How to Buy Physical Silver With a Self-Directed IRA

Self-directed individual retirement accounts offer investors a great deal of investment flexibility. The only types of investments prohibited by Internal Revenue Service regulations are life insurance and collectibles. This means you can buy physical silver and other precious metals with a self-directed IRA. You need to take care, however. The prohibition on collectibles includes collectible coins. The IRS allows only certain types of silver coins and bars whose value depends entirely on their metal content. In addition, you must follow IRS regulations for purchasing and storing physical silver.

Step 1

Open a self-directed IRA if you don’t already have one. Providers of self-directed IRAs impose few restrictions, whereas a managed account can limit you to buying just stocks and bonds or even restrict you to bank CDs. Check with a provider before you open an account to be sure you can buy physical silver and make other investments you want. Banks and brokerage firms may offer self-directed IRAs. There are also a number of custodial firms that specialize in self-directed IRAs. You must choose a custodian for the account. Typically the account provider assumes this responsibility. Bear in mind that with a self-directed IRA you — not the account custodian — are responsible for choosing investments and complying with IRS rules.

Step 2

Select an approved depository for storing your silver. Under IRS rules you cannot take physical possession of precious metals you buy with an IRA, and neither can your account custodian. Typically, account providers that allow IRA investment in precious metals have an arrangement with an approved depository or can recommend one.

Step 3

Fund your IRA by making contributions. You can deposit up to $5,000 per year, as of 2012. Once you are 50 years old, this limit goes up to $6,000. You can also roll over funds from other tax-deferred retirement accounts.

Step 4

Chose the type of silver bullion you want to buy with your self-directed IRA. The IRS allows American Eagle, Austrian Philharmonic and Canadian Maple Leaf silver coins. You can also use an IRA to buy silver bars that meet IRS standards for purity.

Step 5

Instruct your IRA trustee/custodian to purchase the silver using the funds you have contributed to your self-directed IRA. Do not buy the silver yourself. IRS rules prohibit you from depositing investment assets into an IRA account. You must first deposit cash and allow the account trustee to carry out the actual transaction.