So you’re considering a Gold IRA, but you are asking, “Can I cash out Gold IRA?”
Well, that’s a perfectly fair question to ask and I won’t waste your time with a long intro before answering it.
You can cash out your Gold IRA, but there are early withdrawal penalties and taxes associated with doing so.
So, in this article I wanted to break down what you can expect to pay, as well as the fees for doing so with different Gold IRA companies.
I also added some links to information on other precious metals that you can add to a Precious Metals IRA (same thing as a Gold IRA), like Palladium and Platinum.
If you plan to read this article in full, expect to spend around 11 minutes to do so.
When considering cashing out your Gold IRA, it’s important to understand the potential penalties and exceptions that may apply – so let’s take a look.
Quick Disclaimer:
The content provided in this article is for informational purposes only and should not be considered financial or investment advice. Always consult with a qualified financial advisor before making any decisions regarding Precious Metals, Investing, or IRAs. Additionally, this article contains affiliate links, and I may earn a commission if you make a purchase through these links, at no additional cost to you.
Another question, I have been asked is, “What Gold IRA companies are the best” or “Which IRA companies are the most trusted?”.
If you’d like more information, below is a link to a comparison PDF by Augusta Precious Metals that could be useful. (It’s also free.)
Augusta Gold IRA Company Integrity Checklist
Early Withdrawal Penalties
If you’re wondering, “Can I cash out my Gold IRA early?” the answer is yes, but it comes with a cost.
Generally, early or premature distributions from an IRA or retirement plan before age 59½ are subject to an additional 10% early withdrawal tax unless an exception applies.
| Age | Early Withdrawal Penalty | Additional Tax |
|---|---|---|
| Below 59½ | Yes | 10% |
| 59½ and above | No | None |
For instance, withdrawing funds from a traditional Gold IRA before age 59½ is considered a non-qualified distribution and will incur a 10% early withdrawal penalty, in addition to regular income taxes (CBS News).
However, SIMPLE IRA plans have a unique rule: distributions within the first two years of participation incur a 25% additional tax instead of the standard 10% (IRS).
Exceptions to Early Withdrawal Taxes
There are specific exceptions where the 10% early withdrawal tax does not apply. These exceptions are designed to provide relief in special circumstances:
- Public Safety Employees: Public safety employees, including specified federal law enforcement officers, corrections officers, firefighters, and air traffic controllers, who are age 50 or over, are exempt from the 10% additional tax on early distributions.
- Medical Expenses: Withdrawals used to pay for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income may be exempt from the early withdrawal penalty.
- Disability: If you become permanently disabled, you can withdraw funds without incurring the 10% penalty.
- First-Time Home Purchase: Up to $10,000 can be withdrawn penalty-free for a first-time home purchase.
- Higher Education Expenses: Withdrawals used to pay for qualified higher education expenses for yourself, your spouse, or your children can be exempt from the penalty.
For a comprehensive list of exceptions and more detailed information, you might want to explore our other articles such as can i borrow from my gold ira? and do you pay tax on gold?.
For more insight on whether gold IRAs are a good idea, you can visit our dedicated page.
Required Minimum Distributions (RMDs)
Traditional Gold IRA RMDs
For Traditional Gold IRAs, you must start taking annual RMDs at age 72.
This rule applies to Traditional IRAs, SEP IRAs, and SIMPLE IRAs.
However, if you reach age 72 after December 31, 2022, you must start taking RMDs at age 73.
Failure to take your RMDs can result in significant penalties.
Specifically, the penalty for not taking the RMD is 25% of the amount that should have been withdrawn.
| Age | Required Minimum Distribution (RMD) |
|---|---|
| 72 (if born before Dec 31, 2022) | Yes |
| 73 (if born after Dec 31, 2022) | Yes |
| Failure to take RMD | 25% penalty on amount |
For more information on how Traditional Gold IRAs compare to other types, visit our article on what is the difference between a gold ira and a traditional ira?.
Roth Gold IRA RMDs
Roth Gold IRAs differ significantly from Traditional Gold IRAs in terms of RMD requirements.
