What is a Traditional IRA

What is a Traditional IRA?

A traditional IRA is a tax-deferred retirement savings account. Deferring taxes is the primary objective of investing in an IRA; this means all of your dividends, interest payments and capital gains can compound each year without being hindered by taxes. Allowing you Traditional IRA to grow much faster than a taxable account is the name of the game.

Traditional IRAs come in two varieties: a deductible IRA can lower your tax bill by allowing you to deduct your contributions on your tax return – you essentially get a refund on the taxes you paid earlier in the year.

Whether you qualify for a full or partial tax deduction depends mostly on your income and whether you have access to a work-related retirement account like a 401(k).

Unlike 401(k) plans, Traditional IRAs are not sponsored by an employer. Rather, individuals need to qualify in order to open and contribute to their own IRA, although the qualifications are quite simple: earn taxable income and be under the age of 70 1/2.

Types of Gold You Can Invest in Through a Traditional IRA

Traditional IRAs have plenty of investment options but can be limited by the IRA custodian and IRS rules. These are the types of investments that a standard IRA owner should be able to invest in:

  • Mutual fund shares
  • Exchange Traded Fund (ETF) shares
  • Individual stocks
  • Individual bonds (corporate and government)
  • Options
  • Certificates of Deposit (CDs)
  • Money Market Fund shares

You cannot invest in physical gold bullion through a Traditional IRA. However, the simplest way to invest in gold through your Traditional IRA is to purchase stocks in gold mining companies or to purchase a mutual fund that includes mining company stocks. This strategy is referred to as buying “paper gold.” There are also gold ETFs (GLD) and mining ETFs which provide indirect access to gold investing.

Does Gold and Precious Metals Qualify in a Traditional IRA? Retirement Plan Contribution Chart