Precious Metals

The Reason Investors Are Exchanging Stocks For Alternative Assets

July 5, 2016 by IRA Services

If you are nervous about the where the stock market is headed, you are definitely not alone. At the start of this year, BlackRock, the world’s largest asset manager, reported that it was seeing many of its biggest clients pulling out of the stock market in favor of more tangible assets like real estate, private credit, and commodities.

If you are thinking of adopting the same strategy, don’t forget that the right retirement account can be a useful investment vehicle.

Stock market volatility – knowing the right signs

Over the long term, stock purchases can earn a high return. However, in the short term, they are extremely volatile investments. The market will inevitably swing up and down, dragging the value of your portfolio along with it. It can be difficult – either psychologically or financially – to stand by your stock investments in the midst of huge market changes. This uncertainty can lead to poor investment choices, like selling low during a temporary downturn.

Beyond short term shifts, there are larger cycles to the stock market. After years of gains, many believe that the stock market is long overdue for a bear market, which is one reason so many of BlackRock’s clients are taking a cautionary approach and moving their money elsewhere. Alternative assets, like real estate and loans, can generate similar returns to stocks, without as much risk and volatility. Compared to stocks, these types of investments are also easier to understand for someone without a financial background.

The limits of traditional retirement plans

Traditional retirement plans like the 401(k) and non-self-directed IRAs offer limited investment options and usually do not include alternative assets, mainly for cost reasons. As a result, investors are often left to choose between either risky stocks, or bonds and certificates of deposit (CDs), which are less volatile but typically earn lower returns.

Many people looking to put their savings into alternative assets often overlook retirement plans as an investment vehicle, and so they miss out on some great tax benefits. Even worse, some make an early withdrawal to access their retirement savings, triggering a 10% penalty if you are younger than 59 ½ years old.

But there are retirement plans out there that can broaden your investment horizons. Self-directed IRA accounts allow you to reap the tax benefits of retirement plans while also giving you more flexibility in your investments.

The self-directed IRA

Self-directed IRAs are structured like traditional IRAs, and carry the same tax benefits. The main difference between these two plans is that the companies that run self-directed accounts allow you to invest in alternative assets like real estate, personal loans, and precious metals. Despite the advantages and growing popularity of alternative investments, many investors remain unaware of self-directed IRAs – only about 2% of IRA investors use these accounts.

Setting up a self-directed IRA is easy – just contact a company that handles this type of account. If you already have money in an existing IRA, you could transfer those funds to your new account through a rollover at any time. However, if your retirement savings is in a work-sponsored plan, you will need to wait until you leave that job to facilitate a rollover. Once you complete the rollover, you can start moving your savings out of the stock market and into new alternative assets through your self-directed IRA.

Investing always comes with some degree of risk, but you can help minimize that risk with a more diverse portfolio.

How To Invest Your Retirement Plan In Precious Metals

November 16, 2015 by IRA Services

iStock_000019443856_Small The term “gold standard” exists for a reason.

Precious metals investments have seen a comeback over the last decade or so since the financial crisis, when the stock market crashed but gold and silver continued to show strong returns and balance against future market losses. Precious metals have also shown to provide solid protection against inflation, a common concern for many investors.

For those looking to expand their retirement investments to gold, silver and other precious metals, there are several options. But these investments are not as straightforward as other, more traditional, investment assets like stocks and bonds.

Read on for a few important rules to keep in mind when investing your retirement plan in precious metals.

Types of Retirement Plans

Your ability to invest in precious metals depends on the type of retirement plan that you have. Self-directed IRAs work best in this case. These accounts allow for the widest range of investment options, including investments in physical gold, silver, platinum, and other precious metals.

Traditional IRAs, on the other hand, do not allow for precious metal investments. However, you can still try to simulate the security and returns of precious metal investments with a Traditional IRA. Stock in a silver mining company or a gold ETF (a fund that tracks the price of gold) can be good surrogates for precious metal investments.

Work-retirement plans, like 401(k)s, typically offer the fewest ways to invest in precious metals. These type of accounts only allow investments in a list of assets pre-chosen by employers, who rarely include precious metal assets. If your plan does not allow precious metal investments, speak with the benefits department of your office about the possibility of adding these options.

