A Gold IRA functions similarly to a traditional IRA, with the extra benefit of giving you more control over your investments, which can include physical gold coins and bars as well as other IRS-approved silver, platinum, and palladium metals. Make sure your choice is based on Gold IRA Company Reviews.
With your Gold IRA or Custom Precious Metals IRA, you will invest your retirement savings based on specified tax treatment (pre-tax or after-tax) and then draw distributions in the future, just like any other retirement plan. You will continue to have beneficiary (ies), receive quarterly statements, and be able to log in online to check your balances with your Gold IRA or Custom Precious Metals IRA. There are a few other types of accounts, similar to traditional retirement plans, that each provides different tax benefits. The three types of gold IRA accounts are as follows:
- Traditional Gold IRA: A regular gold IRA is a tax-deferred retirement savings account that operates in the same way as pre-tax traditional IRAs. Your contributions and any gains will be tax-free, and contributions are usually tax-deductible. The IRS sets yearly contribution limitations of $5,500 for those under the age of 50 and $6,500 for those beyond the age of 50. You will have to pay taxes on your distributions from a pre-tax IRA when you retire.
- Roth Gold IRA: A Roth Gold IRA is tax-deferred retirement savings account that functions similarly to a Roth IRA. While Roth IRA contributions do not provide an immediate tax break, the main benefit of a Roth IRA is that you will not have to pay taxes when you begin to collect distributions during retirement.
- SEP gold IRA: SEP gold IRAs are offered to self-employed individuals and business owners. The SEP Gold IRA is similar to a pre-tax traditional IRA in that, your contributions are not taxed, but it allows you to make larger contributions. You can contribute up to 25% of your income or $53,000, whichever is smaller, instead of the $5,500 cap.
Keep in mind that forming a gold IRA isn’t the only way to invest in gold with your retirement assets. Aside from purchasing physical gold bullion, there are simpler alternatives to invest your retirement income in gold-related products. Gold stocks, such as shares of gold mining firms or gold royalty businesses, can be used to help fund mines. When the price of gold rises, these companies become more profitable, and their stock price rises with it.
You could also invest in gold ETFs or mutual funds. These funds invest in a variety of gold-related assets, such as equities in various gold mining businesses. There are also funds that use futures trading tactics to directly monitor the gold spot price. These assets are available through a regular brokerage IRA, so you won’t have to go through the trouble and expense of setting up a self-directed gold IRA. A self-directed gold IRA is required if you must own the real metal.