Every investment option has its own relative advantages and disadvantages. There’s no “one fits all” investment solution that’s the perfect solution for every investor. The question to ask isn’t, “Is this the best investment?”. The right question to ask is always, “Is this the best investment for me? Is this the investment vehicle that best fits my current financial situation and my investment goals?”.

A Roth IRA (Individual Retirement Account) has become a popular investment vehicle, principally because of the unique and substantial tax advantages that it offers. A Roth Gold IRA also offers investors several other advantages, such as flexibility in terms of the assets that the account can invest in.

There are two principal differences that distinguish a Roth Gold IRA from a Traditional Gold IRA – 

1. Tax Treatment
2. Required Minimum Distributions (RMDs)

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Gold Roth IRA – Tax-free Profits and Withdrawals

With a Traditional Gold IRA, you get an immediate tax benefit at the time you make contributions to the account. The amount of your taxable income for the year is reduced by the amount of money that you contribute to a Traditional Gold IRA that year (up to the maximum annual contribution amount allowed by the Internal Revenue Service/IRS). In short, contributions are tax-deductible. However, you will pay taxes on any withdrawals you make from the account later, including any gains that have been realized on the account’s investments.

With a Roth Gold IRA, the contributions that you make to the account are not tax-deductible. Thus, you will pay taxes on that money for the year when it is earned. However – and this is the main benefit that a Roth IRA provides for you - when it comes to making withdrawals from the account, not a penny of those withdrawals is taxed. Any and all gains that your Roth Gold IRA investments make are totally tax-free.

That is a potentially huge benefit. Imagine that you had invested $10,000 in gold, in a Roth Gold IRA, back around the turn of the century, when the price of gold was around $300 an ounce. (So, your $10,000 investment would have landed you approximately 33 ounces of gold.) Now, fast forward to 2024, with the price of gold at $2,650.

• Your investment gains per ounce = $2,350 ($2,650 - $300 = $2,350)
• Your total profits realized with 33 ounces of gold = $77,550 (33 x $2,350 = $77,550)

That’s a $77,550 investment profit that you’ve made – and it’s totally tax-fee! The IRS can’t take a single dollar of those profits away from you. And that’s with just assuming an investment of $10,000 in your Roth Gold IRA. Obviously, if you had made additional annual contributions to the account over the years, buying more gold, then your profits would be much bigger.

In contrast, if you had made the same investment in physical gold in a Traditional Gold IRA, then as you withdrew those $77,550 in profits during retirement, you would have owed the IRS more than $21,000 in taxes – nearly one-third of your total profits. (The IRS cruelly and without rational reason taxes gains on physical gold as collectibles – on which the current long-term capital gains tax rate is 28%.)

The ability to enjoy compounded growth of your wealth tax-free in a Roth Gold IRA is a major advantage, one that can make a huge difference in the total return on investment (ROI) that you eventually make.

Traditional Gold IRA vs Roth Gold IRA – Required Minimum Distributions

The other key difference between a Traditional and a Roth Gold IRA is that with a Traditional Gold IRA, the IRS requires you to take minimum annual distributions (withdrawals) from the account, starting at age 73. And that means incurring a tax liability with each annual withdrawal. With a Roth Gold IRA, there is no RMD requirement.

Both Roth Gold IRAs and Traditional Gold IRAs can be initially funded by rolling over funds that you have in an existing IRA or 401(k) account. True Gold Republic account executives can assist you with the process of doing an IRA or 401(k) rollover into a Gold IRA in a manner that enables you to avoid incurring any tax liability.

Roth Gold IRA Basic Facts

Let’s review the basics that govern investing with a Roth Gold IRA.

First, just like with a Traditional Gold IRA, a Roth Gold IRA is a self-directed IRA (sometimes referred to as an SDIRA). It is this self-directed component that provides investors with the flexibility to invest in tangible assets such as physical gold and silver. Investments in physical gold and silver (coins and/or bullion) are allowed in a Gold IRA, but not in a regular IRA. Regular IRAs can only invest in paper assets, such as stocks and bonds.

Although your Roth Gold IRA is termed “self-directed”, the IRS doesn’t actually allow you to personally hold in your possession the precious metals investments that you make with the account. Instead, your account must be managed by an IRS-approved custodian. You make all the investment decisions – e.g., “I want to buy 100 American Silver Eagle coins” – but it’s the Roth Gold IRA custodian who makes the actual purchase of those assets, and who is, technically, the holder of them. Your custodian will also handle any reporting requirements to the IRS regarding your Gold IRA investments. At True Gold Republic, we have established partnerships with the most well-respected, IRS-approved Gold IRA custodian firms, so we can easily connect you with them and arrange for custodial services for your Roth Gold IRA.