If that doesn’t work, you will have to wait until after you are employed to buy silver and gold assets with your 401(k). Once you leave the company, you can roll over your old work plan into a self-directed IRA, at which point you would be free to invest in physical precious metals.

Permitted Investments

The IRS has certain rules around which type of precious metals are eligible for self-directed IRA investment. For example, the metals must be over a certain level of physical purity, a regulation that is meant to prevent investors from buying collectible items that usually lack long-term investment value. The acceptable level of purity varies depending on the type of precious metal. Gold bars, for instance, must have at least a 99.5% level of purity.

There are also regulations around precious metal coins. Only certain coins are acceptable, such as the American Eagle gold and silver coins, Canadian Gold Maples, and American Buffalo gold coins. Other coins, like the South African Krugerrand, are not allowed.

If you fall afoul of these IRS regulations, the agency could force you to take the ineligible asset out of your account, leading to extra withdrawal costs and taxes.

Managing Your Investments

There are certain procedures to keep in mind when making precious metal investments. First, you must make any purchases for your self-directed IRA through your designated IRA custodian, usually the company managing your account. Futhermore, you are not allowed to add precious metals that you already own into an IRA. Instead, you must use cash in your IRA to buy precious metals through the custodian. This IRS rule is meant to prevent any unfair dealings that take advantage of tax deduction benefits.

In addition, any physical precious metal assets you purchase for your IRA must be stored outside your home, with your IRA custodian. Custodians that sell IRA precious metal investments usually provide storage services for a fee.

Finally, when you sell your precious metals, you will not owe taxes on the proceeds, as long as you keep that money in your IRA. By reinvesting those earnings in other investments, you can delay taxes further.

Alternative investments can offer a valuable balance against more traditional investments in uncertain times. To read more about how to maximize retirement benefits through precious metals and other alternative assets, read our article about opening multiple IRAs.

News & Ideas – July 2015

July 6, 2015 by IRA Services

GO PAPERLESS TODAY

As announced at the beginning of this year, we have begun charging a $5.00 per paper statement fee each quarter. To avoid this cost, you may elect to download your statements from our website. To elect to go paperless, visit our website www.iraservicestrust.com, log into your account, and change your delivery method under the Statement Section in the lower left corner of the display.

If you are not sure whether you have internet access or should you require any assistance, send an email to info@iraservices.com or call Customer Service at (800) 248-8447. If you currently don’t have an online account and wish to establish one, submit an Internet Access Request form that is available on our website www.iraservicestrust.com under the Forms & Fees tab.

CONSIDER THE BENEFITS OF A ROTH IRA

A Roth IRA is a tax-free retirement savings account that can be funded with after-tax dollars. Funds deposited continue to grow tax-free and can be withdrawn with no penalty. Establishing a Roth IRA now or converting some of your Traditional IRA may save you money in taxes, especially over longer periods, growing yourself a bigger nest egg.

QUALIFIED DISTRIBUTIONS ARE TAX-FREE

Funds in a Roth IRA that have been held for at least 5 years can be distributed tax free if you are over the age of 59 1⁄2. They can also remain in the Roth IRA indefinitely to grow even further until you need them.

Funds held in a Roth IRA, unlike the Traditional IRA, are not subject to mandatory withdrawals starting at age 70 1⁄2, so you are free to maintain the balance of funds in your Roth IRA even after the age 70 1⁄2 milestone at which Traditional IRAs must begin.

Converting moneys from Traditional IRA to Roth IRA will reduce the amount remaining in Traditional IRAs that are subject to the Required Minimum Distributions (RMD).

You can take physical possession of your ‘hard assets’ like real estate or precious metals, tax-free. This is possible when you make Qualified Distributions (over the age of 59 1⁄2, with 5 years in the Roth IRA). Now they are yours to hold and to use as you wish.

NO ELIGIBILITY AGE LIMIT FOR CONTRIBUTIONS

New contributions to your Roth IRA are still permitted after 701⁄2, as long as you have earned income. If your income (MAGI) exceeds $6,500 but is less than $116,000 (or $183,000 if filing jointly), you may be entitled up to the maximum contribution, including the catch-up provision of $6,500.

