What To Know About Stacking in a Silver IRA
Silver stacking within self-directed Individual Retirement Accounts (SDIRA) is an investment strategy where a "stacker", that would be you, purchases silver over time. In most cases, the individual is accumulating at different times to dollar-cost-average the purchases.
Key Takeaways From this Article
- Silver Stacking in an IRA is a good option to store savings, hedge inflation, and economic turmoil
- Silver IRAs can be a tax advantage
- Choosing a Silver IRA Dealer makes opening an IRA easier
- Silver Stacking is dollar-cost-averaging which is another way to say your initial cost can be average to a lower initial investment
Silver stackers have different strategies, their plan could be to invest a certain dollar amount or purchase a certain amount of pure silver of one item, for example, American Silver Eagle 1 oz coin until they have accumulated 100 ounces or invested $10,000. Then after reaching that goal, they may choose to move to another type of coin or bar, always purchasing because they are stacking over time to get the best overall cost basis for their silver.
A person can stack silver at home by purchasing any silver product they are attracted to or have knowledge of in anticipation there will be a demand for the product in the future and they will have a positive return. The silver stacking options are endless but could include privately minted rounds, bullion, coins, Proofs, or collectible items like bullets or figurines that are made with silver. You can acquire these silver stacking options from local coin dealers or online from a silver dealer and hold your stack at home.
Stacking silver in a retirement account has the same principle where you purchase silver over time, but the product availability is more limited and you are purchasing within a retirement account that does not allow for home storage.
There are both positives and negatives for stacking with a self-directed Silver IRA and we'll cover those more in-depth later in this article.
Whether you are new to silver stacking and Silver IRAs or not, this article will provide you with valuable insights and practical steps to get started. Let's explore the world of silver stacking and discover how it can enhance your retirement portfolio within the framework of an SDIRA.
Why Silver Stacking?
Before starting you need to determine if silver stacking is right for you. So why would you stack silver? Do you have an interest in investing in physical precious metals or are you looking to use a Silver IRA for diversifying your current retirement portfolio?
As silver stackers, we stack to take cash out of our pockets and put it into a physical asset with the intent that the item's value will increase. Choosing to stack removes your retirement savings from being held in cash or traditional investment markets and puts it into a physical asset.
If you are buying for home storage, great, you should look at this as your "extreme" rainy day fund. You don't buy silver and hold it at home to sell when times are tough. You should look at it as a way to trade your cash (which is easy to spend) for a physical asset that is more difficult to sell.
While considered a means to invest for retirement, there is nothing wrong with selling silver in your IRA or your home-stored silver when the silver market is strong and the price is up. Being willing and able to sell to make a profit allows you to re-invest those returns and stack more silver.
Stacking silver in an IRA has the same concept of removing retirement savings from the traditional stock market and bank savings accounts, but you are using retirement savings to make your purchases within a retirement account. You still control the purchases and the sale of the silver, but you just cannot personally hold the silver at home.
Five Reasons to Buy Silver:
- Historical Significance and Value of Silver - Silver has a rich history of being used as a medium of exchange and a store of value. For centuries, it has been recognized and valued across cultures and civilizations. Its enduring significance and demand contribute to its attractiveness as an investment.
- Portfolio Diversification and Hedging against Inflation - Silver stacking provides a means of diversifying investment portfolios. By adding silver to a portfolio that includes stocks, bonds, and other assets, investors can spread risk and potentially enhance returns. Furthermore, silver has historically acted as a hedge against inflation, preserving purchasing power during periods of rising prices.
- Tangible Asset with Intrinsic Value - One of the unique aspects of silver stacking is the tangible nature of the asset. Unlike stocks or bonds, silver is a physical asset that holds intrinsic value. It offers a sense of security and ownership, as investors can physically hold and possess their silver holdings.
- Potential for Capital Appreciation - Silver stacking presents an opportunity for potential capital appreciation. The price of silver can fluctuate significantly, providing the possibility for investors to profit from price increases. Silver's lower price point compared to gold allows for smaller percentage gains to have a more substantial impact on investment returns.
- Tax Benefits of a Retirement Account - One positive for stacking silver in your retirement account is you get the benefits of holding off paying taxes on your profits till you start taking your distributions. You can have a pre-taxed SDIRA or a Roth IRA and take full advantage of the benefits of buying through a retirement account.
By considering the historical significance and value of silver, the benefits of portfolio diversification and inflation hedging, the tangible nature of the asset, and the potential for capital appreciation, precious metals buyers can understand why silver stacking is an attractive investment strategy.
