Required Minimum Distributions (RMDs) and Gold IRAs

One disadvantage of using an IRA for retirement savings is that the government eventually forces you to start withdrawing funds every year once you turn 72. These required minimum distributions can create income tax obligations if drawn from pre-tax accounts like traditional IRAs.

Understanding how RMDs work with gold IRAs allows planning distribution strategies to optimize taxes and preserve wealth.

How RMDs Work

The IRS RMD rules for IRAs state:

Once you reach age 72, minimum withdrawals are mandated each year
The amount is based on life expectancy tables and your prior year-end IRA balance
Starting at 72, you must take your first RMD by April 1 of the next year
All subsequent RMDs must be withdrawn by December 31 of each year
Failure to take the full RMD results in a 50% penalty on the shortfall

RMDs reduce the longevity of tax-deferred growth for IRAs.

RMDs with Gold IRAs

The RMD rules apply equally to gold IRAs and traditional IRAs:

Physical gold and other precious metals holdings are included in the aggregated IRA balance RMDs are based on
Metals can be sold each year to fund the withdrawal or distributed in-kind
Taxable income is generated on deductible IRAs like traditional and SEP IRAs
Roth IRAs are not subject to RMDs during the original owner’s lifetime

Gold IRAs provide no exemption from eventual required minimum distributions.

Calculating Your Gold IRA RMD Amount

The steps to determine your RMD amount include:

Total all IRA balances as of December 31 of the prior year
Look up your life expectancy factor on the IRS tables based on age
Divide the prior year-end balance by your life expectancy factor

A $500,000 gold IRA balance and age 73 life expectancy of 26.5 years would mean an RMD of $18,868.

Your custodian can handle RMD calculations, but it is wise to validate.

Withdrawing Your Gold IRA RMD

When taking the RMD from your gold IRA, you have choices:

The custodian liquidates metals and transfers cash
Custodian ships you metals directly as an in-kind distribution
Take the RMD portion from your other IRAs and exclude the gold IRA
Convert RMD to a Roth IRA to avoid taxation

Proper planning allows for optimizing your withdrawal method.

Timing of Gold IRA RMDs

Remember the first RMD can be deferred an extra year:

You reach age 72: No RMD due yet
By April 1 of the following year: Must withdraw your first RMD
By December 31: Must take that calendar year’s RMD

After the first RMD, only annual December withdrawals apply.

Accounting for Gold IRA RMDs in Retirement Income

RMDs push more income into retirement years:

Increase budgeted expenses accordingly
Have taxes withheld directly to plan for increased tax obligations
Draw supplemental income from taxable investment accounts first to delay RMDs
Convert portions of deductible IRAs to Roths over time to reduce RMDs

Proper planning integrates gold IRA RMDs into retirement cash flow.

While required minimum distributions can seem like an annoyance, proper planning allows leveraging RMDs from gold and other IRAs to support retirement. Work with a financial advisor to integrate RMDs into income strategies and aim to minimize associated taxes.

Optimizing Ongoing Gold IRA Contributions

Even during RMD years, you can still make annual IRA contributions to help offset withdrawals:

Continue contributing your allowable amount to IRAs each year
Fund a non-deductible traditional IRA and convert to a Roth IRA
Use fresh contributions to further diversify metals holdings
Coordinate additional savings with the timing of RMDs

Ongoing contributions provide flexibility to integrate with RMDs.

Assigning Other Assets to Handle RMDs

If you want to preserve the tax-deferred growth within your gold IRA, some options include:

Withdrawing RMD amounts from your other IRAs first
Drawing more supplemental income from taxable investment accounts
Using dividends and interest income to cover the RMD total
Funding RMDs from shorter-term fixed accounts like CDs

This allows the shielding of physical metals from liquidation.

Getting Professional RMD Guidance

Consulting financial and tax professionals on integrating RMDs into your overall retirement income and distributions approach can provide key guidance on:

Strategically coordinating RMDs across multiple IRAs to optimize tax efficiency
Appropriately factoring gold valuations into total balances for RMD calculations
How conversion strategies can reduce total RMD obligation
Managing the additional income and tax consequences from RMDs

Their expertise allows for maximizing opportunities around the required minimum distribution

Frequently Asked Questions

Q: Can I withdraw more than the RMD amount from my gold IRA?

A: Yes, you can take more than the minimum required amount in any given year if you wish.

Q: Do I have to take an RMD from each separate IRA I own?

A: No, you can aggregate all IRAs together and take the total RMD from any one or combination of IRAs.

Q: Can I still contribute to my gold IRA in the years I’m taking RMDs?

A: Yes, you can continue making annual contributions up to IRS limits in addition to withdrawing your RMD.

Q: Is the 50% RMD penalty waived if I forget to take an RMD?

A: Unfortunately, there are no exceptions to the penalty, even for first-time mistakes.

Q: Do RMDs apply to inherited gold IRAs?

A: Yes, but distribution rules differ depending on your relationship to the deceased owner.