A silver IRA follows the basic rules of an ordinary IRA account, but it has a special designation as a self-directed IRA that allows you to invest in precious metals like silver.
It’s important to note that you don’t need to open a specific silver IRA. Instead, you set up a self-directed account with a qualified broker that specializes in precious metals or other types of alternative investments (e.g. real estate, commodities, private placements, and others).
That said, not all brokers offer self-directed IRAs. And investing in silver within an IRA may be more expensive owing to the cost of storing a physical commodity like silver.
Introduction to IRAs Invested in Precious Metals
An IRA invested in silver assets is one way to invest in precious metals. There are a few kinds of precious metal IRAs you can invest in, including a platinum IRA, a gold IRA, or a palladium IRA.
While alternative investments can be illiquid, volatile, or subject to other risk factors, investors interested in alts may be curious about the potential for greater diversification since these assets typically don’t move in tandem with conventional markets. In the case of precious metals, they can be an inflation hedge.
How a Self-Directed IRA Works
Again, it is important to note that these are not separate types of IRAs. Rather, investors interested in investing in silver or other types of alternative investments can set up what’s known as a self-directed IRA (or SIDRA) in order to choose investments that aren’t normally available through a traditional IRA account.
While the brokerage administers the SDIRA, the investor typically manages the portfolio of assets themselves. These accounts may also come with higher fees than regular IRAs owing to the higher cost of storing physical assets like silver.
That said, these accounts follow the same rules as ordinary IRAs in terms of withdrawal restrictions, income caps, taxes, and annual contribution limits (see details below). A self-directed IRA can be set up as a traditional, tax-deferred account, or a self-directed Roth IRA.
Recommended: Alternative Investments: Definition, Examples, Benefits and Risks
Get a 1% IRA match on rollovers and contributions.
Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1
1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.
Establishing a Silver IRA
If you’re ready to start investing in precious metals and you’ve found a broker or IRA custodian that will allow you to open a SDIRA and purchase silver in your account, you must fund it, either by depositing cash or by transferring money from an existing 401(k) or IRA account. Then your custodian will purchase the physical silver bullion and store it for you.
Requirements for Silver Investments
When comparing a commodity vs. a security, the IRS has specific rules for investing in commodities like silver in an IRA.
One of the most important is that any physical silver bullion held in your IRA must be at least 99.9% pure. This includes coins such as the Australian Silver Kangaroo, American Silver Eagle or Canadian Maple Leaf. Make sure that you work with a reputable precious metals IRA custodian that can ensure you are only investing in approved investments.
Be sure to check that the company is registered both with FINRA (Financial Industry Regulatory Authority) as well as the SEC (Securities and Exchange Commission).
Recommended: Portfolio Diversification: What It Is and Why It’s Important
Managing a Silver IRA Portfolio
The guidelines for managing a silver IRA portfolio are similar to the rules for any other type of IRA.
When you open a silver IRA, you will issue instructions to your broker to buy and sell physical silver, just as you would if you were buying stocks in a regular IRA. The value of your silver IRA portfolio will vary according to the price of silver in the market.
You don’t hold onto or store the silver yourself while it’s an asset in your IRA. If you want to take possession of the physical assets in your silver IRA, you would need to make a withdrawal from your IRA — which is subject to standard rules governing IRA withdrawals.
An early withdrawal before age 59 ½ may result in taxes and/or penalties, so make sure you understand the terms of investing in any IRA before you take a withdrawal from a self-directed IRA.
Tax Advantages and Drawbacks of Silver IRAs
Remember that a silver IRA still follows the basic structure and tax rules of traditional and Roth IRAs. The annual contribution limit for a regular, Roth, or self-directed IRA is $7,000 for tax year 2024, or $8,000 for those 50 and older.
• With a self-directed traditional IRA, you save pre-tax money for your retirement, similar to a traditional IRA. The assets grow tax deferred over time. You pay taxes on the money when you withdraw it, which you can do without a penalty starting at age 59 ½.
• With a self-directed Roth IRA, similar to a regular Roth IRA, you make after-tax contributions. Your assets also grow tax free over time. And in the case of a Roth account, qualified withdrawals are tax free starting at age 59 ½, as long as you have had the account for at least five years, according to the five-year rule.
In addition, investors who want to set up a Roth SIDRA must meet certain income requirements. These are the same as the income caps on an ordinary Roth account. In order to contribute the full amount to a Roth IRA you must earn less than $146,000 (for single filers) or $230,000 (if you’re married, filing jointly), respectively. See IRS.gov for more information, or consult a tax professional.
One of the drawbacks of a silver IRA is that the assets in your IRA are intended for retirement. That means that if you withdraw the money in any IRA before you reach 59 ½, you may have to pay additional taxes and/or a 10% penalty.
The Takeaway
A silver IRA is a common name for a self-directed IRA that invests in and holds physical silver bullion. You can open either a traditional silver IRA or a Roth silver IRA, each of which comes with its own tax advantages.
Only certain brokerages support investing in silver in a self-directed IRA, so make sure that you have found a reputable company that offers this option. It’s also important to know that the IRS has certain regulations about investing in a silver IRA, such as a requirement that any silver be at last 99.9% pure.
Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.
FAQ
What types of silver investments are eligible for a silver IRA?
If you are looking to invest in gold, silver or other precious metals, it’s important to understand that there are certain IRS requirements and regulations for the types of silver you can hold in an IRA. Only silver that is 99.9% pure is allowed to be held in a Silver IRA. This includes popular coins such as the Canadian Maple Leaf, Australian Silver Kangaroo, or American Silver Eagle.
How does the process of establishing and funding a silver IRA work?
The first step in opening up a silver IRA is to find an IRA custodian that allows you to self-direct (or manage) your investments. Once you’ve opened a self-directed IRA at a brokerage that supports it, you can deposit money or transfer it from an existing 401(k) account or IRA. Your custodian will then purchase the silver bullion based on your instructions.
What are the potential tax advantages and drawbacks of a silver IRA?
The tax advantages of a silver IRA depend on whether it is structured as a traditional or Roth self-directed IRA. With a traditional IRA, you may be eligible for a tax deduction in the year that you make your contributions. With a Roth IRA, you pay tax on your contributions in the year you make them, but you don’t pay capital gains on withdrawals; qualified withdrawals are tax free.
One potential drawback is that, in most circumstances, you will have to pay additional taxes and/or penalties if you withdraw money from your IRA before you reach retirement age.
Photo credit: iStock/Pekic
SoFi Invest® INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOIN-Q224-1900646-V1