How do gold IRA distributions work? 3 things to know
Gold has become a popular investment option for those seeking stable, reliable returns and protection against market instability. One smart way to invest in this precious metal is with a gold IRA.
In addition to the usual benefits of investing in gold, gold IRAs offer attractive tax perks that can reduce your tax burden and allow you to keep more of your hard-earned money. But to make the most of this investment, you must know the rules to follow. Otherwise, you stand to lose money to unnecessary taxes and penalties.
Learn more about gold IRAs with a free information kit.
How do gold IRA distributions work? 3 things to know
Here's what you need to know about gold IRA distributions to get the maximum financial benefit from your investment.
Qualified vs. non-qualified distributions
IRA withdrawals fall into two categories: qualified and non-qualified distributions. Qualified distributions are withdrawals that meet IRS guidelines and are made after the age of 59 ½.
For a traditional IRA, you'll pay taxes on any distributions you take because you do not pay taxes when you contribute the funds. If the distribution is qualified, this is all you'll pay; if it's non-qualified, you'll also pay a 10% penalty tax on the amount you withdraw.
With a Roth IRA, you pay taxes on the funds when you contribute them, so these funds are not taxed when you withdraw them. However, if you take a non-qualified distribution from a Roth IRA, you will pay taxes and a 10% penalty on any earnings you've made on funds you withdraw.
There are some exceptions to this rule. For example, the 10% penalty is waived if you use the money to buy your first home, pay for higher education and other purposes.
Required minimum distributions (RMDs)
Under IRS rules, you must begin taking required minimum distributions (RMDs) from a traditional gold IRA at age 72. Your RMD amount is calculated based on your age and your account's value. Failure to take RMDs can result in a penalty of 25% of the amount you're required to withdraw.
Roth gold IRAs do not have required minimum distributions.
In-kind vs. liquid distribution
Gold IRAs hold physical gold as their underlying asset. As a result, when you make a withdrawal from your gold IRA, you can do so in one of two ways.
You can choose a standard liquid distribution of cash in the form of a check, wire transfer or ACH transfer. Or, you can choose an in-kind distribution, in which you receive the actual gold bars and coins. You may then store them or sell them as you see fit.
A financial advisor can help you determine the best type of distribution to take based on your investment objectives.
Request your free investors kit today to learn how a gold IRA fits into your retirement strategy.
The bottom line
Gold IRAs can be a useful retirement investment tool, but it's essential to know how to take distributions wisely. By understanding the different types of distributions, tax implications and timing considerations, you can better make more informed decisions and get the most out of your account.
