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In 1974, Traditional Individual Retirement Accounts (IRAs) were first introduced through the Employee Retirement Income Security Act (ERISA). An IRA is an investment vehicle specifically designed to accumulate funds for retirement. The savings within an IRA are not subject to taxation, until withdrawn from the retirement account.

Two simple criteria must be met for opening a traditional IRA: being under 70 ½ years old, and earning taxable income. As of 2024,  the IRS rules for annual contribution limits to a traditional IRA is $7,000 ($8,000 for those 50 years old or older), or cannot exceed “your taxable compensation for the year, if your compensation was less than this dollar limit”. 

Since 2020, there are no longer any age limits to making contributions to either a traditional IRA or Roth IRA. Similar to other types of retirement accounts, traditional IRAs have a 10% early-withdrawal penalty on the funds if you make distributions before 59 ½, with the IRS making some exceptions in extenuating circumstances. Required minimum distributions (RMDs) apply to traditional IRAs. New IRS regulations regarding withdrawals based upon the Setting Every Community Up for Retirement Enhancement (SECURE) Act outline that if an individual turned 70 years old on July 1, 2019, or later, then withdrawals from a traditional IRA are not mandatory until the individual turns 72.

A traditional IRA offers numerous investment options, however, the IRA custodian may put limitations on the sort of assets that are available. It is important to note that the IRS does not permit funds from a traditional IRA to be invested in physical assets such as precious metals bullion or real estate.

Traditional IRA Rollover Rules & Limitations

Funds from a traditional IRA can be “rolled over” or transferred into another type of retirement account within 60 days, as per IRS rules. Additionally, funds can only be rolled over once every 365 days from a specific IRA. If you already own a traditional IRA, you can easily put that money into a self-directed IRA, like a Precious Metals IRA.

Essentially there are two ways to move money from your traditional IRA into another retirement account: a rollover, or a custodian-to-custodian transfer. If you elect to take distributions in cash before retirement, funds will be subject to a 10% penalty.

The easiest method of moving funds from a Traditional IRA into a self-directed IRA like a Precious Metals IRA is via a custodian-to-custodian transfer. Simply open a self-directed IRA with a reputable, IRS-approved IRA custodian. This custodian then directly transfers the funds from the existing traditional IRA into the new IRA. Thereafter, said custodian will invest the funds as per the instructions that you have provided. With a custodian-to-custodian transfer, you never touch the funds and the money transferred is not subject to any tax penalties.

Traditional IRA vs. Other Retirement Accounts

The table below compares the various types of retirement plans:

Plan TypeSponsorshipRoth Option?Allows Precious Metals Stocks?Allows Precious Metals Bullion?Allows Other Alternative Investments
Precious Metals IRAIndividualYesYesYesYes
Traditional IRAIndividualYesYesNoNo
401(k)EmployerYesMaybeNoNo
SEP IRASelf-employed or Business ownerYesYesMaybeMaybe
Solo 401(k)Self-employedYesYesYesMaybe
Simple IRAEmployerYesYesMaybeMaybe
Money Purchase PlanEmployerNoMaybeNoNo
Profit Sharing PlanEmployerNoMaybeNoNo
457(b)Government or Non-governmental Tax-exempt EmployerYesMaybeNoNo
SARSEPEmployerNoYesMaybeMaybe
Keogh PlanSelf-Employed or Unincorporated EmployerNoMaybeNoNo
Thrift Savings Plan (TSP)Government or Armed Services EmployerYesNoNoNo
ESOPEmployerYesMaybeNoNo
AnnuityIndividualNoMaybeNoNo

“Maybe” denotes where precious metals investment options are dependent upon the retirement vehicle provider.

Traditional IRA Contribution Limits

For 2024, the Internal Revenue Agency (IRS) rules for contribution limits to traditional IRAs and Roth IRAs are that “total contributions cannot exceed $7,000 ($8,000 for individuals 50 years old or older), or cannot exceed your taxable compensation for the year, if your compensation was less than this dollar limit.”

The IRS recently changed the adjusted gross income (AGI) for traditional IRA contribution limits. These new regulations stipulate that “if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:

  • More than $123,000 but less than $143,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $77,000 but less than $87,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.”

 

Traditional IRA Calculator

A traditional IRA can prove to be an excellent retirement investment choice because it is a tax-advantaged investment vehicle. Numerous components contribute to the amount of savings you set aside for retirement. Use this Traditional IRA Calculator to determine how much you could potentially save.

 

Traditional IRA Companies

Vanguard Traditional IRA

Choosing to invest in a traditional IRA can be an excellent choice, considering that your hard-earned savings grow tax-free until distributions are made. This provides essential peace of mind as you approach retirement age. A Vanguard Traditional IRA  offers over 3,000 mutual funds with no transaction fees, in addition to commission-free exchange-traded funds (ETFs). It’s important to note that a Vanguard Traditional IRA does have a $1,000 required minimum investment for mutual funds kept within the account.

