Using Gold With a Roth IRA

So what is a gold Roth IRA — and why should I have one? 

Usually our clients come to us asking this question.  They have seen that the stock market is volatile and they want to either diversify their portfolio or they think that the geopolitical unrest is about to boil over and gold is a safe haven that will protect them from US dollar inflation.  We therefore want with this article to address what is a gold Roth IRA, and what are the advantages of setting up and investing in one.

A gold Roth IRA is an investment vehicle intended to protect you from financial disaster as well as prepare you for a strong retirement. 

To begin with a Roth IRA differs from a traditional IRA in a few key features.

  • The first of which is taxes.  When you have a Roth IRA the distributions are tax free.  This is very different from a traditional IRA, which when distributions are taken out, you will be paying the taxes.  A self-directed gold backed IRA is funded with post tax dollars, this means that you will be paying the tax now rather than later.  This is good for two kinds of people.  If you are currently in a lower tax bracket and you will most likely be in a higher one when you start to take your IRA distributions, then this is the better choice.  Second if you believe that the US is going to raise taxes and when you retire the tax rate then will be higher than now, you will also benefit. 
  • The second feature is that with a traditional IRA you must begin to take distributions of the IRA and pay those taxes from Age 72.  These are called Required Minimum Distributions (RMDs).  With a Gold Roth IRA there is no RMD age.  You can choose to never take your distribution and pass the IRA payout to your heirs if desired. 

Why Is Gold A Good Choice Now?

No matter which political party is in power in the US, the national debt ceiling has been increased.  When this happens the value of the dollar is hurt by inflation.  The higher the debt ceiling the more likely it is that we will default on our debt — and then what will happen? The rates which we are required to pay to barrow money will eventually increase, which brings with it a vicious circle of ever increasing debt.  Because the US dollar was removed from the gold standard in 1971 under President Nixon, it has since been a fiat currency backed by nothing. 

With the devaluation of the dollar the price of gold rises.  Today, our government’s debt is the highest it’s ever been.  Between 1990 and the present the gross federal debt of the United States of America per capita has grown from $12,818 to $69,060 U.S. dollars, and the total debt has increased 50% in the past 8 years.

The dollar is no longer the storage of wealth it was before.  This is where gold comes into play. It has been a Store of Value (SOV) or safe haven for wealth for over five thousand years, and has been used as a currency for nearly three millennia.  Gold has consistently been the best investment friend during times of crisis. It is easily transported and always has a value.  It is not a paper asset and therefore will never be diluted the way currencies or even stocks can.  A company can go bankrupt, and a currency can be worth nothing through hyperinflation but an ounce of gold will always have value. It can always be traded for something of value.  When this attribute is of importance there is no other investment that can be gold’s equal. 

What Rules Govern Gold IRAs?

We have had investors ask, “Can I buy gold with a Roth IRA?” and the answer is Yes!! But there are some rules that must be followed.  Most IRAs allow only stocks, bonds and mutual funds for investment but there is a little known loophole called the “self-directed gold backed Roth IRA.”  With this IRA, which we can help you set up, you are able to hold specific types of gold coins and bullion bars.  The bars must be of 99.5% purity and the coins must be of 99.9% purity.  Additionally you must have a designated administrator also called a trustee, who will both buy the gold as well as store the gold in an IRS approved facility/depository.  In the past this was not an easy process but because of the desire to hold gold and through competition the process has become much easier and we have many trustees and facilities that we work with so that we can provide you the best solution for your specific needs.

Should I Set Up A Roth IRA Or Just Buy Gold?

This question is a very important one.  The goal for this investment is to make the greatest returns. Holding physical gold in your Roth IRA, not only insures the security of the precious metal investment, but also confers all of the tax advantages you would otherwise be entitled to as an IRA owner.  Just buying gold does not help in this regard.  There is a certain amount that you are able to deposit in to an IRA every year and therefore how much you have to invest is also important.  With the gold Roth IRA you can continue your contributions of currently up to $5500/year after age 70, and you don’t have to take withdrawals.  Some investors benefit from a traditional gold IRA which requires that you to start taking regular withdrawals at a 72. 

Also, your earnings and deductible contributions to a Roth IRA grow tax-free.  All of the tax benefits of a Roth IRA happen when your withdrawals are made.  When you convert a non-gold Roth IRA to gold is the best way for you to get a hedge against inflation, you are protecting your wealth and purchasing power as the US dollar declines, and you gain all your profits and growth associated with the gold valuation.  Once set up, a gold Roth IRA is no more complicated than any other IRA investing.

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