Gold IRA vs Roth IRA: Can You Have Both?


Are deciding between Gold IRA vs Roth IRA? Good news! You can have both gold IRA and Roth IRA at the same time. You can use the funds in one to buy more of or invest in the other, because these two retirement accounts are independent of each other. 

Gold IRA

Roth ira

Can hold gold and other precious metals

Can hold any asset including gold, crypto, real estate, stocks, and bonds

Gold IRA vs Roth IRA in Detail

Gold IRAs and Roth IRAs are different types of individual retirement accounts (IRA) - the former is categorized by what the funds are invested in and the latter is categorized by when it is taxed. 

A gold IRA or a precious metals IRA is a special retirement account that allows you to hold gold, silver, palladium, and platinum as part of your retirement portfolio. These assets can be in the form of physical gold, or they can be gold-related paper assets like gold futures or stocks in a gold mining company. 

A Roth IRA, on the other hand, is a retirement account that is set up using after-tax funds. With this type of retirement account, your capital grows and can be withdrawn tax- and penalty-free until the age of 59.5. The funds in your Roth IRA account can be invested in stocks, bonds, mutual funds, money market funds, exchange-traded funds, and even precious metals and cryptocurrency. If your funds are invested in gold, then it's a gold Roth IRA account. 

A simple IRA account, or a SEP IRA is one that is specifically designed for small business owners. It works just like a gold IRA investing account, where you can put in after tax income or Roth IRA contributions. 

These funds are completely self-directed, so you, as the investor, are in full control of the portfolio. You may hire a financial advisor to give you more insight on gold and silver IRA, if you feel you need more guidance, especially in the beginning when you start investing your retirement funds. 

Gold IRA Scams

Recently, gold IRA scams have become rampant, especially on social media. You should be very careful when checking out any gold IRA offers, especially those that require you to divulge your personal and/or credit card data. The best way to get information about precious metals IRA is by directly contacting trusted companies. 

Can You Hold Physical Gold in a Roth IRA?

You can hold physical gold in a Roth IRA. Since the portfolio is self-directed, you are in total control over where to put your funds, including in gold IRA accounts. 

The unique capability of being in control of your own retirement portfolio makes self-directed Roth IRAs a better option than a standard 401(k). One of the key problems of 401(k) accounts is that they are managed by people who, basically, have limited interest in whether your funds are growing optimally.

Another big problem that retirement investors have is the limited choices that their 401(k) can be invested in. All funds invested in a 401(k) are pooled together in a mutual fund, and cannot be invested independently. For example, if you want to buy Amazon or Apple stocks, you won't be able to do that in a 401(k). The only way you can get those stocks is if the people handling your 401(k) funds decide to invest in them.  

Not to say that 401(k) is a free service. Just like with self-directed IRAs, you need to pay administrative fees on your retirement investments, and these rates are non-negotiable. Roth IRAs and gold IRAs usually have lower fees than a 401(k), and varies per custodian, so you have options.

If you just started contributing towards your retirement fund, note that not all 401(k) have a Roth option, so before getting stuck in a less than ideal savings program, check with your employer or 401(k) administrator. While it is not a bad idea to start saving, in whatever form, you need to think ahead for when you already have more disposable income. Putting your retirement funds into a Roth IRA or doing a gold IRA rollover should be your goal if you want to maximize your earnings. 

How is Gold IRA Taxed?

If your gold IRA is funded by a Roth IRA, then it is taxed upon set-up and you enjoy tax-free withdrawals until the age of 59.5. However, if your gold IRA is funded by a traditional IRA, then you will be taxed on the principal and the capital gains when you start making withdrawals upon retirement. 

The Tax Cut and Jobs Act of 2017, which lowered income tax, will revert to the original rates in 2026. If you open a Roth IRA before 2026, you will pay lower taxes upfront because of this act. This is a great deal, especially since you are likely going to be in a higher tax bracket when you retire. It is better to pay tax now, when you are liable to pay only a small amount, than to pay later when you become qualified to pay more. 

Roth IRAs and precious metal IRAs have a feature that allows you to build generational wealth. Unlike 401(k) where you don't have a choice but to take distributions or withdrawals after retirement, you are not required to take distributions on any self-directed IRA. You can leave it directly to your heirs.

This is a clever way to pass on wealth to the next generation without paying inheritance taxes. Roth IRAs and gold IRAs do not have required minimum distributions, and they can keep growing for as long as the account is funded. 

For example, say you are 30 years old and you contribute the maximum annual contribution, which is $6500, at the time of writing. At 10% annual return, you will have well over a million dollars in your account by the time you retire. From there, the growth becomes exponential. After all, a 10% return on $6000 is a modest sum, but 10% of one million every year will grow your wealth even faster. This will ensure that your heirs will be financially secure, even if they do not actively manage the portfolio.

