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Traditional IRA and ROTH IRA Accounts

Typically attributed to Founding Father, Benjamin Franklin, in a 1789 letter he once famously noted that, “Nothing can be said to be certain, except death and taxes,” investors looking at establishing a precious metals IRA account can control the amount of inevitable taxes they have to pay prior to that inevitable shedding of their mortal coil.

Indeed, the advantages of an IRA in ameliorating tax burdens are well known, and over the years, investors have become very familiar with both traditional IRA accounts and ROTH IRA accounts. To understand why you might choose a precious metals type of retirement fund, let’s explore the advantages already in place with these two existing investment platforms.

While it is true as Mr. Franklin wryly pointed out, but while taxes are inevitable, the right IRA account lets you decide when you want to pay the taxman.

Traditional IRA Accounts

As an investment vehicle, traditional IRA accounts exploded onto the scene after Congress passed the 1974 Employee Retirement Security Act. Under the law’s provisions, investors are allowed to fund their IRA with pre-tax money (tax deductible), which is then invested is assets of their choosing. Once in the fund, this money can grow, tax free, over time until the owner reaches retirement age, which is currently 59.5 years of age. In addition to providing retirement security, an IRA account helps:

  • Lower your current tax bracket since all IRA contributions are tax deductible
  • Owing to the fact that you have more money to invest, by definition, in a tax deductible account, you can amass a larger portfolio over time
  • Early withdrawals, without penalties, are possible in the event of unusual life occurrences such as illness, or purchasing a first home
  • Even investors in a higher tax bracket can contribute to a traditional IRA account

Investors who plan on their retirement tax rate to be lower than their current tax burden would do well to looking at investing in a traditional IRA account.

ROTH IRA Accounts

Whereas a traditional IRA account represents an opportunity to invest pre-tax money into your retirement account, a ROTH account uses post-tax funds, money you have already paid taxes on, to fund your retirement account. The obvious benefit to this approach it that it allows you to make qualified withdrawals from your account, tax free, because you already paid taxes on those funds prior to investment. Once in the fund, this money can grow, tax free, over time until the owner reaches retirement age, which is currently 59.5 years of age. In addition to providing retirement security, a ROTH IRA account helps:

  • Allows for withdrawal of funds, without penalty or taxes, after age 59.5 and the account has been open for at least five years
  • Investors over the age of 70.5 can still contribute into their ROTH IRA account
  • There are no Required Minimum Distributions (RMD)

Unlike a traditional IRA account, investors who plan on their retirement tax rate to be higher than their current tax rate would do well to looking at investing in a traditional IRA account.

Why Choose a Precious Metals IRA?

Choosing a precious metals IRA as a vehicle to fund your retirement provides the same tax benefits as both the ROTH and traditional IRA accounts, but it also affords flexibility when looking for investment options beyond the typical investment options of stocks, bonds, and mutual funds.

For inclusion in a self-directed IRA account, your precious metal purchases must meet minimum fineness levels. Specifically, with the exception of the American Gold Eagle coin, all bullion products falling outside the following ranges are excluded from precious metals IRAs:

  • Minimum Silver Fineness: .999
  • Minimum Gold Fineness: .995
  • Minimum Platinum Fineness: .9995
  • Minimum Palladium Fineness: .9995

In addition to metals that fail to meet minimal fineness requirements, other examples of non-approved bullion products include pre-1933 bullion, gold Krugerrands, and 90% United States silver coins.

For those investors who are now rethinking their IRA investment options, it is easy to convert your exist IRA account into a precious metals account in a process that can take as little as two to three weeks to fully fund. Investing in precious metals via an IRA account presents significant tax advantages over those investment transactions that occur outside the advantages of a tax sheltered retirement fund.

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