Unlike Traditional IRAs, Roth IRAs do not require you to take RMDs during your lifetime (BP Trends).
This means you can leave your investments in the Roth IRA to grow tax-free for as long as you live, which can be particularly advantageous for estate planning.
| Age | Required Minimum Distribution (RMD) |
|---|---|
| Any age | No RMDs required |
This flexibility makes Roth Gold IRAs an attractive option for many investors. For more insights into Roth IRAs and their benefits, visit our article on can i convert my ira to a gold ira?.
For further details on the tax implications and other rules related to Gold IRAs, check out our articles on who holds the gold in a gold ira? and how is a gold ira taxed?.
Another common question I get asked about sales tactics used by Gold IRA companies is about how silver is leveraged and mentioned.
If you want to learn more, below are two free PDFs by Augusta Precious Metals that break down how to check the integrity of an IRA provider as well as information on how Silver is used as a sales tactic.
Augusta Precious Metals Links:
Distribution Options
When it comes to cashing out your Gold IRA, understanding the different distribution options is essential.
Whether you have a Traditional Gold IRA, Roth Gold IRA, or an Inherited Gold IRA, each has unique rules and benefits.
Traditional Gold IRA Distributions
Traditional Gold IRAs require you to start taking distributions at age 72, known as required minimum distributions (RMDs) (CBS News).
If you fail to take the RMD, you may face a 25% penalty on the amount that should have been withdrawn.
| Age | RMDs Required? | Penalty for Missing RMDs |
|---|---|---|
| 72 | Yes | 25% |
| 73 (if you turned 72 after Dec 31, 2022) | Yes | 25% |
Figures courtesy Investopedia
Traditional Gold IRA distributions are taxed as ordinary income.
This means the amount you withdraw will be added to your taxable income for the year.
If you’re considering early withdrawal, be aware that you might face additional penalties and taxes. For more details, visit how is a gold ira taxed.
Roth Gold IRA Distributions
Roth Gold IRAs offer more flexibility compared to Traditional Gold IRAs.
One of the significant advantages is that Roth IRAs do not have required minimum distributions. This allows you to keep your investment growing tax-free for as long as you like.
| Age | RMDs Required? | Tax on Withdrawals |
|---|---|---|
| Any | No | Tax-free (if qualified) |
Qualified distributions from a Roth Gold IRA are tax-free, making it a valuable tool for tax planning.
This is especially beneficial if you expect your tax rate to be higher in the future. To learn more about the benefits of Roth Gold IRAs, check out do iras grow your money.
Inherited Gold IRA Distributions
Inherited Gold IRAs come with their own set of rules.
If you inherit a Gold IRA, you are generally required to withdraw the funds within 10 years.
Beneficiaries are also subject to required minimum distributions (RMDs), taxes, and penalties.
| Requirement | Details |
|---|---|
| Withdrawal Period | Within 10 years |
| RMDs | Yes |
Inherited Gold IRAs can be a bit more complex due to the tax implications and distribution requirements.
Make sure to consult a financial advisor to navigate these rules effectively. For more information, see what is the difference between a gold ira and a traditional ira.
To make an informed decision on which Gold IRA option is best for you, consider your financial goals, tax situation, and investment timeline. For more insights, visit is gold a good retirement investment and which gold ira company is best.
Tax Implications of Gold IRA Withdrawals
Taxation on Early Withdrawals
If you withdraw funds from your Gold IRA before the age of 59 ½, you will typically face a 10% early withdrawal penalty. This applies to both Traditional and Roth Gold IRAs (IRS).
However, there are exceptions to this rule. The IRS allows penalty-free early withdrawals under specific circumstances, including:
- Unreimbursed medical expenses
- Health insurance premiums during unemployment
- Higher education costs
- Permanent disability
- IRA inheritance
- Purchasing, constructing, or rebuilding a home
- Fulfilling an IRS levy
- Making substantially equal periodic payments
- Active duty involvement (BP Trends)
For a Traditional Gold IRA, early withdrawals are subject to both the 10% penalty and regular income tax (CBS News).
