

In some historical cases, the value of silver has even increased dramatically against a backdrop of economic chaos and uncertainty. In the 1970s, during a period of exceptionally high inflation, silver appreciated by over 2,700%.

It’s Used In Industrial Applications 

Silver has seen a surge in demand over the past several years due to its use in various industrial applications. In fact, about half of its worldwide demand is driven by its use in multiple industries, while only 15% of gold’s demand is driven by industrial use. 

Industrial applications use silver due to its excellent conductivity. It actually has the highest conductivity of any element for electricity and heat. Silver is also known for its sensitivity to light and surprising anti-bacterial qualities. 

The two most popular uses of silver in industrial applications are solar panels and electric vehicles. However, it’s also used in various other applications such as batteries, glass coatings, LED chips, nuclear reactors, RFID chips, semiconductors, a wide range of medical uses, and much more.

It’s A Tax-Advantaged Investment

Like any other IRA, a silver IRA is a tax-advantaged investment. This means that you can deduct your entire investment from your pre-tax income, which brings down your total tax bill.

You will also never pay any taxes as dividends are re-invested into your retirement fund each year. You will only be responsible for paying taxes on your IRA when you begin to take distributions from it once you reach retirement. 

The Disadvantages Of A Silver IRA

The main disadvantage to a Silver IRA is that its growth is limited to capital gains. That means your investment only grows if the market value of silver increases. You’ll still own the same amount of capital (silver), but it has the potential to be worth more money if its value increases over time. However, you run a similar risk with a traditional IRA if the stocks or bonds you invest in perform poorly.

Unlike a stock investment, a Silver IRA does not pay interest or dividends, so you cannot take advantage of compound interest like other types of investments. Though precious metals such as silver are historically a very safe investment, higher prices in the future are never guaranteed. 

Restrictions in Silver IRA Custody

Silver IRA investments exclude all jewelry, silver you already own, and any assets stored in a home or safe deposit box. Because of IRA regulations, any and all investing choices must be arranged through the custodial institution, which reports all activity to the appropriate governing bodies.

Silver IRA investments can only be made through the custodian or trustee and may only be in the form of silver coins or bullion of at least 99.9% purity. 

Presently, IRA-approved Silver investments include: 

  • 1 oz American Silver Eagle Coins 
  • 1 oz Chinese Silver Panda Coins
  • 500 oz American Silver Eagle Mint Case
  • 1 oz Canadian Silver Maple Leaf Coins
  • 1 oz Silver Britannia Coins
  • 1 oz Austrian Silver Philharmonic Coins
  • 100 oz Royal Canadian Mint Silver Bars
  • 100 oz Johnson Matthey Silver Bars
  • 1 oz Sunshine Mint Silver Bars
  • 1 oz Johnson Matthey Silver Bars
  • 1 oz Sunshine Mint Silver Rounds
  • the Mexican Silver Libertad
  • and the Australian Kookaburra Silver.

Silver IRA investments will be stored in a licensed and insured third-party storage vault. When choosing a custodian for your Silver IRA, it is vital that you educate yourself and choose both a reputable silver dealer and trustee.

No Interest Or Dividends On Your Investment

Unlike a stock investment, a Silver IRA does not pay rent, interest, or dividends; its growth potential can be limited compared to other types of investments.

In a paper portfolio, one can invest the annual dividend check back into the IRA, where it will continue to grow tax-free until retirement. Compound interest is a real advantage when it comes to investments such as stocks and bonds, even though they are riskier.

Though your silver investment will likely grow in value from the time you invest to the time you withdraw, that growth is not guaranteed and does not pay dividends.

There May Be Additional Costs & Fees

Silver is a “hard asset,” which means it’s a physical object that needs to be physically stored, secured, and insured. Because of these requirements, you may incur additional costs and fees when investing in a Silver IRA. 

There are also additional costs incurred by the “spread,” so for your silver investment to be profitable, its value increase needs to be greater than its storage cost and the spread.

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How To Fund Your Silver IRA

Let’s add a paragraph on funding – “one of the first questions people have about opening a silver IRA is how do I fund it? You might be surprised that it’s just as easy as funding any traditional IRA. Here are the two primary funding methods.” 

Purchase Silver Through A Custodian

The primary way that an investor will fund a silver IRA is by purchasing silver through a custodian. 

Because IRAs offer tax-advantaged investment opportunities, all investments are heavily regulated and must be filed by a licensed Custodial institution such as a bank or a credit union. The Custodian, or Trustee, handles all of the logistics of your silver investment, from reporting and clearing the investment with the IRS, insurance, transportation, and storage in a secured, licensed and insured third-party vault. 

This puts the investor’s retirement account entirely in the hands of the Trustee, so it is vitally important to do your research and ensure that you are dealing with a reputable and trustworthy Custodian like Noble Gold Investments. 

You can visit the website of the U.S. Commodity Futures Trading Commission to learn more about precious metal frauds and scams so you know what to look out for and avoid.

Roll Over An Existing IRA or Transfer A 401k

Another popular way investors can fund a silver IRA is by rolling over an existing IRA or 401k

By creating a rollover IRA,  you can move a qualified retirement plan from a former employer, such as a 401(k) or 403(b), into an IRA. Rollover IRAs work precisely the same as traditional IRAs, allowing you to make tax-deferred and tax-deductible investments. 

Consolidating existing 401k or IRA accounts into a single self-guided Silver IRA account will allow you to keep your retirement funds all in one place and give you greater control over your retirement nest egg.

Storing Your Silver IRA

Typically, IRS regulations forbid both investors and account custodians from taking physical possession of IRA investments in precious metals. Cash must be deposited into the IRA, and then investments into precious metals such as silver will be arranged by the custodian, then handled and stored by an approved depository.

Silver IRA investments usually are stored in a licensed and insured depository to ensure the investment is secure. When you purchase gold and silver in an IRA from Noble Gold Investments, we store your precious metals in our secure depository in Texas.

Start Planning For Retirement With A Silver IRA Today

Starting a Silver IRA today is an excellent way to hedge against inflation and unpredictable market fluctuations. Physical silver has been in demand for thousands of years and has continued to increase in value.  

If you’re interested in starting a silver-backed IRA, creating an account with Noble Gold Investments is fast, easy, and secure. You can click here to open an account or feel free to give us a call to learn more about our gold and silver IRAs at (877) 646-5347. 

Good luck and happy investing!

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