What is a Self-Directed IRA
A self-directed Individual Retirement Account (SDIRA) is a retirement account that provides individuals with the flexibility to choose and control their investments. Unlike traditional IRAs, which limit investment options to stocks, bonds, and mutual funds, SDIRAs offer a broader range of investment choices.
Investors can diversify their portfolios by allocating funds to alternative assets such as real estate, precious metals, private equity, and more. SDIRAs empower individuals to align their retirement savings with their interests, expertise, and investment goals, providing greater control and potential for enhanced returns.
The drawback of an SDIRA is you, as the account holder and beneficiary of the retirement account, cannot have an immediate reward for the investment returns. You manage the account and work to get good returns on your investments, but wait till 59 1/2 years of age before you can start taking distributions. Any distributions before that age are subject to penalties.
Retirement Savings converted to physical precious metals is a means to conserve your cash when the value of the dollar declines and inflation rises. It is also a hedge against inflation and is a store of wealth. Choosing to open a metals IRA gives you control of your investments and retirement savings.
How to Stack Silver within a Self-Directed IRA
Stacking silver allows you many benefits including your ability to take control of your retirement savings. Starting there is a process that needs to be completed. It involves opening accounts with a custodian and choosing a depository for your metals. The purchase of your metals can be accomplished through any silver dealer who is aware and knowledgeable of the process of investing with an SDIRA.
Once you have the account and metals purchased, you can control the account and buy and sell as you see fit. Typically, a good gold dealer will suggest a 5-10 year hold on any precious metals purchased. But, you as the manager can choose when your returns are worth cashing in.
Getting started with a Silver IRA involves a few Steps.
You can choose to complete these steps on your own or you can work with a qualified and reputable Gold Dealer. On your own you will need to choose a custodian, rollover or fund your account, then find a precious metals dealer, purchase metals, open a depository account, and then have the metals dealer ship to the depository.
Or, you can choose to work with a Precious Metals Dealer who specializes in Silver IRAs and facilitate the paperwork and transactions.
Companies such as Goldco and Augusta Precious Metals' business is to facilitate opening Silver IRA accounts and then helping individuals choose the metals right for their investment strategy. These companies will help walk you through the paperwork and since they are working with you from the beginning they may offer some incentive to work with them. Incentives could include FREE Silver or No IRA Fees for 10 Years. These are the benefits you receive working with a Gold IRA Dealer. For clarity, we mention Gold IRA Dealer here, but the terms "Gold IRA", "Silver IRA", or "Precious Metals IRA" all refer to a self-directed IRA or SDIRA.
In addition, when you work with a Gold IRA Dealer they put your interest first. They educate and inform, their goal is before you buy you understand how precious metals benefits your retirement savings. They are not advisors, so they will never tell you to buy or sell a particular item or tell you how much to invest.
Choosing a Reputable SDIRA Custodian
When considering silver stacking within a self-directed Individual Retirement Account (SDIRA), it is crucial to select a reputable custodian. SDIRA custodians specialize in alternative investments and provide the necessary infrastructure to facilitate these transactions. Research custodians carefully, considering factors such as their track record, fees, customer reviews, and the level of support they offer.
Opening and Funding an SDIRA
To stack silver within an SDIRA, you must first open and fund the account. This involves completing the necessary paperwork with the chosen custodian and transferring funds from an existing retirement account or making new contributions to the SDIRA. The custodian will guide you through the process and ensure compliance with IRS requirements.
Once the account is funded, you can purchase silver and start stacking.
Storage of Your Silver
When stacking your silver using an IRA you are not able to keep the metals stored in your possession. You will be required to open an account with a depository or vault. Several depositories around the country are approved.
When storing your metals confirm which type of account you have set up. There are two types to be aware of, first is the non-segregated account. This account mixes your metals in with other investors, banks, or investment firms. You have an allocated amount, based on your deposit, but when you sell the metals the depository will take your allotment out of the larger pool of metals. Segregated storage will be separate from other metals. Your metals will be labeled and kept under your name separate from others. This gives you the knowledge that the metals you bought are yours and not mixed with others.
Make Sure You Understand IRS Rules and Regulations
Stacking silver within an SDIRA requires a solid understanding of IRS rules and regulations. Familiarize yourself with the specific guidelines governing precious metals investments within retirement accounts. For example, the IRS requires silver to meet certain purity standards, and there are rules regarding storage and distribution. It is advisable to consult a tax professional or financial advisor well-versed in SDIRAs to ensure compliance and understand the tax implications.
