Types of gold IRAs to know

Gold can be a good investment. Its value has historically held steady in times of inflation and economic uncertainty, making it a great way to protect the money in your investment portfolio. It’s also a way to diversify your investments, which can help balance risk and reward and potentially safeguard you against losses from higher-risk assets like stocks.

There are several ways you can invest in gold, including gold IRAs. Like regular IRAs, gold IRAs are retirement accounts that deliver certain tax benefits. Unlike regular IRAs, they hold physical gold rather than stocks, bonds and mutual funds. 

Gold IRAs come in three forms: traditional, Roth and Simplified Employee Pension (SEP) IRAs. Take a look at the differences between these types to determine the best option for you. Start exploring your gold IRA options now.

3 types of gold IRAs to know

Each type of gold IRA has its own advantages and requirements. Here’s what you need to know about each.

Traditional gold IRAs

• Eligibility: As long as you have earned income, you can contribute
• How they’re funded: With pre-tax dollars (the money you contribute is not taxed)
• Contribution limit: $6,500 or $7,500 for those ages 50 or older for the tax year 2023
• Are contributions tax-deductible?: Yes
• Are withdrawals taxed?: Yes
• Early withdrawal rules: If you withdraw funds before age 59 ½, you face taxes and a 10% penalty
• Required minimum distributions (RMDs): You must begin taking distributions starting at age 73

Traditional gold IRAs tend to be a good choice for those who expect their retirement income to be lower than their current income. Because traditional IRAs are taxed, when you withdraw funds (at your income rate at the time), your money will be taxed at a lower rate than if it were taxed when you contributed it.

Request a free gold IRA information today to learn more about gold IRAs.

Roth gold IRAs

• Eligibility: Your income must be under a certain limit ($153,000 for individuals and $228,00 for married couples filing jointly for tax year 2023)
• How they’re funded: With after-tax dollars (the money you contribute is taxed)
• Contribution limit: $6,500 or $7,500 for those ages 50 or older for the tax year 2023
• Are contributions tax-deductible?: No
• Are withdrawals taxed?: No
• Early withdrawal rules: You may withdraw funds at any time tax- and penalty-free.
• Required minimum distributions (RMDs): None

Roth gold IRAs can be a good option for those who expect a higher income in retirement. Roth IRA contributions are taxed when you make them (at your income tax rate at the time). So, your money will be taxed at a lower rate than if it were taxed when you withdrew it.

SEP gold IRAs

• Eligibility: Small-business owners and self-employed individuals
• Contribution limit: Up to 25% of your self-employed compensation or $66,000 (whichever is greater) for the tax year 2023
• How they work: The same as traditional gold IRAs

SEP gold IRAs are designed for self-employed people, such as small-business owners, freelancers and entrepreneurs. They have all the same features as traditional gold IRAs, except their contribution limit is significantly higher.

You can open a traditional or Roth gold IRA if you’re self-employed, so this isn’t your only option. However, if you don’t need the tax benefits of a Roth IRA, a SEP gold IRA is worth it for the contribution limit alone.

The bottom line

When deciding which type of gold IRA to open, consider your financial situation — both now and how you expect it to look in the future. Weigh the tax benefits of each, and if you’re self-employed, consider opting for a SEP gold IRA for the higher contribution limit. And, as with any financial product, contact a financial advisor if you have questions about the best option for your unique situation.