For Roth Gold IRAs, withdrawals of earnings before age 59 ½ are subject to taxes and a 10% penalty, but contributions can be withdrawn tax- and penalty-free.
Capital Gains Tax on Gains
Capital gains tax applies to any increase in the value of the gold within your IRA when you cash out.
For early withdrawals before retirement age, this can mean a significant tax burden. The IRS imposes a 28% capital gains tax on the earnings from the increased value of the metals.
Here’s a simplified look at the tax implications for early withdrawals:
| Withdrawal Type | Age Requirement | Penalty | Tax Rate |
|---|---|---|---|
| Traditional Gold IRA | Before 59 ½ | 10% | Ordinary Income Tax |
| Roth Gold IRA | Before 59 ½ | 10% (on earnings) | Ordinary Income Tax (on earnings) |
| Early Withdrawals (Capital Gains) | Before 59 ½ | 10% | 28% Capital Gains Tax |
For further details on how gold IRAs are taxed, refer to our article on how is a gold ira taxed.
For more information on related topics, you might find our articles on can i borrow from my gold ira? and what is the difference between a gold ira and a traditional ira? helpful.
Specific Gold IRA Withdrawal Rules
When it comes to your Gold IRA, understanding the specific withdrawal rules is key to maximizing your investment and avoiding potential pitfalls.
Here, we will look at the rules for self-directed IRA distributions and inherited Gold IRA withdrawal guidelines.
Self-Directed IRA Distributions
Self-directed IRAs offer you more control over your investment choices, including the ability to hold physical gold. However, they come with their own set of rules and complications.
Advantages and Disadvantages
Self-directed IRAs provide several benefits:
- Asset selection: You can choose from a wider range of investments.
- Tax breaks: Earnings within the IRA grow tax-deferred or tax-free.
- Personalized diversity: Tailor your investment portfolio to fit your needs.
However, there are also disadvantages:
- Rule violations: The potential to accidentally break IRS rules.
- Custodial help: Lack of assistance from custodians can be an issue.
- Fee structures: Complicated and sometimes higher fees.
- Illiquidity: Some investments may be hard to sell.
- Fraud risk: Higher susceptibility to fraud.
IRS Restrictions
The IRS imposes strict rules on what you can hold in a self-directed IRA:
- Prohibited investments: Life insurance, S corporation stocks, prohibited transactions, and collectibles like antiques, artwork, alcoholic beverages, and rare coins.
- Gold requirements: Gold must be at least 99.5% pure (24 karats). Eligible investments include American Gold Eagle coins, Canadian Gold Maple Leaf coins, and certain gold bars and rounds produced by accredited refiners or national government mints (Investopedia).
Tax Rules
Gold and silver held in a self-directed IRA have specific tax rules:
- Purity standards: Gold must be 99.5% pure; silver must be 99.9% pure.
- Capital gains tax: Physical holdings are subject to capital gains tax, only owed after selling. Short-term gains (held less than a year) are taxed at ordinary income rates, while long-term gains are taxed at a maximum of 28% (Investopedia).
Inherited Gold IRA Withdrawal Guidelines
If you inherit a Gold IRA, specific rules apply to how you can withdraw the assets.
RMD Rules
Inherited IRAs have Required Minimum Distributions (RMDs):
- Traditional inherited Gold IRAs: You must start taking RMDs regardless of your age.
- Roth inherited Gold IRAs: You must take RMDs, but they are generally tax-free.
10-Year Rule
For IRAs inherited from someone who passed away after December 31, 2019, the SECURE Act mandates that the entire IRA must be distributed within 10 years. This rule applies to both traditional and Roth IRAs.
Tax Implications
- Traditional inherited Gold IRAs: Withdrawals are taxed as ordinary income.
- Roth inherited Gold IRAs: Withdrawals are generally tax-free if the account was held for at least five years.
For more information on related topics, check out our articles on can i borrow from my gold ira?, how is a gold ira taxed?, and can i convert my ira to a gold ira?.