What Is a Gold IRA and How Does It Work?

Gold bars. hallojulie/Shutterstock

A gold IRA is similar to a traditional individual retirement account (IRA)—account holders can gradually fund their accounts until they are ready to retire and cash them out. Gold IRAs include similar contribution limits and withdrawal restrictions to cash IRAs. However, holders can provide gold IRAs with gold and silver coins or bars instead of feeding the account with paper.

Gold IRAs involve making regular contributions. Over time, the gold will increase in value, allowing account holders to profit despite inflation.

When opening a retirement plan, account holders can choose between these main options:

• Traditional IRAs allow holders to receive tax benefits in the short term since they can write off the amount they contribute during their yearly taxes. Remember that the account holder must pay income tax when withdrawing all these funds.
• Roth IRAs allow holders to pay all their income taxes now so that they can receive the total amount when they withdraw the money later.

Benefits of Making Regular Contributions to a Gold IRA

The benefits of making regular contributions to a gold IRA include:

• Tax benefits
• Direct management
• Stable value appreciation
• Lower inflation risks
• High annual returns

How to Make Regular Contributions

Account holders can make regular contributions to their gold IRA. Once an account is established, contributions can be made in three different ways:

• Add cash: Cash can be deposited into the account and then used to purchase gold. Under various government restrictions, existing gold is not permitted to be placed into a new IRA.
• Transfer funds: Cash or precious metals can be transferred from different IRAs into a new account. Assets may need to be liquidated and used to re-purchase the gold during this process.
• Rollover: Funds from other retirement accounts, like a 401(k), can be moved into an IRA. Once the funds are in the IRA, they can be used to purchase the gold.

After opening the account and adding the initial funds, the account owner will need to continue funding it regularly over time. Making regular contributions isn’t tricky, but some planning is recommended.

Plan Ahead

Account owners should begin crafting a contribution schedule as soon as they create an account. Consider monthly or annual bills, like rent or mortgage, health and life insurance, vehicle loans, utilities, and credit cards. Next, consider how much money is needed for retirement and the desired time frame.

For example, if someone needs $100,000 to retire comfortably, calculate how much will be needed to contribute each year until the age of 65 (or whenever retirement should happen). We recommend contributing a bit above this minimum to play it safe.

Knowing Spending Limits

While contributing as much as possible might sound good, it can land people in trouble since an account holder cannot withdraw the funds without penalties. There should always be reserved savings outside of the IRA that can be depended on in a financial emergency.

It would help if there were also an understanding of daily spending limits within the desired contribution goals. For example, if you want to contribute $5,000 per year, budget your regular activities accordingly.

Make It a Habit

Many people frequently forget about their IRA, leaving it to sit dormant for far too long. You don’t want this asset to go to waste, so be sure to make contributions a habit. Consider making the first day of each month your budget planning day where you can evaluate current bills and decide how much to contribute.

Automate Your Contributions

A great way to never forget a contribution is by setting up an automatic schedule. If you follow this route, ensure that your contribution amount will never exceed your limits. Remember that you can always go in and adjust the contributions as you see fit.

Can I Add Money to My Account Anytime?

You can add money to your account anytime, though you may not exceed $6,000 per year (or $7,000 per year if you’re over 50). Over time, these contributions can add up to a hefty retirement fund. Many people choose to make contributions:

• Weekly
• Biweekly
• Monthly
• Quarterly
• Annually
• As a lump sum

You might find it helpful to schedule your contributions simultaneously with other bills or deposits. For example, you could allocate a portion of each paycheck toward your IRA or contribute money each time you pay your mortgage. Regardless of your strategy, choose something that works best for your finances.

The Oxford Gold Group helps investors protect and grow their wealth by purchasing physical gold and silver for their IRAs and for home delivery as effortlessly and securely as buying bonds or stocks. That’s why investors have turned to the security of gold and silver and the Oxford Gold Group. Call 833-600-GOLD or visit OxfordGoldGroup.com to receive a complimentary copy of “Your Precious Metals Investment Guide.”

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