A Golden Opportunity to Diversify Your Retirement Savings

By John Paul Ruiz, QKA, CISP
Director of Professional Development, The Entrust Group

Retirement is fast approaching for 78 million Americans born between 1946 and 1964. Between 6,000 to 10,000 of these Baby Boomers turn age 60 every day.

For most of them, especially those who participate in their employer-sponsored 401(k) and similar plans, most of their retirement savings are invested in securities, either directly or through mutual funds. Given the volatility of the stock market, which most mutual funds participate in, another market downturn would be devastating for these investors. For some, their current objective is to preserve whatever nest egg they have left so they can retire at some point.

For many people facing retirement or already there, a primary question becomes what to do with their employer-sponsored retirement plan investments? The best way to determine the right answer is by seeking the assistance of a competent financial advisor, tax advisor or legal advisor.

Although retirees may keep their retirement assets in the prior employer's retirement plan, most roll over their assets into individual retirement arrangements known as IRAs. Some even convert taxable Traditional IRAs to avail themselves of the tax-free benefit of a Roth IRA. One of the advantages of rolling assets over into an IRA is the ability to diversify their portfolios with alternative investments.

Many people are investing their IRAs in precious metals. Precious metals provide:

1. return on investment, and,
2. they increase investment preservation.

Unlike stocks or bonds, while the value of a precious metal may decrease, the investment itself doesn't disappear. The investor's IRA still owns the physical metal. The precious metals platform offered by ASI Precious Metals Direct IRAs through The Entrust Group is a reliable and convenient way to diversify.

Although the Internal Revenue Service restricts some collectible investments in an IRA, Internal Revenue Code, ICF 408 (m) makes exceptions for certain coins and bullions as long as they meet specific criteria. American Eagle gold, silver and platinum coins all qualify to be held in an IRA. For bullion, there are two criteria:

1. The bullion must be in the physical possession of the Trustee of the IRA.
2. It must meet specific criteria of fineness.

If these criteria are not met, the IRS may rule the assets in the IRA violate IRC 408(m) and are therefore, taxable. (See private letter ruling 200217059) Thus, it is essential to select an IRA administrator and an investment provider who knows the rules governing precious metals investment.

The type of IRA that holds the precious metals provides additional value in supporting the IRA holder's objective of saving for retirement. Investments in a Traditional IRA grow tax deferred and any gains on the sale of an investment conducted inside an IRA are not reportable. Buying and selling precious metals inside an IRA does not trigger taxation, such as the high 28% tax rate on gains on the sale of a collectible investment held outside of an IRA.

In Roth IRAs, not only do the earnings grow tax deferred, they also may be distributed tax free, providing even more money during retirement.

So, how do you invest in precious metal in an IRA?

The first step is to establish and fund an IRA (Traditional or Roth) using a trustee or custodian such as The Entrust Group. You can fund the new IRA with a transfer from another IRA of the same type already established at another institution.

Or, you can rollover funds from a profit sharing plan, 401(k), 403(b) or governmental 457(b) plan from a previous employer.

Once the IRA is funded, you instruct the trustee or custodian to invest in the asset you have chosen.

Keep in mind that you do not have to invest all of your retirement plan assets in one type of investment. That's the beauty of diversifying.

With the help of your professional advisor, you get to choose the amount and type of investment. Even the U.S. Mint, on its brochure describing the American Eagle coins, notes that investing in precious metals is a great way for investors to diversify their retirement portfolios.

John Paul Ruiz brings to the team over 20 years of experience in the retirement and financial services industries. Before joining Entrust, he served as Vice President of Professional Development for Integrated Retirement Initiatives, LLC. John Paul has also gained valuable retirement plan insight from his roles at Ascensus, the IRA Institute, and American Bankers Association, among others. To complement his extensive career within the retirement and finance industries, John Paul holds QKA and CISP certifications.