Gold IRA Withdrawals and RMDs: How Taking Money Out Works

Taking money out of a gold IRA follows the same tax rules as any other IRA. What is different is the thing inside it. Your IRA holds coins and bars, not cash, so each withdrawal means either selling some metal or taking the metal itself.

This page covers both ways, how required minimum distributions (RMDs) work when your account holds metal, the extra tax on early withdrawals, and how withdrawals are taxed in a traditional and a Roth IRA.

How do I take money out of a gold IRA?

You ask your custodian for a distribution, which is the IRS word for a withdrawal. Then you choose one of two ways to receive it.

1. Sell metal and take cash. The custodian arranges a sale, usually through a dealer, and pays you the cash. Selling inside the IRA doesn't create a tax bill by itself. The IRS says amounts in an IRA, including gains, generally "aren't taxed until they are distributed." Tax applies when the cash leaves the IRA.

2. Take the coins or bars themselves. This is called a distribution in kind. The custodian has the depository ship the metal to you. It now belongs to you outside the IRA, and you can keep it wherever you like.

Either way, the withdrawal is reported to you and the IRS on Form 1099-R.

How is metal valued when I take it out?

At its fair market value on the day it is distributed. The IRS instructions for Form 1099-R tell the payer to include "the FMV of the securities or other property on the date of distribution." FMV means fair market value.

So if you take a 1-ounce gold coin out of a traditional IRA, the custodian reports what the coin is worth that day. That amount is income to you, even though you received no cash. If you later sell the coin, your gain or loss outside the IRA follows the normal rules for metals. A tax professional can explain how that works for you.

Before taking metal in kind, ask the custodian how it values each coin or bar and whether it charges a fee to ship it.

When do RMDs start for a gold IRA?

Required minimum distributions start with the year you reach 73, or 75 if you were born in 1960 or later. They apply to traditional IRAs, including traditional gold IRAs.

The IRS sets these timing rules in Publication 590-B and its RMD FAQs:

• Your first RMD is for the year you reach the starting age. You can delay it until April 1 of the following year.
• Every later RMD is due by December 31 of that year.
• If you delay the first one, you will take two RMDs in the same year: the delayed first one by April 1 and the second by December 31. That can push up your taxable income for that year.
• Still working doesn't change it for an IRA. The IRS says owners of traditional IRAs must begin RMDs at the starting age "even if they're retired," and the delay for people still working applies to workplace plans, not IRAs.

How is the RMD amount figured?

You divide the IRA's value on December 31 of the previous year by a number from an IRS life expectancy table. For a gold IRA, that December 31 value is the market value of your metal on that date.

You don't have to do the math alone. The IRS says the custodian that held your IRA at the end of the previous year must either tell you the RMD amount or offer to calculate it, by January 31.

A few rules that matter for gold IRAs:

• More than one traditional IRA? You figure the RMD for each one, but you can take the total from any one or more of them. This lets some people take the whole RMD from an IRA that holds cash or funds and leave the metal alone.
• Taking extra doesn't carry forward. If you take more than the RMD this year, it doesn't reduce next year's.
• RMDs can't be rolled over into another IRA.

What if I need to sell metal to meet an RMD?

This is the main practical issue with a gold IRA in retirement. Gold pays no interest or dividends, so the account has no cash coming in. Unless you keep some cash in the IRA, each RMD means selling metal or taking it out in kind.

People in this situation often consider:

• Keeping some cash inside the IRA to cover RMDs and yearly custodian and storage fees.
• Taking the RMD from another traditional IRA, if they have one, under the rule above.
• Selling small amounts each year instead of a large amount at once. Smaller coins and bars can make this easier.
• Taking coins in kind, while setting aside cash outside the IRA to pay the income tax.

Remember that a forced sale happens at whatever the price is that year, and the dealer buys back below the market price. US regulators put it simply: "A dealer will always sell metal above the spot price and buy it back below the spot price." Ask your dealer for its buyback price before you need it.

What happens if I miss an RMD?

The part of the RMD you didn't take may be subject to a 25% excise tax. If you correct the shortfall within two years, the tax drops to 10%.

You report the tax on Form 5329. Publication 590-B also says you can ask the IRS to waive it if the shortfall came from a reasonable error and you are taking steps to fix it. With a gold IRA, a slow sale or a late shipping request can make you miss the December 31 deadline, so many people start the process well before the end of the year.

Is there a penalty for taking money out early?

Usually, yes. If you are under 59½, a 10% additional tax generally applies to the taxable part of the withdrawal, on top of regular income tax. It applies to "money or other property," so taking coins in kind counts too.

Publication 590-B lists exceptions. Some of the common ones are:

• You are totally and permanently disabled.
• You have unreimbursed medical expenses above 7.5% of your adjusted gross income.
• You pay health insurance premiums while unemployed (after receiving unemployment pay for 12 weeks in a row).
• You take a series of substantially equal payments based on your life expectancy.
• You use up to $10,000 to buy, build or rebuild a first home.
• You pay qualified higher education expenses.
• You inherited the IRA from someone who died.

Each exception has its own conditions, and the list in Publication 590-B is longer. A tax professional can confirm whether one applies to you.

How are gold IRA withdrawals taxed?

It depends on the type of IRA. A traditional IRA withdrawal is taxed as income. A qualified Roth IRA withdrawal is tax free.

Traditional gold IRA. The IRS says distributions from traditional IRAs "are taxed as ordinary income." The exception is any part that comes from nondeductible contributions, which you already paid tax on. Gold held in an IRA is taxed like any other IRA withdrawal, at your normal income tax rate, whether you take cash or metal.

Roth gold IRA. Qualified distributions are not taxed. A distribution is qualified when both of these are true:

• At least five years have passed since the start of the first year you contributed to any Roth IRA.
• You are at least 59½, or you are disabled, or the money goes to your heirs after your death, or it is a first-home withdrawal of up to $10,000.

If you take metal from a Roth IRA, its cost basis outside the IRA is its fair market value on the day it was distributed.

Roth IRAs also have no RMDs while the owner is alive. The IRS says the RMD rules "don't apply to Roth IRAs while the owner is alive." That removes the forced-sale problem described above, which is one reason some people prefer to hold metals in a Roth. Our page on gold in a Roth IRA covers this in more depth, and gold IRA taxes explains how contributions are treated.

What can't a gold IRA do in retirement?

A gold IRA can hold value, but it can't do the jobs most retirees need money to do:

• It pays no income. Every withdrawal means selling or taking metal.
• It costs money to hold. Custodian and storage fees continue every year, even as the account shrinks.
• Its price swings. You may have to sell for an RMD in a year when prices are low, and gold has had long flat stretches.
• Selling takes time and goes through a dealer at a buyback price below the market.

For monthly bills, most retirees lean on Social Security, pensions, bonds, cash and funds that pay income. Metals, if any, are a small part of the mix. See how to protect your retirement savings after 50 and how much of your portfolio should be in gold. For RMD planning across all your accounts, people often consider talking to a fee-only fiduciary or a tax professional.

If you want gold you can hold at home without IRA rules, see our gold IRA storage rules and our sister site, bestgoldsilverinvestment.com.