Continuing our series of stories about precious metals from our dear customers, we have an inspiring account from Bob W. He shares his experience of accumulating precious metals over more than two decades:
My story in no way rivals the wonderful story in your original email, but here it is. [you can find my original story here]
Once I had a back surgery which did not go as planned. I was left at home on the mend and had much time on my hands. I had always enjoyed reading financial stuff and started reading articles about precious metals versus government issued fiat currency.
I learned the difference between the two. I understood the issues of debasement and inflation and what they could do to devalue government issued currency.
At the time (1996), I was out of work and also had a growing family with three children in either private universities or high schools. In spite our financial worries, I made the leap and purchased a combination of silver, gold, and platinum.
I was back at work after a little over a year and continued to purchase small batches of primarily silver whenever I could. The dealer I used for my original purchase eventually suggested I swap out my platinum coins (which had appreciated significantly) for silver eagles, which I did.
Over the years, I’ve continued to increase my metals holdings, except in 2011 and 2012 at which time I liquidated several hundred eagles.
I also opened up a precious metals IRA when I rolled over a 401(k) from a previous employer in 2006.
I’ve periodically taken redemptions in kind from this IRA, especially when I felt the market was depressed. I have kept my metal or gifted it to my children at different points in time.
The largest portion of my holdings is still held securely in a storage facility out of state.
Over the years I’ve tried to encourage family members to view real money as I do.
I have so many comments about Bob’s story.
For starters, it’s a perfect example of sustainable, long-term investing. Bob has been a patient and steady investor who has systematically invested for decades. He played a long game and didn’t give in to speculation and mania, which has paid off for him big time.
For the record, in 1996, an ounce of silver and gold traded at around $5 and $375 respectively. As I write this, gold sits at around $1,295 while silver sells at $16.51.
Removing Emotions and Speculation from Investment Decisions
Another aspect of Bob’s story that stuck with me was his resilience and emotion-free investment decisions.
Bob was wise enough to recognize bubbles in the precious metals market and re-balance his portfolio accordingly. In retrospect, it looks straightforward. But in the midst of mania, it takes discipline and courage to sell.
He sold part of his stash of precious metals in 2011. Back then, precious metals were in a big uptrend with gold nearing $1,900/oz and silver $50/oz. The rally was the direct result of Bernanke’s aggressive quantitative easing in response to the 2008 financial crisis.
As QE tapered, Bob temporarily reduced his exposure to precious metals to capture some gains at highs.
High metals prices induced excess optimism and speculation among investors. Caught up in the mania, they forgot that all asset classes go through bull and bear cycles. A crash followed.
The reverse is happening now.
With today’s relatively low prices, precious metals are falling out of favor. Everyone is obsessed with tech stocks instead, which closely resembles the period leading up to the dot-com crash.
As history shows, following the herd is the fastest way to lose your shirt.
A Better Alternative to a Traditional Precious Metals IRA
I’d like to wrap up this article with one piece of advice for Bob and any of you who have a precious metals IRA. Instead of taking redemptions from an IRA, I suggest transferring your IRA assets to a Roth IRA.
In doing so, you’d still realize gains on the assets being rolled over and pay taxes. Also, you’ll enjoy the following benefits in the future:
- Future gains would never be taxable again as long as the assets stay in the Roth IRA.
- Roth IRA distributions are non-taxable for the beneficiary.
- Roth IRAs do not require forced distributions once the owner reaches age 70 ½. Your gains will continue to compound tax-free as long as the assets are in the fund.
- Your heirs will hold all the benefits of a Roth IRA if you don’t take redemptions before death.
A Roth IRA is one of the most important parts of your estate plan. Of course, you must consult your tax accountant or estate attorney to see how a Roth IRA conversion would work based on your personal circumstances.
For most investors, however, Roth IRAs are one of the most powerful tax shelters. They are 100% legal and yet very few advisors recognize their value.
Bob, thank you for being a member of the Hard Assets Alliance and for sharing your stories with us!