NO RMDS FOR SOLE SPOUSAL BENEFICIARIES

A spouse, who is the sole beneficiary of a Roth IRA that meets the criteria for qualified distributions, may make the Roth IRA their own, tax-free. Not only that, they can even make new Contributions to it going forward, as long as they have earned income. A non-spouse beneficiary (or a spouse who is not sole beneficiary) may elect to take distributions according to his or her own life expectancy. These too will be tax-free to the beneficiary (again, assuming the original Roth IRA owner had met the criteria for qualified distributions at the time of death).

NO INCOME LIMITS FOR CONVERTING TO ROTH IRA

Even if your earnings are too great to allow you to make new Contributions to a Roth IRA, you are allowed to make Conversions to a Roth IRA without limitations from your existing Traditional IRA. Yes, it will be taxable in the year you convert, but this could still pay off in the long run, as you may be able to keep the money working for you indefinitely before ultimately withdrawing it tax-free. However, you should consult with your tax advisor to determine what is best for you and your tax situation.

THINKING OF YOUR LEGACY (CHILDREN AND GRAND-CHILDREN)?

For a parent of a child who has earned income, a Custodial Roth IRA can be a great way to teach the value of saving and investing. Besides getting a head start on saving and investing, the child can learn and see how a small investment made today, especially when repeated periodically, can grow into a large pile of funds over time. Down the road, the child could tap into it for qualified higher education expenses, and similarly, they could use up to $10,000 towards their first home purchase, without tax or penalty, in either case.

PAPERLESS NOTIFICATIONS FOR PROPERTY TAX AND EXPENSE PAYMENTS

As of May, 2015, if you are holding real estate in your account, we are now emailing our Property Tax Payment Request form, along with any property tax bills that we receive. This form can simply be completed, then faxed or e-mailed back to us. You may instruct us to send the check with the original tax document or to send it directly to the tax authority. We ask that requests be submitted as promptly as possible to allow us to make timely processing of your payments.

In addition, we occasionally receive asset summaries, insurance policies, utility bills, and similar documents pertaining to assets held in your account. We will forward these promptly to the e-mail address indicated on your account. If a payment is required, we will also attach the Expense Payment Request form for your convenience. Once we receive your instructions indicated on that form, we will forward the payment to the authorized provider.

Also, we suggest clients consider arranging with their providers to have bills sent directly to them (at their residence or primary address), which will provide more time for receipt and processing of payment requests. Please note: if you require the original document to be sent to you, a $5.00 forwarding fee will apply, charged to your account.

Always remember, however, that all Distribution Requests for withdrawal of funds or Transfer Authorizations to bring funds from elsewhere should be sent directly to IRA Services Trust Company rather than the Investment entities or previous custodians. In the case of deposits such as Contributions or Rollovers, they should also be sent directly to us, using the Deposit Info form available on our website www.iraservicestrust.com under the Forms & Fees tab.

A NEW PRECIOUS METALS STORAGE FACILITY – ON THE WEST COAST

We have approved the use of a second precious metals storage facility. Located in San Diego, California, BlueVault provides segregated storage for gold and silver bullion only. For more information, visit their website at www.bluevaultsecure.com or call 619-342-8090.

As always, our original precious metals storage facility, Delaware Depository Services Company, continues to provide storage for all precious metals (gold, silver, platinum and palladium).

A WORD ABOUT RESPONSIBILITIES

As a self-directed IRA account holder, you have a number of responsibilities, which include:

Performing due diligence on your investment(s)
Understanding the risks related to your investment(s)
Understanding Prohibited Transaction rules and avoiding them
Ensuring that valuations are provided to us for all assets on at least an annual basis
Understanding our fees and minimum balance requirement.

Please read our Fee Schedule and Financial Disclosure.

IRA Services Trust Company does not assume responsibility for any investment decision. Therefore, it is advisable to consult suitable professionals (accountants, tax or financial advisors, or attorneys) before making your investment decisions.