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The word “gold” is often used to describe exclusive or privileged status, with “gold tiers” trending as signifiers of high esteem within a club or organization. Often in these very same places you’ll find one level higher: “platinum tiers.” Platinum is often viewed as a more elite and precious metal than even gold; its value as a very precious metal has persisted over time.
Buying platinum within your self-directed individual retirement account (SDIRA) allows you to further diversify your precious metals holdings and potentially safeguard your retirement savings. Let’s explore why platinum is so valuable before reviewing how to buy platinum with an IRA in order to leverage the tax benefits.
With an occurrence rate of 0.005 parts per million on Earth, platinum’s rarity is on-par with that of gold—and it has certainly been esteemed similarly. Dating back to its first known use in the 7th century BC, platinum was found as a decoration, alongside gold and silver, on a casket in Thebes made for Queen Shapenapit. For about two millennia, platinum work was centered on the Pacific-facing coast of South America.
It wasn’t until the 1820s that platinum gained usage in currency applications, with Russia as the first to mint coinage with it. Much more recently, sovereign mints around the world started issuing platinum collectible coins and bars. Over the last 20 years, platinum began to be seen as a vital investment commodity; from its placement in a Precious Metals IRA through the introduction of platinum ETFs like the Aberdeen Standard Platinum Shares ETF (PPLT), it has gained a strong reputation among investors.
Adding depth to platinum’s high value is the fact that not only is it esteemed in jewelry and decoration, but it also has proven to be extremely useful in industrial applications. Platinum is a fantastic catalyst for industrial purposes such as oil refining and catalytic converters in automobiles. Such critical industrial applications will promote ongoing demand for this metal and maintain its value.
In fact, platinum grew so valued that in the early 2000s, it became more expensive than gold on the open market. Today, it is viewed as a solid alternative choice to gold and silver in a precious metals portfolio. A recent Forbes article even points out that while its sister metal, palladium, had become more-often used in catalytic converters, platinum is making a comeback.
Since the Taxpayer Relief Act of 1997 went into effect, the IRS has allowed eligible platinum products to be purchased inside of IRAs—and they have been gaining in popularity.
In IRS Publication 590-B, platinum gained official retirement asset status alongside palladium, gold and silver coins and bullion. It is worth noting that the IRS still places strict limits on which exact precious metals pieces qualify for purchase and placement into IRAs. However, individuals have been successfully navigating these rules and buying platinum for their retirement savings.
Precious metals like gold and silver are well-known for their potential to help savers diversify their retirement nest eggs, increasing the likelihood they will be able to weather financial storms and economic panics that might send other asset classes—like fiat currency—onto turbulent paths. It wasn’t so long ago we saw this exact thing happen; in fact, it was only a little more than a decade earlier, during the financial collapse of 2008. While the dollar was plunging, the value of precious metals like platinum skyrocketed to all-time highs.
When traders and investors are panicky, they rely on assets seen more for their rarity and long-term value stability, and they like to branch out beyond assets based on fiat currency. Precious metals like platinum certainly qualify, behaving independently from fiat currency—in fact, as we have seen historically, metals like gold and platinum have some of their best moments when the dollar is at its worst.
This isn’t to say that platinum doesn’t come with its own volatility and periods of price movement, but platinum can complement other precious metals well. Diversification of precious metals can be just as important as diversification into precious metals. This can decrease the risks associated with single-metal portfolios, like disruptions in mining or market flooding.
For any precious metals holder, diversifying into precious metals like platinum and palladium can serve to shore up positions in gold and silver.
As noted, platinum was included onto the list of IRA-eligible assets shortly after the passage of the 1997 Taxpayer Relief Act. But conventional IRAs are limited in their holdings, based primarily on the options favored by the financial institution offering the IRA; typically, these include mutual funds, stocks, and bonds.
To receive the full range of IRA asset options—and to also be fully in charge of choosing what to buy—you will need to open a self-directed IRA (SDIRA). In this type of IRA, you can choose to purchase any type of asset within your retirement account as long as it is not excluded by the IRS.
Just as how only certain gold and silver products are eligible for placement into IRAs, platinum too is restricted. The specific rule is that only platinum coins or bars with a purity level of .9995, or 99.95%, can be bought inside of IRAs, limiting the number of minted coins to just a handful.
The main IRA-eligible platinum coin is the American Platinum Eagle bullion coin, although other assorted platinum bullion coins, rounds, and bars may also be eligible. The exact platinum products that are IRA-approved vary somewhat from year to year. The .9995 purity criterion is the only real rule on eligibility the IRS requires for platinum inside of an IRA.
Additionally, in order to leverage the tax benefits of an IRA, you’ll need to follow the same best practices regarding withdrawals as you would with any other assets: until you are 59 ½ years of age you should avoid taking physical possession of your precious metals. This is why an IRS-approved IRA custodian (paperwork) and a reputable depository (secure storage) are needed.
401(k)s and other employer-sponsored retirement plans offer a limited selection of assets that you can purchase, which generally include stocks, mutual funds, and bonds—all paper assets rooted in fiat currency.
In fact, employers will often strongly nudge their employees to buy stock specifically in their company. While owning a part of the company may be attractive to employees, this strategy can also prove highly problematic in the long run if the company struggles down the road or even goes bankrupt.
You may prefer to diversify the assets in your retirement account, which might help you protect your savings and future lifestyle. But if you want to diversify beyond the limited array of conventional assets permitted by your 401(k), you’ll have to roll over funds into a new retirement account that allows for a wider range of assets than you currently can access.
A self-directed IRA (SDIRA) is the type of retirement account that can hold the widest range of asset types. As long as the asset is not specifically excluded by the IRS, you can buy it within an SDIRA. In fact, you are completely in charge of choosing the types of investments in an SDIRA as well as how your funds are allocated to make these purchases.
So how do you get from the constraints of a 401(k) to the freedom of an SDIRA? The answer is a rollover of your eligible 401(k) into a new SDIRA, where you can then buy platinum and other precious metals, save for retirement, and enjoy the benefits of a tax-deferred retirement account.
Each 401(k) plan sets out rules for making withdrawals and also defines distributable events and eligibility criteria for rollovers. It is always best to check the terms of your specific plan as you consider a rollover. For example, most 401(k) plans do not allow rollovers while you are still working with the employer, but there are a select few that do.
Generally speaking, there are two ways to move funds from a 401(k) into an IRA: one does not have a penalty, and one may have a penalty if you do not meet certain conditions.
Your Precious Metals Specialist will review whether your accounts are eligible for rollover, and help you navigate any paperwork associated.
We’ve simplified the process of opening a Precious Metals IRA into five simple steps, so that you can focus solely on maximizing your savings for your retirement.
The five steps are:
Again, with all of this, your Birch Gold Group Precious Metals Specialist will be on hand to help out and answer any questions.
Diversification can be a smart move to protect your retirement savings. Aside from diversifying into precious metals, diversifying the types of precious metals you purchase may help further shield your savings from long-term hits due to market volatility or even economic downturns.
If you’ve got questions about opening a Precious Metals IRA, or if you’d like to go ahead and open one, call and speak to a Precious Metals Specialist at (800) 355-2116.