Gold IRA Tax Benefits for High Earners

Gold IRA Tax Benefits for High Earners

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Inflation, rising gas prices, political conflict, war - all of these factors affect the economy negatively. You may be looking at your current retirement plan with concern. 

How can your current portfolio weather the economic and political storm? How can you improve your investment strategy so you can retire comfortably later?

If you're a high-earning individual making $200,000 or more per year, you may be concerned about how you'll maintain your standard of living in retirement.

Although your employer's retirement plan is a good start to investing, you should know its limitations. 

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For high earners, the tax benefits of contributing to an employer's plan stop at a certain contribution amount. If you limit your investments to an employer's plan, you may not build the wealth you need to retire comfortably.

A gold IRA offers the flexibility and tax benefits you need to increase your wealth.

The Limitations of Employer Retirement Plans

For novice investors, an employer's retirement plan is a great introduction to investing. Employer retirement plans offer limited investment options in the most popular assets. As an employee, you contribute part of your pre-tax paycheck to fund the plan. This type of plan offers several tax benefits.

By contributing pre-tax dollars, you are reducing your taxable income, and you'll reduce the amount that you pay in federal and state taxes. These contributions also remain tax-free until distribution. 

High earners should know the Internal Revenue Service's contribution limits for different types of IRAs. For 2023, the IRS set a maximum annual contribution amount of $22,500 for workers aged 49 and under.

If you are age 50 or over, you can make catch-up contributions up to an additional $7,500 for a total of $30,000 for 2023. The IRS updates these amounts annually. 

In addition to limitations on annual contributions, your employer's plan also limits your investment options. An employer IRA or 401(k) may offer a bespoke mix of stocks and bonds. With these retirement plans, novice investors don't have to worry about managing their investments.

Employees can choose from several pre-set investment options and leave the day-to-day management to the firm's expert advisors. If you are a high earner or a more experienced investor, a diversified investment portfolio can ensure you have the income you need in retirement. 

What does "phase out" mean for my retirement contributions? 

In addition to contribution limits, certain plans also have income caps. With a Roth IRA, you contribute your post-tax dollars. When it's time to withdraw the funds for retirement, this money is tax-free. However, Roth IRAs are only available to individuals whose earnings do not exceed the income cap. 

The IRS bases the Roth IRA income cap on your modified adjusted gross income (MAGI). For 2022, single filers could contribute to a Roth IRA if their MAGI is less than $129,000. In 2023, the IRS increased the cap for single filers to $138,000.

At $138,000, you enter the phase-out range. From $138,000 to $153,000, the IRS reduces your maximum contribution limit. At $153,000, you are ineligible to contribute to a Roth IRA.

For married earners who file jointly, the IRS raised the MAGI income cap to $204,000. When you reach a modified adjusted gross income of $204,000, you enter the phase-out range. At $214,000, married filers are ineligible to contribute to a Roth IRA. 

High earners interested in maximizing their investments are still eligible for a traditional IRA. Traditional IRAs do not have income caps, but you may pay taxes on contributions to a retail traditional IRA account.

What is a diversified investment portfolio?

Diversification is all about minimizing your risk. When you diversify your portfolio, you spread your investments across different types of assets. There are three main asset classes that each carry a different level of risk. Most new investors are familiar with stocks.

Many companies offer stock to employees as a benefit. However, investing in stocks can be riskier than other assets. Investors have lost all their money by investing in a single company's stock, instead of creating a diversified portfolio.

For example, in February 2022, Meta (the parent company of Facebook) lost $232 billion in one day. This crash was the largest one-day drop in recent history.

Investment data

If you invested all of your wealth in Meta stock before this crash, you likely lost all of your wealth. A diversified portfolio can help you absorb major stock losses. 

The second major asset class is bonds. Bonds are less risky than stocks. Conservative investors who worry about risk may be tempted to place all of their wealth in bonds. Bonds provide steady, predictable income. Many investors like that they can count on interest payments twice a year.

If you're interested in growing wealth, bonds may not provide you with the returns that you need. If the bond issuer declares bankruptcy, you may lose your investment. 

If you're interested in creating a diversified investment portfolio, you may want to consider alternative investments. Alternative investment options include:

  • Gold
  • Silver
  • Platinum
  • Palladium
  • Real estate
  • Commodities (oil, gas)
  • Hedge funds
  • Art


The IRS sets rules for alternative investments, particularly precious metals like gold. Precious metal investments often do not follow the standard market fluctuations. If your stocks decline, your precious metal investments may hold steady or increase.

Including gold and other precious metals in your portfolio can protect you against market volatility. Before choosing an alternative investment, you should research the requirements for purchasing and storing your alternative investment. 

Advantages of Investing in Gold

There's a reason why gold's popularity endures over time. For thousands of years, gold was a sign of wealth. Royal figureheads wore gold jewelry and gold crowns to display their wealth and power.

As a currency, gold first appeared in coins around 650 B.C., and the first pure gold coins appeared around 750 B.C. Up until the Second World War, many countries tied the value of their currency to gold. 

Even though the United States ended the gold standard in 1971, gold remains a popular investment choice. While some people purchase gold because it's a status symbol, wise investors purchase gold because of its benefits.

Gold Offers Stability 

During times of political or economic crisis, many investors seek the stability of gold. As paper investments like stocks and bonds decline, the value of precious metals often increases.

