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Should I Take My Precious Metals Out of an IRA to Minimize Taxes in Retirement?

“I have a precious metals IRA with the Hard Assets Alliance. And so the other day, I was thinking about the taxes I would have to pay on this IRA when it's time to retire and sell gold. Would it be wise for me to transfer my gold into a non-IRA account and pay the taxes now? My thinking is that gold will rise considerably in the long term, meaning more taxes to pay in the future. What are your thoughts on that, Olivier?” —L.S.

Note: The information provided below is for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any financial activity.

I have spent a lot of time dealing with precious metals IRAs and looking at options to minimize my tax burden in the long run. Here are a couple of thoughts that may be helpful to you:

1) While the 2018 tax reform may reduce the tax burden in the short term, the financial situation of the United States almost guarantees a rise in our future tax liabilities. Now, add in our record-high deficit and unfunded pension liabilities, which will have to be funded in one way or another. Alternatively, the government might deliberately accelerate the pace of monetary erosion through inflation—which is taxation in disguise. The effect for you, however, will be the same.

2) Between 2002 and 2011, precious metals soared in value. Since the Fed ended QE in 2011, the prices have corrected. Meanwhile, almost all the other asset classes went up. Relative to other asset classes, precious metals are currently cheap. As a result, they are poised to provide greater returns in the future than most overvalued asset classes such as stocks, bonds, or even real estate.

3) Your thinking on the accumulated gains in precious metals and paying taxes on them now rather than later makes sense. Taking your metals out of the IRA, however, would not shelter your future gains from taxes. Any future appreciation of your precious metals is subject to taxation when you sell them.

4) A great alternative would be to transfer your precious metals from a traditional IRA into a Roth IRA account. The rollover would be a taxable event just like distributing the assets to a non-IRA account. However, any future gains in the Roth IRA account would never be taxed again. Another advantage of holding assets in a Roth IRA is that they are not subject to mandatory distributions when you turn 70½ like a regular IRA.

My view is that this is the perfect time to consider a rollover into a Roth IRA. (I myself did a sizable Roth conversion in 2018 for the purposes described above.) Regarding your original question, the Roth IRA makes a lot more sense than a taxable distribution to a non-IRA account, which, again, doesn’t shield you from future taxes.

I hope this is helpful.

To golden opportunities,

Olivier Garret

Olivier Garret, CEO
Hard Assets Alliance

 

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