Precious metals currently look like a no brainer investment in a world of market volatility, rehypothecation, massive bail ins and outs, and a growing number of templates for taking people’s retirement assets away.
Many are familiar with the option of keeping precious metals in an IRA. Those who understandably refuse to take the penalty for cashing out in order to take full personal possession now have the next best option and a way to get control of their metal.
A Historical Perspective
Self-Directed IRAs were first introduced in the United States in 1975, shortly after the inception of the IRA.
Soon thereafter, trust companies and custodians started allowing alternative asset classes such as real estate, foreign real estate, REITS, private equity, promissory notes, and certain precious metals to be held in self-directed IRAs.
One recommended custodian, IRA Services Trust, was one of the first to do this.
Traditional Self-directed IRAs versus IRA LLCs
Traditional self-directed IRAs do not allow personal possession of precious metals, whereas the IRA LLC does. Both have deferred taxation benefits pursuant to the retirement tax code.
Traditional self-directed IRAs require that PMs be held at a qualified depository, most of which are in Delaware, and many also have a large percentage of COMEX holdings.
They are typically not especially costly to set up, but they can incur considerable storage, maintenance, and transaction fees over time. Most sovereign bullion coins, U.S., Canadian, Perth, etc… are accepted, as well as "other 999 bullion."
For the security minded retirement investor, the IRA LLC allows an investor to take personal delivery with no taxes or penalties incurred. Precious metal shipping costs are free in most cases, and shipping and supply turnaround times will depend on market conditions, but are currently only a couple of weeks or less.
The New Age
The new wave of retirement funds are allowed to keep their tax deferred status, but still allow an individual to choose how their funds are allocated. In other words, you can hold cash, investments, physical silver and gold.
The IRA LLC allows for any investment that is not a prohibited transaction, including cash in the IRA LLC bank account, stocks, bonds, private placements, oil and gas leases, investment real estate, precious metals in your closet, etc…
An IRA LLC is not subject to annual audits, although anyone subject to U.S. taxes is subject to an IRS audit, so one would just need to be able to furnish the assets of the IRA LLC. The basic annual requirement is merely the reporting of the LLC’s assets.
The real advantage of the IRA LLC is that it acts as an emergency hedge, without requiring that you leave the system entirely. There is no penalty in using one, and you can still put the assets to work for you and leverage your precious metals as collateral.
American Eagles are the only coins eligible for personal holding within such an IRA LLC. Other bullion is allowable in traditional self-directed PM IRAs, but they cannot be held personally, only in a depository.
Some 401 retirement plans allow the participant to periodically withdraw into an IRA while still contributing and building their 401 plan. Old 401 plans are free to rollover.
Australia’s Retirement Program
In Australia, you can choose where you invest your retirement money, however under stricter guidelines and yearly audits.
Property and borrowing for certain investment properties are allowed, as well as stocks, authorized property funds, gold and silver. Other investments are also permitted, although mainly bricks and mortar.
These plans have tax benefits and once it reaches maturity, they offer excellent tax free incentives. However, these plans are much more costly to set up and audits are much more expensive. It is recommended to have at least $100k at set up to make them worthwhile.
Such precious metal retirement programs are not the same or as cheap as the "option" of holding unencumbered metal under your direct control or possession, but they seem to be the next best thing since they are not potentially worthless digital or paper assets.