The Differences Between a Gold IRA and a Traditional IRA
If you’re reading this blog, it’s evident that you already understand the importance of retirement savings and investments. And with several investment choices out there for post-retirement financial stability, IRAs top the list.
IRA stands for Individual Retirement Account; this restricted savings account is a source of income in an individual’s post-retirement life. Only the account owner makes contributions and savings, and the nature of the account determines the type of contribution.
Traditional and gold IRAs are the two main options that are available to customers. In this blog, we’ll distinguish between the two types in detail to help you make the best choice for yourself.
What Is a Traditional IRA—and How Does It work?
Traditional IRAs consist of investing in paper assets such as cash and stocks. These IRAs are generally overseen by brokers or investment advisors. A traditional IRA allows you to direct your pre-tax income toward an investment that’ll convert it to a tax-deferred one.
According to the IRS, the withdrawals from a traditional IRA account are taxed at the current income tax rate, and no capital gains or dividends are assessed. The RMDs in a traditional IRA are allowed to begin at the age of 72.
Pros of a Traditional IRA
The following are some of the most significant advantages of owning a traditional IRA:
- A traditional IRA is similar to a Roth IRA except for the tax implications.
- It allows the owner to make annual tax-deductible contributions in the retirement fund unless your employer offers a qualified plan.
- There’s no income limit for enrolling in a traditional IRA.
- A traditional IRA can be set up even if you have other retirement plans.
- It protects against bankruptcy, and all the contributions are protected from creditors.
- You can pass on the assets to your beneficiary(s) after death.
Cons of a Traditional IRA
There are two major cons of a traditional IRA:
- You can’t make any contributions to your traditional IRA after the age of 72.
- Withdrawals from a traditional IRA can only begin after you’ve turned 72, and a failure to withdraw your RMD will result in a tax deduction of 50% by the government.
What is a Gold IRA—and How Does It Work?
A gold IRA is a retirement savings account in which the account owner can hold gold or other precious metals. This specialized IRA can either be set up with pre-taxed funds or as a Roth IRA that was bought with taxed money.
Unlike other types of IRAs, a gold IRA requires the purchase and storage of physical gold bullions, and hence, it requires a gold IRA company or custodian to manage the account.
Pros of a Gold IRA
Here are the benefits of setting up a gold IRA:
- Like traditional IRAs, a gold IRA also offers tax benefits with a bonus of savings protection through portfolio diversification.
- A gold IRA provides you with full control over your account. You can choose any IRA approved precious metal as a contribution.
- Gold has been considered a haven investment for centuries. Adding gold in your portfolio minimizes the impact of economic volatility and inflation.
Cons of a Gold IRA
The following demerits accompany the decision of setting up a gold IRA:
- Gold doesn’t pay dividends or has no earnings.
- It has industrial and jewelry uses, but the yellow metal is usually kept in storage vaults in banks and third party depositories.
Contact Orion Metal Exchange For Your Gold IRA Needs
If you intend to buy gold or silver bullions or invest in a gold IRA, you’ve come to the right place. We also help keep your precious metal investments safe with our secure private vault storage rentals.
Reach out to us to learn more