Don’t Miss the 2016 IRA Deadline – Lower Your Tax Rate by Contributing to a Precious Metals IRA!
Posted on March 23, 2017
If you are looking for a way to help secure your financial future while potentially lowering your tax burden, a precious metals IRA may be the simplest solution.
Why Invest In a Precious Metals IRA Account?
When most people think of the term “IRA,” they likely think of an account that holds traditional stocks or mutual funds, and bonds. Many investors do not realize that an IRA account may also be used to purchase and hold other alternative asset classes like real estate, futures contracts, and precious metals.
That’s right. You can buy real physical gold, silver and other precious metals using your existing IRA account. Don’t have an IRA account? No problem. Setting one up has never been easier.
Precious Metals IRA Benefits
- A precious metals IRA allows you to grow your savings on a tax-deferred basis: A precious metals IRA gives you a vehicle to invest in that cannot only allow your savings to grow tax-deferred, but lets the power of compounding work for you. Albert Einstein once called compound interest “the most powerful force in the universe.” Although gold does not produce income, regular contributions to your precious metals account can potentially help compound your earnings over time. In addition, regular contributions may also enable you to take advantage of dollar-cost averaging, with the idea being that over time you may lower your overall cost basis. For example, if you bought gold at $1,200 per ounce this year and bought more gold next year at $1100 per ounce, your total cost basis would be $1,150 per ounce. Buying gold or other precious metals regularly may allow you to take advantage of any dips in price and lower your cost basis over the long-run.
- You can lower your tax bill: You can save part of your income (up to specified limits) in a traditional IRA account and do not have to pay taxes on those funds. You also do not pay any taxes on gains made within the IRA until you start making withdrawals. Another major potential benefit is that you may fall into a lower tax bracket. Taxpayers fall into one of seven brackets currently: 10%, 15%, 25%, 28%, 33%, 35% or 39.6%. Taxable income is the income that is taxable. This is what is left from gross income after subtracting all applicable deductions and exemptions. Let’s take a look at how one may fall into a lower tax bracket by contributing to a precious metals IRA.
- If your taxable income is $95,000, you will fall into the 28% tax bracket. The tax table calls for taxes of $18,558.75 plus 28% of any amount over $91,150. The tax on this would be calculated as: $95,000 – $91,150 = $3,850 x 28% = $1,078. Added to $18,558.75 is total tax of $19,636.75
- If your taxable income were $5,000 less due to an IRA deduction, you may fall into the 25% tax bracket (with $90,000 in taxable income). The tax table calls for taxes of $5,183.75 plus 25% of any amount over $37,650. The tax on this would be calculated as: $90,000 – $37,650 = $52,350 x 25% = $13,087.50. Added to $5,183.75 is total tax of $18,271.25
- Using this example, there would be a tax savings of $1,365.50.
- You can diversify a precious metals IRA with different products: According to IRS guidelines, there are numerous types of precious metals you can purchase and hold within an IRA account including: gold and silver bullion, proof coins, rounds and bars of specified purity, as well as certain platinum and palladium products. This allows you to diversify your precious metals holdings. Some of the most popular products include American Gold and Silver Eagle coins and Canadian Gold and Silver Maple Leafs.
- Forget about storage: Storage is always an important consideration when purchasing precious metals. Fortunately, when you purchase precious metals using an IRA account, the storage issue is taken care of. Precious metals purchased within an IRA must be held within an approved depository. An approved precious metals depository utilizes highly advanced security features to keep your gold, silver, platinum, or palladium safe. You can sleep well at night knowing that your metals are safe and secure. In addition, a depository may hold your metals off their own balance sheet, and they may carry significant insurance to cover loss or theft.
- Your custodian takes care of all the details: An IRA account is managed by a custodian. All IRA accounts must have a custodian, and the custodial entity may be a bank, credit union or trust company that is licensed and regulated by the IRS. The custodian will pay for purchases made using IRA funds, handle any shipping and delivery details and provide regular account statements. The custodian also coordinates any distributions and handles tax reporting.
- Traditional or Roth: You can choose to purchase and hold precious metals using a traditional IRA or a Roth IRA. A traditional IRA allows for tax-deferred growth, and taxes are paid when withdrawals are made. A Roth IRA allows for withdrawals to be made with no taxes or penalties provided certain conditions are met. This is because a Roth is funded with after-tax contributions, therefore there is no tax deduction. A Roth may potentially make sense if you expect your tax rate to be higher during retirement.
- Larger contribution limits: For both traditional and Roth IRA accounts, the contribution limits for the 2016 tax year are $5,500 and $6,500 (if over age 50).
A precious metals IRA can provide you with a vehicle for growing your holdings on a tax-deferred basis and lowering your current tax liability while at the same time providing you with all of the potential benefits that come with physical precious metals ownership.
Making the Correct IRA Decision
The decision to invest in a traditional or Roth precious metals IRA should be carefully considered. These retirement savings vehicles can potentially provide many distinct advantages, but also come with their own very specific guidelines.
Done within the rules, allocating retirement savings to a precious metals IRA can be a highly effective way to diversify your holdings and save for you financial future.
Look into a precious metals IRA today while there is still time. You can make 2016 contributions until April 18th, 2017.
If you are considering a traditional or Roth precious metals IRA or have any tax related questions, we encourage you to discuss the matter with your own tax professional.
All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.