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Gold IRA vs Roth IRA

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As the average consumer is more conscientious about growing their hard-earned money, the world of investing has become a hot topic for many.

Which type of investment is the best for my family? Can I afford to make regular contributions in this crazy economy? What happens if a family member gets sick and can’t work?

With so many options out there, it’s easy to receive misinformation from what should be authoritative sources.

Here’s a simple breakdown of the benefits of investing in a Gold or Roth individual retirement account (IRA). 

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What’s a Gold IRA?

A Gold IRA, also known as a precious metals IRA, allows the investor to include gold, in the form of bars or coins, in their investment portfolio. This type of IRA is part of the self-directed IRA, which allows the investor to include several types of assets in their portfolio. 

The Benefits of Investing in a Gold-Related IRA

These assets, however, must adhere to the guidelines established by Internal Revenue Service (IRS) and Security Exchange Commission (SEC) before the account is considered active.

Otherwise, investors are subject to penalties, which may include account closure. Also, several steps must be followed before the investment account goes live. These are detailed below.

The Benefits of a Gold IRA

This type of investment account is popular for many reasons. For one, the value of gold itself rarely fluctuates, compared to paper currency or stocks. Outside of the freedom of selecting a self-directed IRA, other important factors to note include – 

  • Allows investors to take advantage of tax breaks
  • Earns money over a while
  • Keeping in an IRA-approved depository is safer than keeping gold in a home vault or safe deposit box
  • Gold IRAs are regulated by the government, making these more stable than non-IRA physical gold investments
  • A Gold IRA allows the account holder to invest in other assets, like real estate

How to Open a Gold IRA

Firstly, it’s important to note these types of investments are not a way to get rich quickly. Like most stable investments, it takes time to see growth. While losses are minimal, investors can expect to see a dip from time to time.

It’s also important to note that pre-owned gold or rare gold coins may not be used. The chosen assets must meet IRS purity types as stated by the guidelines at the time of opening the account.

How do gold ira work

For the novice, it helps to speak with a financial advisor to see if this type of investment is practical. Although they may have some recommendations, it doesn’t hurt to shop around and speak with anyone who’s experienced with investment accounts.

If the prospect doesn’t meet certain qualifications, the advisor may recommend other alternatives that don’t require as many steps.

After doing some comparison shopping, the next is to go to a bank, trust, or other IRS-approved financial institution to open an account. The entity that holds the account is known as the custodian at this point. Their role is to process the account according to IRS guidelines. 

This includes connecting the investor with a gold dealer along with using a depository that meets IRS guidelines. They’re not qualified to confirm asset quality or make recommendations for the investor.

The custodian’s role is to be neutral, as they don’t have the expertise or resources to make suggestions where they benefit.

Things to Look for During the Account Process

 At every step, consumers need to be well-informed from the beginning stage until the time to receive withdrawals. The IRS and SEC have basic information on their respective websites that’s updated regularly. However, other authoritative sources include, but aren’t limited to the following websites – 

  • Forbes
  • MarketWatch
  • The Motley Fool

Again, it’s important to note these sites can only provide basic information and not give predictions or insider tips. Many of the ads placed on these websites should be used with caution, as some entities may not act per investor guidelines. On the SEC’s website, other things consumers need to watch for are – 

  • High-pressure tactics to pay money immediately
  • The promise of “guaranteed returns”
  • Seminars or workshops that offer free lunch
  • Unsolicited contacts via email or phone

Finally, it helps to deal only with businesses that operate within IRS guidelines. Many times, unscrupulous dealers that were used in the beginning stage may call a current customer about something that’s “limited time only”. These salespeople don’t have the resources to make any predictions or give unbiased advice.

What’s a Roth IRA?

Somewhat similar to a traditional IRA, a Roth account offers investors the opportunity to grow their assets tax-free. However, there are certain rules to be followed.

Also, if the holder wants to diversify their assets even more, such as including cryptocurrency or real estate, a self-directed IRA is ideal. This is an option that should be selected upon opening the investment account.

It’s also important to note that with a Roth IRA, contributions from taxable income cannot be deducted from tax filings. This is why the only individuals eligible to open this type of investment account must do so with actual earnings.

Those who receive alimony, investment income, or social security benefits cannot open a Roth IRA. There are also income limitations to be considered.