There are Prohibited Transactions and Disqualified Persons
SDIRAs have restrictions on certain transactions and disqualified persons. The IRS prohibits certain types of investments, such as collectibles or life insurance, within an SDIRA. Additionally, there are restrictions on engaging in transactions with disqualified persons, including yourself, certain family members, or entities in which you have a significant interest. Understanding and adhering to these rules is essential to avoid potential penalties or disqualification from the SDIRA.
By following these key steps, including choosing a reputable custodian, opening and funding the SDIRA, understanding IRS regulations, and being aware of prohibited transactions and disqualified persons, you can effectively stack silver within an SDIRA while ensuring compliance with legal and tax requirements.
What Can You Stack in Your Silver IRA
Now that you have your Silver IRA account opened and funded, you are now able to choose the bullion you want to buy. As it's said, "This is the fun part".
Remember there are restrictions to the precious metals you can purchase within your IRA; just because we're talking about Silver Stacking does not mean you are restricted to only buying Silver in your IRA. You can purchase any precious metal that qualifies so gold, silver, platinum, and palladium are all possible options to stack.
- Metals Must have a Certain Purity Level
- Coins Must be from a Government Mint
- Must NOT be Numismatics or Rare Coins
- Must NOT be rounds from private mints
Metal Purity Requirement:
- Gold must be 99.9% pure
- Silver must be 99.99% pure
- Platinum must be 99.95% pure
- Palladium must be 99.95% pure
Qualified Coins and Sovereign Mints:
- American Eagle Gold Bullion Coins - United States Mint
- American Eagle Silver Bullion Coins - United States Mint
- American Buffalo Coins - U.S. Mint
- Australian Kangaroo/Nugget Coins - Royal Australian Mint
- Austrian Philharmonic Coins - National Mint of Austria
- Canadian Maple Leaf Coins - The Royal Canadian Mint
- Australian Kookaburra Coins - Royal Australian Mint
- Mexican Libertad Coins - La Casa de Moneda de Mexico (Mexican Mint)
Additionally, uncirculated American Buffalo coins are permissible, but Proof Coins are not allowed. Remember all bars and rounds must be created by an approved refiner, assayer, or national government mint.
While we provided some of the more notable mints and coins. Work with your Gold dealer to verify additional qualifying coins or bars. When choosing to stack silver, you can choose to stack silver coins or bars. Typically, silver bars are heavier and you can purchase maybe one bar equivalent to 10-50 silver 1 oz coins. Make the appropriate choice depending on your investment and stacking plan.
What are the Risks or Challenges When Stacking Silver in an IRA
Stacking silver remember is about buying over time. Dollar-cost-averaging your purchases to limit risk and to remove the emotion of buying during high or lower times. No matter the current conditions, you buy, this takes out the emotion of timing your purchases.
But with every investment there are risks, understanding how precious metals benefit your retirement portfolio will help you get through the market volatility of price increases and declines.
Volatility and Price Fluctuations
One of the primary risks associated with stacking silver is its inherent volatility and price fluctuations. Silver prices can experience significant swings within short periods, driven by various factors such as economic conditions, market sentiment, and supply and demand dynamics. Investors must be prepared for potential short-term price volatility and have a long-term perspective when engaging in silver stacking.
Most reputable Silver IRA dealers will talk to you about the historic pricing of Silver along with its lower spot price over other metals like gold. They will educate and inform you, letting you know it's best to hold your purchase for 10 years to see the greatest returns.
Another challenge to consider is the liquidity of silver investments. While silver is generally a liquid asset, it may not be as easily tradable as more conventional investments like stocks or bonds.
Depending on the form of silver held, finding suitable buyers or sellers in the market can take time, especially during periods of low demand. Investors should carefully evaluate their liquidity needs and have a strategy in place to manage potential liquidity challenges.
When working with a Silver Dealer, they will offer a form of "buyback guarantee". These companies are in the business to sell IRA-approved Silver which is the most recognizable and in-demand silver in the market. You are not working with numismatics or rare coins that may have a small market, you are working with precious metal dealers who will buy back your metals.
The timing of getting funds out from the sale of your metals is not as quick as selling a stock or mutual fund. You must first get a buyback price, based on current spot and demand, and then you will have to transfer the coins or bars from your depository to the dealer. They will confirm receipt and if everything goes well they will release your funds at the time they confirm receipt and that the coins or bars are what was expected. This can take a few days, so plan, the alternative is selling to the dealer that sold you the metals, they will have a record of what was sold and this will shorten the gap between requesting the sale and getting your distribution.