The IRS also requires you to store your Roth Gold IRA investments in IRS-approved storage facilities. True Gold Republic offers you a very broad array of approved storage facilities to choose from. You can pick from storage vaults located in Texas, Delaware, Utah, New York, Nevada, or California.

Your Roth “Gold” IRA is actually a precious metals IRA. That means that you can use it to make investments in gold, silver, platinum, and/or palladium. However, the IRS is very damn finicky about the coins or bullion that are approved investments for a precious metals IRA. Gold coins or bullion must have a purity of 99.5%. Silver coins or bullion have a purity requirement of 99.9%. And platinum or palladium coins and bullion must be 99.95% pure. Additionally, the coins or bullion purchased for your Roth Gold IRA must be products that are minted either by an official government mint or by a private minter that is approved by the London Bullion Market Association (LBMA).

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There are, however, two noteworthy exceptions to the IRS purity requirements. Although they do not meet the purity percentage requirements set by the IRS for all other coins, the Gold and Silver American Eagle coins minted by the US Mint are approved investments for inclusion in a Gold IRA (Traditional or Roth).

You have the option to liquidate your Roth Gold IRA at any point in time. However, doing so before you reach the age of 59-and-a-half will result in tax liabilities and penalties that do not apply to account withdrawals made after reaching that minimum retirement age.

Roth Gold IRA Advantages - Conclusion

It’s a good idea to carefully consider your options with both a Roth Gold IRA and a Traditional Gold IRA in order to make the best choice for you.

Again, the primary advantage of investing with a Roth Gold IRA is the extremely favorable tax treatment of investment gains and withdrawals during retirement. Let’s take a quick look back at our example of investing just $10,000 in gold in a Roth Gold IRA versus a Traditional Gold IRA. The relative tax advantages of each type of Gold IRA are as follows:

• Tax advantage with a Roth Gold IRA: $77,550 in tax-free investment profits – estimated tax savings = $21,700
• Tax advantage with a Traditional Gold IRA: a $10,000 deduction in taxable income at the time of Gold IRA contributions – for an investor in the 32% federal income tax bracket, that would represent a tax savings of $3,200

However, the investor using a Traditional Gold IRA would have to pay the approximately $21,700 in taxes on withdrawals that the Roth Gold IRA investor avoided. Obviously, over the long haul, the Roth Gold IRA investor reaps a much larger tax benefit than the Traditional Gold IRA investor.

So, why might an investor opt to go with a Traditional Gold IRA when, at first glance, it may appear that choosing the Roth Gold IRA option is a “no-brainer”? – Because of the benefits they receive by having their tax liability substantially reduced in the years when they’re making contributions to the account. For example, an individual might be in such a tight financial situation that the $3,200 in immediate tax savings might represent the difference between being able to stay financially solvent versus suffering a major financial setback (such as having to declare bankruptcy or default on some credit card bills, thus, negatively affecting the individual’s credit score rating).

Another possible scenario where choosing a Traditional Gold IRA could end up being the most profitable choice: An individual might have an immediate, short-term investment opportunity - one that ended up delivering massive returns, that they could only have taken advantage of by using their $3,200 in immediate tax savings.

So, again, the bottom line is that the choice of, “What’s better? - a Roth Gold IRA versus a Traditional Gold IRA”, is always going to be an individual choice that’s determined by your personal current financial situation and long-term investment goals. Only you can know which investment option is the best investment choice for you to make. Account executives here at True Gold Republic are happy to help you along the way.

• J.B. Maverick

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_{The information provided in this article represents the opinions and insights of True Gold Republic and is intended for informational purposes only. It does not constitute financial advice, investment recommendations, or an offer to buy or sell any financial instruments.}

_{Readers are strongly encouraged to conduct their own research, evaluate their financial goals, and seek advice from a licensed financial advisor before making any investment decisions. True Gold Republic is not responsible for any actions taken based on the information presented herein.}

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Sources:

https://www.focusontheuser.org/gold-ira/roth/

https://www.cbsnews.com/news/traditional-gold-ira-vs-roth-gold-ira-differences/

https://www.thebalancemoney.com/how-to-invest-in-gold-with-a-roth-ira-5224432

https://goldiraguide.org/types-of-accounts/invest-roth-ira/

https://www.investopedia.com/terms/g/gold-ira.asp

https://www.youtube.com/watch?v=pvvACpmYnPc

https://www.birchgold.com/precious-metals-ira/gold-roth-ira/

https://www.forbes.com/advisor/retirement/precious-metal-ira-gold-silver/

https://lendedu.com/blog/roth-gold-ira/

https://www.focusontheuser.org/gold-ira/roth/

https://www.truegoldrepublic.com/service/ira-transfer

https://www.bptrends.com/gold-ira-vs-roth-ira/

https://www.govmint.com/2024-50-1-oz-gold-american-eagle-bu

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