The Benefits of a Gold IRA

Outside of not paying taxes on disbursements, there are many upsides to having this type of investment account. Holders can receive disbursements at the age of 59.5 years and the account is at least five years old. Other upsides include – 

  • Tax and penalty-free withdrawals for first-time homebuyers
  • Unrestricted withdrawals on contributions
  • Tax-efficient inheritance strategy
  • No required minimum distributions (RMD)

How to Open a Roth IRA

The process of opening a Roth investment account is less detailed than a Gold IRA. While income requirements must be met, deciding on the assets to include is where a financial advisor provides clarity.

Again, the roles of advisor and custodian aren’t interchangeable. By law, all investor accounts must be managed by a custodian, according to IRS guidelines.

The acting custodian, such as a bank, insurance company, or other IRS-approved institution, can only process accounts. They don’t have the authority to advise the consumer. For many investors, going with a brokerage firm is the most popular option because they offer the widest range of options.

Most custodians allow consumers to use the following to open a Roth IRA –

  • Bonds
  • Certificates of Deposit (CD)
  • Exchange-traded Funds (EFTs)
  • Money Market Accounts
  • Mutual Funds
  • Stocks

Only under a self-guided IRA can investors include deeds, cryptocurrency, and real estate holdings. Coins and other metals that meet strict IRS guidelines may also be added. Antiques, artwork, and other rare collectibles cannot be included in the investment portfolio.

While many investors appreciate the increased variety, most advisors recommend making precious metals no more than 15% of the entire portfolio.

Other Roth IRA Facts

An investment account must be set up as a Roth IRA from the first day. While it’s possible to convert a traditional IRA into a Roth, there are some guidelines to be met.

Also, if the consumer has a government-sponsored account, like a 401k or 403b, from their place of employment, this can be rolled over into a Designated Roth IRA. Overall, the employer determines under what terms the rollover may be done.

 However, it’s important to note that the Designated Roth IRA may have terms similar to a traditional IRA. These would include, but not be limited to – 

  • RMD as stated in the account terms
  • Non-qualified distributions are taxed
  • Anyone can be made a beneficiary but if the investor is married, their spouse must consent to having a non-spouse beneficiary, like a child or parent
  • Investment choices are limited to what the account allows

Why Do Some Investors Prefer the Roth IRA Over a Traditional IRA

 It comes down to the taxes the investor is likely to pay. While the Roth is set up to pay taxes on contributions, disbursements are tax-free.

Although both IRAs discourage any type of withdrawal before age 59 ½, with the Roth IRA investors catch a break if they draw against contributions, as opposed to earnings.

Roth IRA
Traditional IRA

 As more adults are working into their early golden years, they also benefit from watching their funds grow tax-free. This is better than having to take disbursements by a certain age. Having a Roth IRA is also ideal for passing down the funds to an heir.

 Experts say that investors who can assume whether they’ll pay higher or lower taxes as they near retirement age may be able to determine which plan is best.

While this can be difficult for an investor in their 20s or 30s to predict, meeting with an investment advisor can provide further insight. In some cases, it may be possible to convert a traditional IRA into a Roth IRA at a later date. This is one way to reduce the taxes an investor pays.

Resources to Find More Information

To understand how distributions and pre-tax payments work, the IRS site can answer most consumer questions. A financial advisor at a bank, trust company, or entity approved by the IRS is also a good source. Like the Gold IRA, online experts have information written in plain language for the novice.

Also, anyone who works for their local or federal government should contact their human resources department for investment information.

Most entities hold workshops and other internal resources concerning rolling over funds from their company-sponsored retirement plan. Credit unions may also have information that may be beneficial to employees who are planning to invest.

Final Thoughts

As more working adults are living longer and becoming aware of the financial climate, learning about personal investments is becoming commonplace. While it’s easy to set up an investment account online, having an informed direction goes a long way.

Many people are used to skimming over lengthy online agreements and other contractual obligations without having a full understanding of what’s expected. 

Often, the average adult trusts the contents on e-paper are legal and of benefit to them. However, this isn’t always the case and the investor could lose through penalties or worse. By taking time to research all investment possibilities, it’s possible to make a sound financial choice that fits a specific lifestyle.

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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