January 14

Gold IRA Guide: How to Add Gold and Silver to Your Retirement

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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.

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Gold as a Diversifier Within Your IRA

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. As Harry Markowitz showed when he presented his Nobel Prize-winning paper, Modern Portfolio Theory, in 1955, adding gold to a portfolio with substantial stock holdings can help reduce risk without hurting expected returns.

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

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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.

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What Forms of Gold Can You Own in an IRA?

As mentioned above, you cannot own jewelry, gemstones, or collectibles within your IRA. Self-directed IRA gold and precious metal holdings are limited to bullion: coins and bars of sufficiently established purity and quality.

Note: American Gold Eagle coins enjoy special status when it comes to IRAs. They are the only gold coin exempt from the generally-applicable 0.999% purity requirement that applies to self-directed IRA holdings.

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IRA Contribution Limits

As of the 2022 tax year, Congress imposes an annual cap of $6,000 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 $7,000 to all IRA accounts combined. Contribution limits remain unchanged since last year.

For married couples, the annual IRA contribution cap is $12,000, 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.

Related: Traditional vs. Roth IRA for the Gold and Precious Metals Investor

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Roth IRA Income Limits

Tax year 2021

Single filers.

You can make a full contribution to a Roth IRA if your modified adjusted gross income is less than $125,000.

If your MAGI is greater than $125,000 but less than $140,000, a partial contribution is allowed. Your eligibility to make a Roth IRA contribution phases out entirely above a MAGI of $140,000.

Married and filing jointly.  

You can make a full contribution to a Roth IRA if your modified adjusted gross income is less than $198,000.

If your modified adjusted gross income is more than $198,000 but less than $208,000, you can make a partial contribution.

Your eligibility to make a Roth IRA contribution phases out entirely above a MAGI of $208,000.

Tax year 2022

Single filers.

For tax year 2021, you can make a full contribution if your modified adjusted gross income is less than $129,000.

You can make a partial contribution if your modified adjusted gross income is more than $129,000 but less than $143,999.

Your eligibility to contribute to a Roth IRA phases out completely when your MAGI exceeds $144,000. 

Married filing jointly.

For 2022, you can make a full contribution if your modified adjusted gross income is less than $204,000.

You can make a partial contribution for 2022 if your modified adjusted gross income is greater than $204,000 but less than $213,999.

Your eligibility to make a Roth IRA contribution phases out entirely if your MAGI exceeds $214,000 for tax year 2022.

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IRA Contribution Deadlines

The contribution deadline is generally April 15th of the year following the tax year for which you are contributing. However, in recent years, you could contribute as late as July 15th, due to the taxpayer relief provisions of the CARES Act. Check with your tax professional to ensure your taxes are filed before the deadline.

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.

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. You must use an IRS approved custodian to hold the assets on your IRA’s behalf. For example, a gold vault company or bank facility approved for this purpose.

If you try to hold these IRA assets yourself, or in an ordinary safety deposit box without the formal custodial arrangement, the IRS may force you to distribute the entire IRA at once, causing immediate income tax and significant additional penalties.

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Allowable Gold IRA Holdings

Generally, your gold holdings in an IRA must be a minimum of 99.5% pure. As stated earlier, there is an exception for American Eagle coins.

Bars and coins held in an IRA must be bullion, valued for their weight only.

IRA Approved Precious Metals List

IRA approved bullion rounds must meet minimum fineness requirements and be manufactured by a national government mint, a COMEX/NYMEX, LME, NYSE/Liffe, LBMA or ISO 9000 accredited refiner, assayer or manufacturer.

As mentioned above, you cannot own jewelry or gemstones within your IRA. Collectible coins are prohibited in IRAs, other than American proof Golden Eagle and Silver Eagle coins. Self-directed IRA gold and precious metal holdings are limited to bullion: coins and bars of sufficiently established purity and quality.

These coins are eligible to hold in IRA accounts:

Gold:

American Eagle gold coins

American Buffalo Bullion gold coins

➢ Proof American Eagle coins

Austrian Philharmonic gold coins

➢ Australian Kangaroo/Nugget coins

Canadian Maple Leaf gold coins

➢ Chinese Gold Panda coins

➢ Various other .995 fine rounds


Silver:

American Eagle silver coins

➢ Proof American Eagle silver coins

➢ Austrian Philharmonic silver coins

➢ Australian Kookaburra coins

➢ Canadian Maple Leaf silver coins

➢ Mexican Libertad silver bullion coins

➢ Silver Chinese Panda coins

➢ South African Silver Krugerrand coins

➢ Various other .999 fine rounds

Platinum:

➢ American Eagle platinum coins

➢ Proof American Eagle platinum coins

➢ Australian platinum Koala coins

➢ Canadian platinum Maple Leaf coins

➢ Isle of Man Noble platinum coins

➢ Various other .9995 fine rounds

Palladium:

➢ Palladium Canadian Maple Leaf coins

➢ Various other .9995 fine rounds





IRA Eligible Bullion Bars

You can own IRA-approved bullion bars provided they meet minimum standards for purity, manufactured by a NYMEX or COMEX-approved refiner/assayer or national mint.

Examples of qualifying gold bars:

➢ Canadian Mint .995 fine bars

Credit Suisse .995 fine bars

➢ PAMP Suisse .995 fine bars

➢ UBS .995 fine bars

➢ Various other .995 fine bars

Examples of qualifying platinum bars:

➢ Credit Suisse .9995 fine bars

➢ Johnson Matthey .9995 fine bars

➢ Various other .9995 fine bars

Examples of qualifying silver bars:

➢ Canadian Mint .9999 fine bars

➢ Johnson Matthey .9999 fine bars

➢ Sunshine Mint .9999 fine bars

➢ Various other .9999 fine bars


Examples of qualifying Palladium bars:

➢ Pamp Suisse .9995+ fine bars

➢ Baird & Co. .9995+ fine bars

➢ Various other .9995 fine bars

Gold bars must be 99.5% pure gold.

Your bullion dealer should be able to tell you whether any particular bar or coin is authorized for IRA accounts. Otherwise, speak with an IRS-approved custodian or third-party administrator for self-directed IRA accounts.