Adding gold and precious metal to an IRA can be a great way to diversify your retirement portfolio. Adding alternative asset classes, such as gold, to a stock-heavy portfolio can help protect your retirement portfolio during times of economic insecurity.

 

Gold and stocks frequently move in opposite directions. While both tend to appreciate over time, they don’t move in tandem with one another. When one asset class is struggling, the other often helps to save the day.

 

Because gold and stocks are not highly correlated with one another, they are effective in combination: Gold has a substantial diversification benefit.

 

Gold is a time-tested way of hedging your exposure to stock market risk, interest rate risk, and the threat of inflation.

 

Tax Considerations in Gold IRAs

 

Holding gold in an IRA can be a very tax-efficient way to own gold. Direct ownership of gold doesn't generate dividends or interest payments, however. Gold profits come as capital appreciation, not income. So do your tax planning with that in mind.

 

By holding gold or other precious metals within an IRA, you can rebalance your gold holdings as often as you like without having to worry about capital gains taxes. All taxes on capital gains or dividends are deferred until you begin taking the money out. If you hold the assets in a Roth IRA for at least five years, withdrawals (called distributions) are tax-free.

 

Gold within an IRA is likewise not subject to the 28% tax rate that usually applies to gains from the sale of collectibles. However, Section 408 of the Internal Revenue Code prohibits the holding of any kind of collectible or jewelry with an IRA.

 

IRA Contribution Limits

 

As of the 2024 tax year, Congress imposes an annual cap of $6,500 per year to all your IRA accounts combined. For those age 50 and older, you can make an additional contribution of $1,000, for a total of $7,500 to all IRA accounts combined. Contribution limits remain unchanged since last year.

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For married couples, the annual IRA contribution cap is $13,000, with each half of the couple potentially qualifying for the over-50 ‘catch-up’ contribution separately.

 

If you meet the income limits, you can deduct contributions to traditional IRAs against your income in the tax year for which you are contributing. However, even if you earn too much money to take deductions on IRA contributions, you can still contribute up to the annual maximum on a non-deductible basis.

 

Required Minimum Distributions

 

You can't defer taxes on your assets in traditional IRAs, 401(k)s, SEPs, or SIMPLE IRAs indefinitely. Generally, you must begin taking distributions from these accounts not later than April 1st of the year after the one in which you turn age 72.

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Roth IRAs and designated Roth 401(k) accounts are not subject to the RMD requirement.

 

If you would rather not be forced to take distributions, and pay income taxes on those distributions at ordinary income rates, then you should consider holding them in Roth IRA accounts, converting existing traditional IRAs to Roth accounts, or holding them outside of retirement accounts altogether.

 

Do not attempt to store your IRA gold or any other assets yourself. That’s prohibited under Section 408 of the Internal Revenue Code. You can hold gold personally if it’s not in a retirement account. But if you hold physical gold or any other precious metal in your IRA or other tax-advantaged retirement account, it cannot enter your personal possession. 

 

How to Buy Gold for Your IRA Account

 

Not every IRA custodian will hold gold for your IRA – or any other alternative investment, for that matter. Most Wall Street firms aren’t set up to hold physical assets on clients’ behalf. They are only capable of holding paper securities.

To buy actual physical gold, silver, platinum, or palladium for your IRA, 401(k) or other tax-advantaged account, you must open an account with a self-directed IRA custodian that allows precious metals.

 

Once you open the account, transfer money into it, either via your existing checking account or via a trustee-to-trustee transfer from another retirement account.

 

Once your self-directed IRA account is funded, provide your custodian or administrator with a written instruction to purchase the metal and transfer it directly to an authorized custodian, such as a vault company.

 

Gold IRA Rollovers

 

You can do one IRA rollover a year. To use a rollover to buy gold, direct your existing IRA custodian to transfer funds directly to you or directly to the new custodian. If they send the money to you, you have 60 days to invest the funds in a new account, or the IRS will deem you to have taken a distribution, and you will owe taxes and possible penalties on the rollover amount.

 

This is not an issue if you have them transfer the funds directly to your new IRA custodian in a trustee-to-trustee transfer.

 

When executed correctly, an IRA rollover does not generate a taxable event.