Over the past few years, I have seen a ton of information go out about precious metals IRAs and whether or not they are worth our time.  If you did not know, IRA stands for individual retirement arrangement.  They are a pretty standard way to prepare for that time of our lives, but there are several different forms of them.  That is where things get complicated.

Do not worry if it is all still rather confusing for you.  That is why I am here today – to help explain all of the possibilities for individual retirement arrangements and whether it is worth investing in one dedicated to precious metals right now.  So, if that is something that appeals to you or that you would like to learn more about, be sure to stick around!

Individual Retirement Arrangements: The Deep Dive

Honestly, it is hard to imagine discussing this topic without first starting here.  Of course, there are other guides out there as well such as this one, https://www.thebalancemoney.com/what-is-an-ira-and-how-many-types-of-iras-are-there-2388700, which offer some similar details.  However, I find that they can be a bit difficult to understand at times.  Financial jargon is a can of worms I rarely enjoy delving into.

As their name suggests, they are a form of account that people create to set money aside for their retirement years.  In terms of the varieties, there are three main ones that I will focus on today.  These are Roth, Traditional, and self-directed.  

Roth

Compared to the others, this is a fairly recent development.  They came about in 1997 thanks to the passing of the Taxpayer Relieve Act.  You see, they are taxed differently than either of the others.  When you deposit, your current tax bracket determined the percentage that you are charged. 

This is notably different from the traditional type, which I will be covering next.  For now, though, there are a few other things to keep in mind.  Most importantly, there is the fact that a lot of folks end up using them as a sort of emergency fund as well.  This is because there is no penalty for making early withdrawals like there is in other circumstances.

Traditional

As promised, now I will explain the traditional accounts.  Unlike Roth, they do charge you if you withdraw early.  In addition to that, your initial contributions are not immediately taxed.  Instead, your withdrawals later in life get charged, so they are ideal if you believe that you will have a lower tax bracket upon retiring.

There are some slightly more stringent requirements for them as well, so keep that in mind. Basically, though, as long as you get the gist of what I have said so far then you should be set!  They are a way to save you money in the long run if you correctly predict that your tax bracket will be lower than your current one.

Self-Directed

At last, we can get to the real meat and potatoes of this article!  If you were not previously familiar with them, the idea here is pretty simple.  Essentially, it puts the investor themselves fully in charge of the account and what happens with it.  You can structure it in either of the previous two models that I mentioned.  Most important, perhaps, is the fact that you can choose what sorts of assets you want to add.

Unfortunately, it will not be a complete free-for-all.  Rather, there are some regulations in terms of the specific assets that you can deposit in each category.  We can use precious metals as an example since it is a fairly common thing to put in a self-directed IRA.  

One of the main questions that I see is whether we can use our other retirement accounts to convert to this type and get it done without a penalty in the process.  Thankfully, this is usually a “yes” – you just need to know how to do so.  The link that I provided there can explain some of it if you are curious.  Essentially, it will just be about working with the right organization.

When it comes to the limitations of the precious metals’ variety, let me go over them briefly.  Percentage of raw gold in what you deposit will play a big factor.  For example, a limited number of types of gold coins are permissible.  There are lists all across the internet for that.  Additionally, you cannot put any collectibles into an IRA like this.

Are IRAs worth it?

As we move throughout our adulthood, this is a question that we will have to ask ourselves nigh constantly.  Weighing the costs and benefits of retirement accounts and savings is a pretty big deal, after all, and it can be hard to figure out what will be best for us.  I certainly know the struggle of having to live paycheck to paycheck while still feeling that need to set cash aside when I get paid.

At the end of the day, though, it is important to give ourselves some perspective.  Sure, we will not see the fruits of our labors right away upon investing them into our retirement.  However, once we reach those golden years, we will be thanking our past selves for being so conscientious about it.  Unfortunately, retirement is exceedingly expensive.

Beyond the medical bills that will most likely be a part of your life, there is also the matter of lodging and the fact that you will no longer have that consistent income that you used to have.  If you are lucky, you will get Social Security payments.  They are not nearly enough to allow senior citizens to live comfortably, though, let alone to maintain their previous lifestyle. 

When you are pondering whether or not this is worth it, I hope that you remember those words of wisdom.  Making these decisions might be a challenge, but they are well worth it in retrospect trust me.