What Types of Gold Can You Invest In With a Roth IRA?

You can buy gold coins, gold bullion, and gold bars and store them in the depository of your choice. Note that not all gold items are accepted by gold IRA companies. The precious metal needs to follow certain standards of fineness and provenance before it will be accepted as part of your retirement portfolio.

All IRA gold products need to be at least 99.95% pure, and they should have been produced by a reliable institution like the US Mint. A certificate of authenticity must be presented upon depositing. Gold coins, like the American Gold Eagle, need to be shiny, uncirculated, and free of dents and damage. American bullion, on the other hand, needs to follow the specific weight requirements. 

Customers who bought gold or silver coins from other sources prior to opening a gold Roth IRA account may face the possibility of not being able to translate it to an IRA investment or asset because they do not have the necessary paperwork for their physical precious metal. All the abovementioned requirements need to be fulfilled before any gold coin is accepted by the IRA custodian, so clients must note this before attempting to buy from an uncertified source. 

What are the Withdrawal Rules for a Gold IRA Kit?

The withdrawal rules depend on whether you used a Roth IRA or a traditional IRA to open your gold IRA account. 

If you used a Roth IRA account, you can make penalty and tax-free withdrawals until the age of 59.5 and you won't have to pay tax on the distributions you will take in the future. This is because Roth IRAs are set up with funds that have already been taxed, so you will not be taxed again upon retirement. 

If you use a traditional IRA, or any existing IRA that has not been taxed upon set-up, then you will have to pay the tax rate that is specified for your bracket because the funds that you used to open the account was tax-deferred. 

How Much Can You Put in a Gold IRA?

Starting 2023, both traditional and Roth gold IRAs have a contribution limit of $6,500 for people 49 and under. It goes up to $7500 for people 50 and above. You can continue making contributions for as long as you like, because as of 2020, the age limit for contributions was phased out. 

Is a Gold IRA Tax Deductible?

Roth gold IRA is not tax deductible because you already paid tax for it when you set up the account. Traditional gold IRAs, on the other hand, are tax deductible. 

Does Warren Buffett Believe in Gold?

Warren Buffett does not invest in gold, but that does not mean he does not believe in the value of hard assets and precious metals. He has about $1 billion invested in silver.

It is important to first understand the business strategy or practices the Oracle of Omaha swears by. The biggest one is intrinsic value. 

He believes that any good asset must have intrinsic value - it needs to be useful and have practical applications. For this reason, he also does not believe in meme stocks or even luxury brands because these objects have nothing going for them other than status or affluence. 

This same belief is the reason he invested that much money in silver rather than gold. While physical gold is trendy, he believes that aside from it being beautiful and useful for jewelry and fashion, it has no use anywhere else. Silver, however, has plenty of industrial, medical, and commercial uses - it has intrinsic value.  

He believes that silver as a metal performs functions in various industries that other metals cannot. It is used in automotive, technology, RFID, and even in hardware for servers and computers designed for mining cryptocurrency. 

However, the question remains: is the intrinsic value of something the only valid and acceptable determiner of worth? And if it is, then shouldn't all fiat currencies not backed by the gold standard be considered useless?

The fact is, if the staggering majority of the population considers something to be valuable, then it is. Take, for example, an Hermes bag. Even if they use the highest quality leather, with actual gold or platinum hardware and diamonds, the raw material, labor, and overhead costs would not warrant their price tags, some of which are in the hundreds of thousands of dollars. However, there are intangibles around the brand, like its history, the conceptualization and design, the marketing, and the cost of building their reputation over the last hundred years.  

Similarly, gold might not have "usefulness" as a metal, but pretty much every culture, every society, recognizes it as a valuable item. This isn't a new phenomenon either, nor is it something that is influenced by Western culture. Pre-colonial societies have recognized gold as a valuable asset and a store of wealth, way before globalization.

The value of gold has survived millennia, through advancements in industry and technology, and even going into the digital and internet age. Humankind could easily have devalued gold once we discovered other metals that could be used as currency, or even when we have abolished the gold standard, and yet gold remains to be an influential economic driver that is an integral part of the financial institution's backbone. 

Picking at the intrinsic value of gold does not take into consideration everything else that makes it a sound investment. 

Where Should I Keep My Gold Investment?

You should keep your gold in an IRS-approved storage facility, like Delaware Depository. Under the law, investors who have gold in their portfolio cannot keep their physical precious metals in their possession. 

You can look for an independent depository yourself, but gold IRA companies could arrange the storage for you, as well. If you are looking for the best gold IRA company, check out Birch Gold Group, Regal Asset, Augusta Precious Metal, American Hartford Gold, Oxford Gold Group, Noble Gold, and Patriot Gold. 

Note that all custodians will charge you a storage fee and set-up fee. This is something you need to consider when you are choosing the gold IRA company for you. 

About the author 

Emillene Torres

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