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- All subsequent RMDs must be withdrawn by December 31 of each year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.
IRS Guide to Retirement Plan and IRA Required Minimum Distributions – https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Gold IRA RMD Planning Tips – https://www.advantagegold.com/gold-ira/rmds-from-precious-metals-iras/
Minimizing RMD Taxes – https://www.schwab.com/ira/understand-iras/avoid-rmd-tax-trap
Required Minimum Distributions Worksheets – https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Gold IRA RMD Calculator – https://www.bgasc.com/resources/gold-ira-resources/gold-ira-required-minimum-distribution