Anybody researching tax-advantaged ways to diversify their retirement portfolio has probably come across gold IRAs. Precious metals such as gold and silver are excellent choices for savvy savers- but how much exactly can you- and should you- put into a gold-backed IRA?
Here is a handy summarized guide to the 2023 gold IRA contribution limits- and a little more information about how to use your funds wisely.
How Much Can You Contribute to a Gold IRA?
Until 2022, the annual contribution limits on gold IRAs were $6000, or $7000 for those aged 50 or over.
In 2023, the limits changed. They are now $6500 per year, or $7500 per year once you reach 50. These are the same rules that apply to traditional IRAs and Roth IRAs.
A SEP Gold IRA is a little different. They are designed for self-employed business owners and employees of small businesses. The limit in 2023 is 25% of your total compensation- capped at $66,000. If a quarter of your earnings is more than $66,000, you cannot contribute the excess.
Is There a Way to Contribute More to a Gold IRA?
There is nothing to stop you from investing more than the annual contribution limits to your gold IRA- but doing so will incur a tax penalty of 6% on everything over the maximum approved amount.
You can also invest more money in gold by rolling over funds from another tax-advantaged savings account- such as a traditional IRA or 401(k). This is a good way to invest a lump sum in physical gold without paying extra taxes- since the funds have already been contributed to a retirement saving plan.
How Much Should You Contribute to a Gold IRA?
What you can contribute and should contribute are not necessarily the same. Gold IRAs are meant for diversification and inflation hedging- but they should not be a person’s sole retirement investment option.
The generalized advice for retirement plans is to invest between 10% and 30% of your savings in gold- but it is always best to speak to a financial advisor about your specific circumstances, financial goals, and current portfolio before making any decisions.
Why Is a Gold IRA a Good Choice for Retirement Investors?
Gold has been a safe-haven asset for generations- and remains one of the best ways to hedge against inflation. When the US Dollar value drops, the price of gold usually increases- so it protects against losses in times of economic turbulence.
It is also a tangible asset that is not directly tied to the success of the stock market. If there was another market crash, gold would not lose its value- which cannot be said for most traditional stocks and bonds.
The Bottom Line
If you are looking for a great way to minimize risk, protect your wealth, and diversify your retirement savings- then a gold IRA could be the answer. As long as you follow the maximum contribution limits ($6500 for under 50s and $7500 for over 50s), then you won’t have to pay any additional tax.