For example, the September 11, 2001, terrorist attacks led to political turmoil and a recession. The price of gold rose as traders invested their funds in the precious metals market. 

During the Great Recession in 2008, investors once again chose to invest in gold. The price of gold rose to $872 an ounce and then climbed even higher in 2011.

After the WHO declared COVID-19 to be a global pandemic, the price of gold soared. In August 2020, gold reached an all-time high price of over $2000 an ounce. 

Although traditional investments lost value during these crises, diversified portfolios with gold had added protection. Gold and other precious metals often remain stable, or even thrive, when other asset classes decline. This stability makes gold a popular investment option for high-income investors who are interested in growing their wealth.

What is a Gold IRA? 

Investing in precious metals is more complicated than just purchasing gold coins or jewelry at a retail store. A Gold IRA is a special retirement account that allows you to purchase gold. Precious metal IRAs have specific rules and restrictions set by the IRS.

To get the maximum benefit of your precious metal investment, you should become familiar with your gold investment options and consult a financial advisor with experience in the precious metal market. 

The Benefits of Investing in a Gold-Related IRA

A Gold IRA is a type of self-directed IRA. With a conventional IRA like your employer's plan, you are limited to traditional assets like stocks, bonds, and mutual funds. A self-directed IRA offers more investment options and greater control.

With a self-directed IRA, you make the investment decisions, and the custodian executes the purchases and transfers. You can invest in assets like gold bullion, coins, and mining company stock. 

High-income investors have several options for opening a Gold IRA:

The Traditional Gold IRA

Traditional Gold IRAs have the same rules and restrictions as conventional traditional IRAs. When you select a traditional Gold IRA, you contribute your pre-tax dollars. You pay taxes on your Gold IRA funds at the time of withdrawal.

The IRS regulations state that you must take the required minimum distribution starting at age 72. If you withdraw the funds before the age of 59 and a half, the IRS will assess a 10 percent penalty.

Fidelity 401k Rollover to Another Company-Traditional IRA

For high earners, the traditional Gold IRA offers some tax benefits. Contributing your pre-tax dollars lowers your taxable income and reduces your federal tax.

As your IRA ages, your earnings grow tax-deferred. You can make adjustments to your portfolio without paying capital gains tax. When it's time to retire, you may pay a lower tax rate if your income tax bracket changes. 

The Roth Gold IRA

If your modified adjusted gross income is below the income cap, you can open a Roth Gold IRA. Like the conventional Roth IRA, you pay taxes on the funds before you deposit them into the Roth IRA. At retirement, you'll enjoy the benefit of tax-free withdrawals. 

Before 2020, IRS regulations forced investors to stop Roth IRA contributions at age 70 and a half. Now, investors can contribute to their Roth IRA even in retirement. Unlike traditional IRAs, the IRS does not allow you to deduct your Roth IRA contributions from your annual income taxes. 

The Simplified Employee Pension (SEP) Gold IRA

If you're a high earner who owns your own business, you may benefit from opening a Simplified Employee Pension (SEP) Gold IRA.

You also may open a SEP IRA if you are self-employed. Investors fund a SEP IRA with pre-tax dollars. Like a traditional IRA, the funds grow tax-deferred, and you pay taxes when you withdraw the funds.

SEP ira

High-income investors may take advantage of the higher contribution limits with a SEP IRA. You can invest up to 25 percent of your self-employed income or up to $66,000 - whichever amount is higher.

For high earners, this type of IRA could be an excellent choice for investing large amounts of money. You can deduct these contributions from your income taxes. 

Will I have to pay taxes on my Gold IRA?

Like a conventional IRA, you will have to pay taxes on the funds in your Gold IRA. Depending on which Gold IRA you choose, you can contribute pre-tax or post-tax dollars. For 2023, the IRS limits contributions to $6,500 for investors under the age of 50.

If you are 50 years old or older, you can contribute $7,500 per year. If you exceed the contribution limit, the IRS will assess a penalty. For example, if you contribute $1,000 above the annual contribution limit, the IRS will charge you a $60 penalty. 

How do I choose a Gold IRA?

Before you choose your Gold IRA, calculate your modified adjusted gross income to see if you qualify for a Roth Gold IRA. If your income exceeds the income cap, then you must select a traditional Gold IRA or, if you are self-employed, a SEP Gold IRA. 

Once you determine which Gold IRA you can open, you'll need to select an approved custodian. Not all self-directed IRAs offer precious metal investments, so do your research.

Decide what precious metal investments you are interested in, and then search for a company that offers those investment options.

For example, some custodians may offer the option of purchasing coins and bullion but not gold stocks. If you're interested in purchasing rare numismatics, choose a firm that specializes in finding and purchasing rare coins. 

Investment firms also offer different services. Some firms may assign your account a dedicated financial advisor. New investors in precious metals may want to choose an investment firm that offers a robust customer education program.

Final Thoughts

Precious metal investors new to the market may benefit from an investment firm that has established relationships with approved custodians and guardians. If you don't have a depository selected for your investment, using a recommended depository can make purchasing and storing your gold easier.

Before signing paperwork with a gold investment firm or custodian, investors should read the company's website. Look for information about the company's fee schedule and buyback policy.

Verify the company's information on customer review sites like TrustPilot, Yelp, and Google. Choosing a reputable custodian is the first step for a high-earner who is interested in investing in precious metals. 

Remember to read our list of the Top Gold Companies.

>> Click HERE to read our Best Precious Metals IRA Companies list <<


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