Counterparty Risks and Scams
As with any investment, there are risks associated with counterparty reliability and the potential for scams in the silver market. Investors must exercise caution and conduct thorough due diligence when engaging in silver stacking. Working with reputable dealers and custodians is crucial to minimize the risk of counterfeit or low-quality silver products. Additionally, being aware of common scams and fraudulent schemes can help investors protect themselves from potential financial harm.
Investors can make informed decisions and adopt risk management strategies when engaging in silver stacking by being mindful of the risks associated with volatility and price fluctuations, liquidity concerns, and the potential for counterparty risks and scams. Stay vigilant, stay informed, and seek advice from trusted sources to navigate these challenges successfully and safeguard your investments.
Understanding Silver Bullion Pricing
Buying Silver Bullion
Bullion is based on the Spot Price + the premium attached to the silver at the time of purchase. Most companies will give you your purchase price and that will include both the spot and the premium.
You can determine the premium being paid by subtracting the current spot price from the price quoted. Then you can determine the premium percentage by taking that difference and dividing it by the spot price.
Now you have the premium and the premiums percentage. Once you have this information you need to ask if there are any additional fees (could be a transaction fee or delivery fee) or commissions that you are required to pay. These additional fees or commissions need to be calculated into the premium of the silver coins or bars.
Once you have all the cost of the coins or bars you can determine if that is a good purchase. There is no getting around paying a premium for the metals. The "Spot Price" is what the world market pays for gold or silver, it is not what you pay. The dealer needs to cover his cost and the premium plus fees or commissions to pay his bills.
Selling Silver Bullion
This is where many precious metals owners typically get disgruntled. You need to understand how metals are bought back before you buy today.
When you are ready to sell all or a portion of your silver stack you will start by contacting the dealer you initially bought from. They will have records of the transaction and know exactly what you bought. If you purchased from a dealer that is now out of business or is not willing or able to buy back the metals, you will need to find another dealer to sell to.
The first thing the dealer will want to know is what you own. You will need to give them a list of the assets. You don't need to tell them what you paid, just give them a list of the coins and bars as described from your purchase.
You will be given a "buy" price. This price will likely be below the current spot price of silver. It is unlikely that you will get any premium for your coins or bars as they are bullion. Selling rare coins or numismatics from your home silver stacking storage, you may get a premium if the item is unique or in high demand.
Therefore, as the manager of your account, you need to know what the current spot price is before you inquire. Based on that information you will know how much of your stack you will need to sell.
Remember, prices for gold or silver that are advertised online are based on the spot + premium, you will not receive that price when you sell. If the coins are easily transacted you may get a price just below the spot, but the harder the product is to sell the lower the price you will receive.
Final Thoughts on Buying and Selling Bullion
So, what you need to know when buying precious metals is you are paying a premium. That premium is not recoverable immediately. This is why dealers will recommend holding precious metals for 10 years. The expectation is that the metals will appreciate during that time and you will get a reasonable return.
Also, buying precious metals is a means to store retirement savings. It is not an asset that provides an income. If you need your retirement savings for income, then choosing precious metals may not be the right choice. Consult an advisor that is aware of your income needs and determine if precious metals are a good option for you.
Stacking Silver in An IRA Final Thoughts
Stacking silver is a good idea for those looking to hedge inflation and those looking for a physical asset investment. Buying silver is a way to exchange retirement savings for an asset. Silver stacking in a retirement IRA can be accomplished by purchasing silver on consistent bases versus making one large purchase.
Should you stack silver or gold? A common question comes up when discussing Silver Stacking. Why not Gold Stack in my IRA? You can gold stack in an IRA, it is the same concept, you buy over time to dollar-cost-average your purchases.
The benefit of stacking silver over gold is the price and premiums. Silver is much less expensive than gold and you can purchase a larger quantity of ounces. The current spot price of silver is $22.85 per troy ounce and the gold spot price is $1,927.00 per troy ounce. So you can see you can purchase significantly more ounces of silver for your money over gold. In addition, when you calculate the premiums for purchasing an ounce of silver versus gold you will see the premium for silver is less than that of gold. We're not telling you, the reader, what to stack we are just providing some facts for you to consider.
What To Do Next?
Open a Silver IRA with a reputable dealer, fund your account, and purchase silver over the next year. Work with a dealer that will work with your purchasing plan. Many dealers will require an initial rollover or purchase amount. A "recommended" but not "set in stone" allocation to precious metals is 10-15 percent of retirement savings. Therefore, based on your available funds to rollover you will need to decide which dealer, based on their requirements, will work best for you. Check out our 5 Best Gold IRA Companies review where we give you the minimum requirements of the top Gold and Silver IRA Dealers.