TaxMama’s TaxQuips Solid Gold

  TaxMama® learns something from a question about the required minimum distributions. Got to tell you about this!

 

Dear Family,

One of our readers asked about how to take a required minimum distribution from his IRA account, when the only asset in the  account was one one-kilo gold bar.

In order for you to understand why this is so interesting, I have to explain some things.

1) A  Required Minimum Distribution (RMD) is mandatory for individuals who reach age 70 ½ and have funds in IRAs and retirement accounts. They must take a distribution from their accounts based on the total values of all accounts, distributed over their actuarial life. IRS provides the tables.  (This rule doesn’t apply to Roth IRAs.)  Those who don’t take the distributions are subject to a whopping 50% penalty on the amount not taken.

So, please, if you, or someone you know, is reaching this age, please follow the links in the previous paragraph and get those distributions arranged.

2) Did you know that you can buy gold in your IRA or retirement account?
Yes, in fact, you can. Although there is a prohibition against buying “collectibles,” there is an exception for “highly refined bullion.”

3) Now, this is the point of today’s Tax Quip. Beware of putting investments into your traditional IRA that are hard to liquidate without excessive fees. Especially as you get older, and get closer to the RMD years.

Since you cannot borrow from the IRA, or use the IRA assets as security for a loan, you must liquidate the entire asset in the IRA – if what you have is one solid bulk of gold bullion. In which case, you lose your gold investment, pay fees to sell the gold, and perhaps pay more fees to buy smaller, replacement gold bars. And if you draw the full amount out, you suddenly turn tax-free Social Security income into taxable Social Security income. Instead, buy the smaller bars in the first place.

If you want full, one-kilo gold bars, or other similar investments – buy them in a Roth IRA. You don’t need to take RMDs from Roths. Or buy them personally, outside a retirement account.

My point? Perhaps it’s time to look at the contents of your retirement accounts now, as you are getting closer and closer to age 70. Re-arrange some of your investments to make it easy and convenient to draw the minimum amounts – without being forced to liquidate the investment – and/or cause your Social Security benefits to become taxable needlessly.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments please drop into the TaxQuips Forum.

 

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