Gold Roths

I’m a huge advocate for Roth IRAs for most people - and especially gold investors.

Here’s why:

Most people with the scratch to open an account with a gold IRA firm are pretty successful people. That means they have substantial assets, either in or out of IRAs, and often expect substantial income in retirement.

Let’s do a quick and dirty rundown of the two types of IRAs:

If you go into retirement with a traditional IRA, eventually you’re going to want to start drawing it down and taking some income from the account. And once you hit age 73, you’ll have no choice: You MUST take required minimum distributions – and pay ordinary income taxes on every dime you take out.

But because IRA withdrawals are ordinary income, that income gets added to all your other income. And the higher your on-paper income goes, the bigger your tax problem goes.

Unmanaged IRA growth (and 401(k) growth for that matter!) will trigger a cascading series of tax booby traps:

Booby Trap 1: Social Security Becomes Taxable

Social Security becomes taxable once your “combined income” exceeds certain thresholds:

At that point, up to 50% of your benefits become taxable.

Push that income just a little higher:

Now up to 85% of your Social Security benefits become taxable.

A single dollar of excess income above that threshold can cost you hundreds or even thousands of dollars in taxes on Social Security Income. 

Also, these thresholds are not indexed for inflation. They haven’t budged since Reagan was President. And more and more retirees fall into this trap every year.

The next trap is the bracket jump.

For married couples filing jointly, the 12% bracket tops out at $94,300 of taxable income (2025 levels; adjust annually).

One additional dollar beyond that threshold is taxed at 22% — nearly double the marginal rate.

Large RMDs from a gold IRA, or anything else, will make that jump much more likely. We want as few dollars as possible subject to those 22%, 25%, or (for some readers) 37% tax brackets as possible.

Then you’ve got state taxes, which can push your total income tax margin as high as 50% in some jurisdictions.  

If you don’t take action early in retirement, before your RMDs kick in, unmanaged IRA growth will wind up compressing decades of deferred taxation into your 70s and 80s… and push more of your retirement income into higher tax brackets. 

This one catches many people completely by surprise: IRMAA, which stands for Income Related Medicare Adjustment Amount.

Once your modified adjusted gross income gets above a certain point, the government will force you to pay higher premiums for Medicare Parts B and D. 

Medicare premiums increase once your Modified Adjusted Gross Income crosses IRMAA thresholds. For 2025, the first IRMAA tier begins at:

For those of you at higher incomes, that can push your combined Medicare Part B and Part D premiums to an extra $578 per month above the base premium.

Each.

So for a married couple, the combined IRMAA premiums can cost you up to $13,872 per year in higher Medicare premiums. 

RMAA is a cliff, not a slope. One extra dollar of ordinary income from an IRA can trigger the entire surcharge.

If income climbs high enough — particularly in years with capital gains — you may trigger the 3.8% Net Investment Income Tax.

NIIT applies when Modified AGI exceeds:

That is an additional 3.8% layered on top of capital gains and dividend taxes.

Large IRA withdrawals can be the catalyst that pushes you into NIIT territory.

Long-term capital gains rates also rise with income.

If your taxable income climbs high enough, it can bump your long-term capital gains rate from 0% to 15% to 20%. 

And in higher brackets, capital gains may also be subject to an additional 3.8% tax on net investment income tax. 

Many times, the trigger is RMD-driven income stacking.

Then comes the silent tax bomb.

When one spouse dies, the surviving spouse now has to file as single. Tax brackets shrink by nearly half. The survivor may also lose access to certain tax credits and deductions, depending on her circumstances. 

The same IRA distribution that was manageable as a married couple can suddenly be taxed at higher marginal rates. The survivor may also lose access to certain tax credits and deductions, depending on her circumstance. 

Large balances in IRAs can set up a nasty tax trap for surviving spouses: The survivor won’t be able to keep as much of the required RMD. 

Under the SECURE Act, most non-spouse beneficiaries must withdraw inherited IRAs within 10 years.

If you leave behind a large Traditional IRA, your heirs may be forced to take large taxable distributions during their peak earning years — often at 32%, 35%, or 37% federal rates, on big IRA or 401(k) balances.

Without careful planning, your tax deferral becomes their tax problem. Teach them the value of taking that money out gradually over ten years, rather than waiting and taking it all at once. 

When you enter retirement with a very large IRA balance and no drawdown strategy, you are not entering retirement wealthy — you are entering retirement leveraged to the IRS.

Because RMDs give you no choice about when you can take income out of a gold IRA or any other traditional IRA,  unmanaged IRA growth ends up compressing decades of deferred taxation into retirement years, where the income could trigger multiple unwelcome tax consequences. 

That is the retirement income tax trap.

Here’s how to avoid it: 

It’s better to pay income tax at a low rate now than at a higher rate in retirement, when your RMDs cause you to pay more taxes on Social Security Benefits, higher Medicare premiums, and higher taxes on capital gains. 

Gold can protect you from inflation.

Smart tax planning protects you from the IRS.

Have a great week, and thank you for reading Wealth Money Catalyst! Share this article with any friends who might benefit. And let us know what you’d like to read about!


—

John E.
Wealth Money Catalyst

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