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Last Updated on November 7, 2023
Gold Individual Retirement Accounts (IRAs) are a popular investment option for many Americans seeking to diversify their retirement portfolios and protect their savings against market volatility.
Gold IRAs allow investors to hold physical precious metals like gold, silver, platinum, and palladium in their retirement accounts, providing a hedge against inflation and other economic risks.
However, like traditional and Roth IRAs, Gold IRAs are subject to Required Minimum Distribution (RMD) rules set by the Internal Revenue Service (IRS).
This article will provide an in-depth look at RMDs for Gold IRAs, including how they apply, the available distribution options, and other key facts that investors should be aware of.
What is Required Minimum Distribution (RMD)?
A Required Minimum Distribution (RMD) is the minimum amount that an individual must withdraw from their retirement account(s) each year once they reach a certain age.
This rule was implemented to ensure that retirement account owners do not accumulate wealth indefinitely, tax-free, and that they eventually withdraw and pay taxes on their savings.
At the time of publication the age at which RMDs begin is 72, an increase from the previous age of 70½ following the passage of the SECURE Act in 2019 [1].
RMD amounts are calculated based on the account owner’s life expectancy and the total value of their retirement account(s) as of December 31st of the previous year.
The IRS provides life expectancy tables to determine the appropriate distribution period for calculating the RMD. Failure to take the required distribution can result in a 50% penalty on the amount not withdrawn.
How Do RMDs Apply to Gold IRAs?
Gold IRAs, also known as Precious Metals IRAs, are self-directed retirement accounts that allow individuals to invest in physical precious metals.
These accounts are subject to the same RMD rules as traditional IRAs.
When an account owner reaches the age of 72, they must begin taking RMDs from their Gold IRA. The RMD amount is determined by the value of the precious metals held in the account and the account owner’s life expectancy.
Can You Get Physical Precious Metals or Do You Have to Take Your Distributions in Cash?
When taking RMDs from a Gold IRA, account owners have two options for receiving their distributions: in cash or in-kind.
An in-kind distribution involves the actual transfer of the physical precious metal(s) to the account owner, while a cash distribution involves selling the precious metal(s) and withdrawing the proceeds. Both options have their pros and cons, and the best choice will depend on the account owner’s individual needs and preferences.
Some investors may prefer in-kind distributions, as they allow the account owner to maintain possession of the physical precious metals, which can provide a sense of security and control.
However, in-kind distributions may require the account owner to pay additional costs, such as storage and insurance fees, once the precious metals are in their possession. Additionally, account owners will need to determine the fair market value of the precious metals at the time of distribution for tax purposes.
Cash distributions, on the other hand, can provide account owners with more liquidity, making it easier to reinvest the proceeds or use them for other purposes. However, selling the precious metals to receive cash distributions may expose account owners to market fluctuations and potential losses, depending on the timing of the sale.
Other Key Facts to Know About Gold IRAs and RMDs
- Taxes: RMDs from Gold IRAs are taxed as ordinary income, similar to traditional IRA distributions. The tax rate depends on the account owner’s income tax bracket in the year the distribution is taken – see more about Gold IRA compliance
- Roth Gold IRAs: Roth Gold IRAs are not subject to RMDs during the account owner’s lifetime. This means that investors with Roth Gold IRAs can allow their investments to grow tax-free without having to worry about RMDs. However, beneficiaries of a Roth Gold IRA may be subject to RMDs after the account owner’s death.
- Rollovers and Transfers: Rollovers from a traditional IRA to a Gold IRA do not trigger RMDs. However, once the funds are in the Gold IRA, RMD rules will apply when the account owner reaches the required age. When transferring assets between Gold IRAs, RMD rules will continue to apply based on the account owner’s age.
Deciding if a Gold IRA is the Right Investment Option for You
A Gold IRA can be a valuable addition to a well-diversified retirement portfolio, providing a hedge against market volatility and protection from inflation.
However, it may not be the right investment option for everyone. Before opening a Gold IRA, consider factors such as your risk tolerance, investment goals, and overall financial situation.
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Additionally, take into account the costs associated with a Gold IRA, including storage fees, custodian fees, and potential taxes on RMDs.
How to Open a Gold IRA
- Choose a reputable custodian: Opening a Gold IRA requires selecting a custodian that specializes in self-directed IRAs and precious metals. Custodians are responsible for administering the account, maintaining records, and ensuring compliance with IRS regulations. Conduct thorough research to find a trustworthy and experienced custodian.
- Open the account: Once you have chosen a custodian, complete the necessary paperwork to open your Gold IRA. This will include providing personal information and selecting a beneficiary for the account.
- Fund the account: Transfer or rollover funds from an existing retirement account, such as a traditional IRA or 401(k), or make a direct contribution to your Gold IRA. The contribution limits for Gold IRAs are the same as those for traditional and Roth IRAs.
- Purchase precious metals: Work with your custodian to select and purchase the precious metals you wish to include in your Gold IRA. Remember that only certain types of gold, silver, platinum, and palladium coins and bars are eligible for inclusion in a Gold IRA.
- Store the precious metals: Gold IRA custodians typically partner with approved storage facilities to ensure the safekeeping of your precious metals. These facilities must meet certain security standards and adhere to IRS guidelines for handling and storing precious metals.
Think a Gold IRA is the right investment option for you? Learn more with a free precious metals investing kit from our top-rated company, Augusta Precious Metals:
Summary
Required Minimum Distributions (RMDs) are an important consideration for investors with Gold IRAs, as they can impact their retirement savings and tax liabilities.
Understanding how RMDs apply to Gold IRAs, the options available for receiving distributions, and other key facts can help investors make informed decisions about their retirement planning.
By carefully evaluating the benefits and potential drawbacks of a Gold IRA, investors can determine if this investment option is the right fit for their financial goals and long-term retirement strategy.
Cited sources
https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf
