With a Gold Roth IRA, enjoy tax incentives and distribution flexibility
Anyone mapping out their retirement savings encounters a wide range of account types from which to choose, which extend beyond just a Traditional IRA.
And while placing alternative assets like IRA-approved gold coins, rounds and other precious metals into a retirement account requires a self-directed IRA (SDIRA), there are several types of SDIRAs available — including the most common types, the Traditional IRA and the Roth IRA.
Knowing the advantages of each account type can help you make the right decision for your lifestyle and retirement goals. Here we focus on the Roth IRA, and we discuss why and how you can place precious metals like gold in yours.
What are the distinctive features of a Gold Roth IRA?
While both Roth IRAs and Traditional IRAs offer tax incentives as you build your nest egg, there are distinct differences in the way your contributions and withdrawals are taxed between these two types of accounts. It is always recommended to speak to a qualified tax advisor to find out which account type is best for your particular situation and whether you meet the requirements for particular exceptions.
The most widely celebrated feature of a Roth IRA is that all taxes are paid upfront on the income you use to fund the account. But, you won’t pay any taxes based on any subsequent account growth, and assuming that you follow rules for distributions, your withdrawals will not be taxed as income the way they might be with other retirement account types. That said, you cannot deduct contributions to your Roth IRA from your taxes.
Fewer age restrictions
With a Gold Roth IRA, there are no age restrictions to making additional contributions. You can continue to add to your assets in a Roth IRA and let them continue to grow tax-free even past the age of 70½, if you meet certain qualifications—like having held the Roth IRA for at least five years. Otherwise, with a Traditional IRA, minimum distributions are mandatory for everyone once you reach the age of 70½.
With a Roth IRA, you also have the added flexibility to make some early withdrawals without paying taxes or penalties on the money you take out in retirement. Generally, these early distributions should come after the age of 59 ½ in order to incur no penalties unless you fulfill certain requirements. For example, you can withdraw your contributions (but not growth) from a Roth IRA without withdrawal penalties before 59 ½ (but verify with your financial institution first). All early withdrawals in a Traditional IRA account come with a 10 percent early withdrawal penalty along with added income taxes on the withdrawal amount.
When and why was the Roth IRA created?
The Roth IRA was first proposed in 1989 by Senators Bob Packwood and William Roth. Capped at $2,000 and then known as an “IRA Plus,” this retirement account gave individuals a way to invest after-tax money for retirement—and as a result, they could make tax-free withdrawals down the road.
It was not until the Taxpayer Relief Act of 1997 that the Roth IRA was established while the Traditional IRA was reinstated, having been repealed in 1986.
The idea was that everyone—including people with lower income—could invest in their retirement and benefit from the tax deduction that comes with a Traditional IRA. But legislators were concerned giving everyone that tax break was more than the IRS could afford; they sought to balance that using the Roth IRA, incentivizing the payment of taxes upfront to people who wanted to.
Why should I buy gold? And if I buy gold, why place it in an IRA?
While an IRA allows you to grow your retirement savings and insulate your assets from income taxes as they may potentially increase over time, adding gold to your strategy could add another layer of security to your nest egg through diversification. Your account can include gold along with other precious metals—including silver, platinum, and palladium—alongside traditional retirement investments such as stocks and mutual funds.
Diversifying your retirement savings with precious metals could reduce its risk and volatility against negative fluctuations in the value of the U.S. dollar, market swings, and even political instability. This means that even in the face of national economic instability, such as the growing U.S. trade deficit, rapid inflation, or the increasing national debt, your gold could provide you with ongoing value and purchasing power.
Unlike paper currency, equities, and bonds, gold’s value has historically risen and has persisted even when fiat currency has suffered. Unlike fiat currency, the value of gold is not dependent upon the government, and it does not vary from country to country. While many people recognize that in the short term, the price of gold may fluctuate, they also note that over the long run, gold tends to maintain its value.
A Gold Roth IRA is actually the Roth IRA type of a class of IRAs known as the self-directed IRA (SDIRA), which is what legally can hold alternative assets like precious metals.
With a self-directed IRA, the individual is in charge of decision-making and can select from a wider range of assets beyond the limited array of stocks and mutual fund options available in a conventional IRA. A Gold Roth IRA functions the same as a conventional Roth IRA, but instead of holding paper assets, it can hold gold.
If you are already planning for retirement, you likely already own or have considered your IRA options. Adding a Precious Metals IRA to your nest egg is one easy way to diversify it.
How do I buy gold with a Roth IRA?
We make setting up a Gold Roth IRA simple. Working with us means you will have your own designated Precious Metals Specialist who will get to know you and the reasons for your interest in precious metals and who will then walk you through your options and any steps involved in setting up your account.
There are three main steps to buying gold in a Roth IRA:
- Determine the source of your funds. This may involve reviewing your already-existing accounts to see if you’d like to transfer an existing IRA and/or rollover a 401(k). Your Specialist will help you identify any eligible accounts.
- Open your Precious Metals IRA — i.e., your Gold Roth IRA. Your Precious Metals Specialist will walk you through the specific steps and paperwork needed for this step. You’ll sign your documents and open your SDIRA with one of our IRS-approved custodian partners, although you are welcome to work with any qualified custodian that you’d like.
- Buy precious metals. Once your funds have been placed into your SDIRA and are available, you are free to purchase gold or any of the other precious metals we offer. Again, your Precious Metals Specialist will help you decide how you’d like to allocate the precious metals in your account. These precious metals will be safely stored with your depository until you decide to make any changes to your account.
You can always feel free to reach out to your Specialist with any questions about your account, as well as any changes you would like to make.
What gold qualifies for a Gold Roth IRA?
All gold placed in an IRA must follow the rules laid out by the IRS that limit the types of metals permitted.
Some coins and jewelry are forbidden, but the IRS does allow gold bullion (in coin or bar form) and gold proof coins, such as the Proof American Gold Eagle. Some bullion coins and bars are not eligible for placing in IRAs because they fail to meet the specific purity requirements established by the IRS.
Here’s the gold that you can safely own as part of your retirement strategy.
Explore your options with a Gold Roth IRA
By purchasing gold for your retirement savings, you have the opportunity to diversify your retirement funds with tangible, finite precious metal that tends to maintain its value and purchasing power. By choosing a Gold Roth IRA, all of your assets can grow tax-free, without penalties for early withdrawals, and are free from minimum disbursements.
Here at Birch Gold Group, your designated Precious Metals Specialist is on hand to walk you through your options and answer any questions you may have about placing gold into a Roth IRA.