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One of the first questions people ask after they learn about gold IRAs is, "How much money can I put in the account each year?" The short answer is that the contribution limits are the same for all types of IRAs, whether traditional, Roth, or self-directed. By the way, those "self-directed" accounts are known as SDIRAs but are commonly called "gold IRAs" because they can hold physical forms of all the precious metals.
Of course, the vast majority of people choose gold as their preferred precious metal (PM), but many include silver, palladium, platinum, and combinations of those four choices. So, what are the details of the answer to the question about how much a person can put into a gold IRA? There are actually several nuances to the situation, which are listed below.
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Things to Know When Investing in Gold IRA
Before you open an SD (self-directed) IRA and add anything to it, consider the following crucial points:
Couples Don't Contribute Together
Husbands and wives are treated, for IRA purposes, as separate people. In other words, they don't make IRA contributions "as a couple" or jointly. Each individual can have an IRA, but only in their own name. The good part of that law is that working couples can each contribute up to the limit. See below for specific numbers.
Standard Limits are $6,500 Per Person
The 2023 contribution limits for ALL types of IRAs, except SEPs (discussed below), are $6,500 and $7,500. Why two limits? The lower amount is for taxpayers under the age of 50. For those who turn 50 before Dec. 31 of the tax year, the limit is $7,500 per person.
Example: A married couple, Tom, age 55, and Julie, age 45, each has gold IRA accounts. For 2023, Tom can contribute up to $7,500, and Julie can put in $6,500. Note that Tom is allowed to use the IRS "catch-up" provision because of his age, but Julie can't because she's under age 50.
You Can Have Multiple IRAs, But...
Here's a major area of misunderstanding about the question, "How much can I put in a gold IRA?"
While you're allowed to have as many IRAs as you want, it's still necessary to abide by the annual contribution limits of $6,500 for folks under age 50 and $7,500 for those over 50. For SEPs, you can put in $66,000 or 25% of your self-employed income, whichever amount is less.
Here's a hypothetical situation: Say you have a traditional, non-gold IRA and a gold IRA. If you contribute $1,000 to the non-gold account, and you're under the age of 50 AND not self-employed, you'd be able to put $5,500 into your gold IRA. That's because you "used up" part of your allowed $6,500 limit by placing $1,000 into the non-gold IRA.
There are 3 Kinds of Gold IRAs
There are three basic kinds of gold IRAs (SDIRAs), and they have their own rules about contribution limits and other factors. The three kinds of gold IRAs, along with their contribution limits, are:
For SEP and traditional gold IRAs, you contribute pre-tax earnings, so you get a deduction from income in the year you make the IRA contribution. Later, you'll pay ordinary income tax on the withdrawals you make after age 59.5.
For Roth gold IRAs, you use after-tax earnings, thus getting NO tax deduction in the year of contribution. However, you pay NO TAX at all on withdrawals at retirement. That means if the precious metals have increased in value by any amount, you pay no tax on the appreciated amount either. Roth gold IRAs won't provide an immediate deduction, but they have the potential for a major benefit in the long run.
Use a Custodian For SDIRAs
No matter how much you put into a gold IRA, it's not possible to just set one up and start filling it with precious metals. According to IRS regulations, you must use a government-approved custodian. That is an organization that oversees the account setup and makes sure that account holders do not take possession of the metals.
Contrary to popular belief, you can't keep your gold at home, in a safe-deposit box at the bank, or in a secret location in the woods. The law is clear about gold IRAs. While you can contribute up to the limits, which are the same as the ones for traditional, Roth, and SEP accounts, you MUST use a custodian to initiate the account, file the paperwork, and verify that the physical metals are transferred to an approved storage vault.
Choose a Reputable Gold IRA Investment Company
If you want to get the ball rolling quickly with a gold IRA, it's wise to work with a licensed, reputable metals dealer. This method is highly efficient because the dealer can not only sell you the various metals for your account but can also give you the names of approved custodians and vaulting facilities.
So, it's sort of a one-stop solution for purchasing metals, getting all your questions answered by knowledgeable agents, finding a reliable custodian, and choosing a government-approved storage vault. Setting up a gold IRA and contributing the maximum amount to it is not as complicated as it first seems.
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Know the Roth "5-Year Rule"
It's easy to forget about the all-important five-year rule that pertains to Roth IRAs of all kinds. You can't make any withdrawals until the account has been in existence for five full years AND you are past the age of 59.5. If you break either provision of that rule, the IRS can impose an added 10% fee to whatever tax you pay on the withdrawal.
Taking money out too early, either before the five years are up or before you're 59.5 years old, means that the money you pull out is treated as ordinary income. So, you're not only stuck paying tax on the amount but also must pay a penalty of 10% of the total withdrawal amount. It adds up fast, so follow the "Roth five-year rule" to avoid a massive penalty.
What's the Next Move?
Now that you know the essential facts about how much investors can put in their gold IRAs, just be sure to follow all the rules and IRS guidelines. One hassle-free way to open an SDIRA and stock it with precious metals is to work with a licensed PM investing firm. Most of the top-rated players in the niche can serve as one-stop shops.
That way, you don't have to worry about remembering all the detailed regulations, investment limits, and laws. When you open an account with a reputable investment company, they can connect you with approved storage vaults and IRS-approved custodians and sell precious metals directly to you as a first step.