Disclaimer: I'm not responsible if this happens to be dangerous or you get hurt. I did it at my own risk, and so will you.
Step 1: What You Will Need
1. Two sheets of paper
2. A hand warmer that contains iron powder (I used HotHands® hand warmers)
3. A container to hold the powder in once you're done (I used a small glass vial)
5. A small magnet
6. A small square of plastic wrap
Step 2: Step One: Prepare The Magnet
Step 3: Step Two: Cut Open The Hand Warmer
Step 6: Step Five: Extract The Powder
Step 7: Step Six: Store The Powder
Step 8: Finished!
Have fun with your iron. However, remember that it isn't good to breathe it, and if you don't bottle it up somewhere where it won't have much air, it will rust over time, although hopefully not as quickly as when it was in the hand warmer. Remember also that this powder is not necessarily pure, as it still contains ingredients from the pouch (although hopefully these were separated from the powder when it was magnetized).