A gold Roth IRA is a great way to diversify your retirement portfolio. This type of retirement account allows you to hold gold and other precious metals in the form of minted coins. However, there are some important gold Roth IRA rules to follow. Read on to find out more.
See Top-5 List of Gold & Silver Roth IRA Soultions on this page
Understanding Different Types of IRAs
An IRA or Individual Retirement Account is an account you use to save and invest for retirement. There are different types of IRAs and rules will vary depending on the account you choose.
With a traditional IRA, you can make contributions before taxes. You will not pay taxes right away on the funds that go into your IRA. However, you will have to on the distributions you take once you retire. It’s a popular type of retirement account since many investors find themselves in a lower tax bracket after they leave the workforce.
If you decide to open a Roth IRA, you will make contributions after taxes. Your investments will grow tax-free, and you won’t pay any taxes on your withdrawals once you retire.
It’s also important to consider who makes the investment decisions for your retirement account. In most cases, a brokerage house will hold the funds and decide where to invest the money to grow your retirement account. Typically, this is done by choosing a mix of stocks, mutual funds, bonds, and other products.
However, if you want to open a gold Roth IRA, you’ll have to create a self-directed IRA, which means you’ll be responsible for deciding how you invest the funds.
Who Can Open a Gold Roth IRA?
Anyone with an earned income can open an IRA. Still, if you want to get a Roth IRA, you’ll need to meet some income requirements. You can open a Roth IRA if your MAGI is less than $144,000 a year if you file single and less than $214,000 if you’re married.
Moreover, you’ll require a custodian to oversee your account and a broker who can purchase the gold and precious metals on your behalf. These firms might have conditions of their own, including income and a phone interview to make sure you understand the risks of investing in precious metals.
How Many Roth IRAs Can You Have?
There are no limits on the number of IRAs you can open. In fact, a gold Roth IRA will make a great addition to an existing retirement portfolio since you can use precious metals to diversify your portfolio and as a hedge against inflation over the long term.
What Kind of Precious Metals Can You Invest In?
There are some important gold Roth IRA rules regarding the precious metals you can invest in. For instance, there are four IRA-accepted precious metals you can hold in this account, including gold, silver, platinum, and palladium.
As well, you will have to meet certain standards when it comes to the fineness, weight, and origin of the coins or bullion. You can hold one ounce, one-half ounce, one-quarter of an ounce, and one-tenth of an ounce coins. Any other weights aren’t IRA-approved.
Gold and Silver
American Gold and Silver Eagle bullion coins and proof coins are popular options. These are common, and it should be easy for your custodian to find them.
You can also invest in uncirculated gold American Buffalo coins or hold Canadian Gold and Silver Maple Leaf coins.
Beyond North American coins, you have extensive options to invest in additional foreign coins, including Australian Kangaroo, Nugget, and Kookaburra coins as well as Chinese gold and silver Panda coins. Mexican Libertad coins are another option for investing in silver.
A few British coins are allowed, including gold and silver Britannia coins minted after 2013 and the Queen’s Beasts coins. Austrian gold and silver Philharmonic coins are also well-regarded.
Platinum and Palladium
Platinum and palladium can help you build a more diverse gold Roth IRA. You’ll need to invest in coins that have a purity of at least 99.95% for these metals. The coins should also be NYMEX or COMEX approved.
U.S. Platinum and Palladium Eagle coins and proof coins are popular since they’re easy to find. Canadian Platinum and Palladium Maple Leaf coins are also common.
There are other alternative platinum coins, including Britannia from the U.K. minted after 2018, coins from the Queen’s Beasts series, Australian platinum Koala, and Isle of Man Noble coins.
You can find a more detailed list of the different coins and bullion you can hold in your gold Roth IRA in IRS Publication 590. This document explains that, while older and rare coins hold value for collectors, they’re not an acceptable asset to hold in a retirement account.
If you buy coins that don’t meet these requirements, the IRS will consider these assets as a distribution of the funds held in your IRA account and you’ll have to pay a 10% tax penalty.
Gold Roth IRA Rules Regarding Storage
One of the most important gold Roth IRA rules to keep in mind is that you can’t store the precious metals yourself. Keeping precious metals at home can diversify your assets and ensure that you have access to the coins as needed. Nevertheless, an IRA calls for a custodian who can account for the value and quantity of the precious metals you hold.
You’ll have to keep the coins in an IRS-approved depository, which can be the storage vault of a bank, credit union, or trust company. Note that your account administrator can be a different firm from the one that will hold the precious metals.
You can’t keep your precious metals in a personal safe deposit box. In most cases, you’ll have to use unallocated storage, which means that a financial institution certifies that you hold a certain quantity of precious metals kept in a large storage facility with gold that belongs to other investors.
If you don’t meet these storage requirements, the IRS will consider that you took a distribution from your gold Roth IRA and you’ll be liable to pay a tax penalty.
How Can You Fund a Gold Roth IRA?
You can fund your Roth IRA via a transfer or a rollover. If you opt for a transfer, you’ll have to contact your custodian, send them the funds, and have them purchase precious metals on your behalf.
However, if you already own gold coins and other precious metal bullion, you won’t be able to deposit these assets into the IRA directly. The custodian is the only entity allowed to handle buying and selling precious metals for the IRA.
If you have an existing retirement account, you can choose to roll it over into a gold Roth IRA. Note that you have 60 days to transfer the funds to avoid any tax penalties. You can perform a rollover once a year without paying taxes.
If you’re rolling over a 401(k) from a former employer, you shouldn’t run into any complications. However, if you’re still an employee, your 401(k) provider might have some additional rules to follow.
Gold Roth IRA Rules for Contributions
You’ll have to follow the same contribution rules as for other types of IRAs. You can allocate up to $6,000 for 2021 and 2022 if you’re under 50. If you’re over that threshold, you can contribute up to $7,000 a year.
If you put in too much, you’ll have until the end of the tax year to make a withdrawal to avoid paying a tax penalty.
Gold Roth IRA Withdrawal Rules
A gold Roth IRA follows the same withdrawal rules as other IRAs. Namely, you will have to wait until you turn 59 ½ to start withdrawing funds from your retirement account. If you take a distribution early, you’ll pay a 10% tax penalty on the funds you withdraw.
While you can start taking distributions at 59 ½, you can choose to let your assets grow. However, you’ll have to start taking distributions once you turn 70 ½. Bear in mind that there is a minimum yearly withdrawal.
The IRS will calculate this minimum withdrawal based on your age and the value of your account.
Additional Rules for Gold Roth IRAs
There are a few additional rules to keep in mind:
- You’re making contributions after taxes, which means you won’t have to pay taxes once you start making withdrawals, provided that you waited long enough to avoid tax penalties.
- There is no need to report contributions on your tax return.
- You can make contributions to someone else’s gold IRA as a gift, but you won’t be able to contribute more than $6,000 a year.
- You can open a custodial gold IRA for a minor to help a child or grandchild start saving for retirement.
- You can choose an account beneficiary to have a loved one inherit your gold IRA.
A gold Roth IRA can be an interesting addition to your retirement portfolio if you want to diversify your assets. However, you will need to follow gold Roth IRA rules for the IRS to recognize your precious metal coins as a valid contribution to your retirement account.
I hope you found this article to be helpful and that you now have a better overview on the subject of gold Roth IRAs. Please share your own experience in the comment section below as it can help others! Also, if you got any questions I would be more than happy to try to answer them below aswell!
I wish you success!
Michael, founder of Gold Retired