Fidelity Traditional IRA

Fidelity has consistently been one of the highest-rated multinational financial services companies in the industry. Investment options with a Fidelity Traditional IRA include over 3,500 mutual funds, stocks, bonds, and ETFs. Unlike other Traditional IRA providers, a Fidelity Traditional IRA has no required minimum investment, with the exception of mutual funds. You will also have access to a wide range of Fidelity research and investment tools with this retirement account.

Charles Schwab Traditional IRA

A Charles Schwab Traditional IRA offers thousands of mutual funds with either no or low required investment minimums, and no transaction fees. Likewise, other investment options with this company’s Traditional IRA include ETFs, stocks, bonds, and CDs. For those who opt for a Charles Schwab Traditional IRA, you will have access to a variety of retirement planning tools, not to mention personalized investment strategies and assistance from top industry professionals.

 

Traditional IRA FAQs

A traditional IRA is a tax-advantaged investment vehicle specifically designed to accumulate funds for retirement. The savings within a traditional IRA are not subject to taxation until withdrawn from the retirement account.

For 2020, the Internal Revenue Agency (IRS) rules for contribution limits to traditional IRAs and Roth IRAs are the “total contributions cannot exceed $6,000 ($7,000 for individuals 50 years old or older), or cannot exceed your taxable compensation for the year, if your compensation was less than this dollar limit”.

Although they possess several similarities, there are differences between a traditional IRA and a Roth IRA. The savings within a traditional IRA are not subject to taxation until withdrawn from the retirement account. Conversely, Roth IRA is funded with after-tax dollars and permits tax-free withdrawals.

With traditional IRAs based upon the Setting Every Community Up for Retirement Enhancement (SECURE) Act, if an individual turned 70 years old on July 1, 2019, or later, then withdrawals from a traditional IRA are not mandatory until the individual turns 72.

The IRS does not require withdrawals from a Roth IRA until the account owner has died.

This is completely dependent on your preferences. You may choose either a traditional IRA or a Roth IRA depending on your retirement goals.

It is a simple process to convert a traditional IRA to a Roth IRA. This process is called a Roth IRA rollover.

First, put money into your traditional IRA account. You then must pay taxes on your traditional IRA contributions, as contributions to a Roth IRA are made with after-tax dollars. Finally, open a Roth IRA either with your existing IRA provider or another IRA company.

As per the 2020 IRS rules, a fully deductible contribution to a traditional IRA can be made by individuals (or spouses) who do not have a retirement plan with their employer, or make $196,000 or less.

The IRS has specific rules on how a traditional IRA is taxed. Distributions (or withdrawals) will be taxed from a traditional IRA.

Additionally, if you are under 59 ½ and make a withdrawal from a traditional IRA, you will face a 10% early-withdrawal tax, unless you qualify for an exception on taxation for early withdrawal.

The main difference is that a traditional IRA is an individual retirement vehicle that you can set up on your own. Conversely, a 401(k) is categorized as a “defined contribution plan”, and is offered by employers. Employees fund their respective accounts with paycheck deductions prior to taxation. Additionally, with some 401(k) plans, the employer will make proportionally matched contributions to the account based on elective deferrals of the employees.

There are numerous investment options offered by a traditional IRA. However, it is important to understand that you can be limited by both IRS regulations and your respective IRA custodian. Below are the types of investments available to you with a traditional IRA:

• Mutual funds
• Exchange-Traded Funds (ETFs)
• stocks
• bonds
• Options
• Certificates of Deposit (CDs)
• Money Market Funds

It is crucial to note that as per IRS rules, a traditional IRA cannot be used to invest in physical gold bullion (or any other approved precious metal). The easiest method to invest in gold with a traditional IRA is to buy a mutual fund that includes mining company stocks, or invest outright in the stocks of gold mining companies. This investment strategy is known as purchasing “paper gold.” Mining ETFs and gold ETFs are also available, which provide indirect exposure to the precious metal.

Investing in precious metals such as gold is an excellent hedge to protect your investment portfolio against economic uncertainties and inflation. A diversification strategy that includes gold (or other precious metals) not only protects your portfolio against market turmoil, but gold also provides significant growth potential. A simple method for diversification is to open a self-directed IRA.

The Internal Revenue Agency (IRS) has stringent regulations on what types of gold and silver are permitted in an IRA. Essentially, the criteria include the purity levels of the gold or silver, and where it was minted. It is crucial to understand that only specific bullion coins and bars which meet IRA-approved purity levels are permitted in this type of retirement vehicle. Some examples of bullion coins that are approved by the IRS for investing in an IRA include American Eagles, Canadian Maple Leafs, and Austrian Philharmonic.

It is imperative to understand that the IRS does NOT permit things like collectible coins or numismatics as an IRA account. Any reputable IRA company will only recommend IRA-approved gold and silver bullion coins and bars. Be wary of any Gold IRA company that attempts to push collectible coins or numismatics as an investment option for an IRA - their intentions will be dubious.

A Gold IRA company is a firm that acts as a custodian for the entirety of the process for setting up Gold IRAs (in addition to other Precious Metals IRAs). The process entails setting up the account, an IRA rollover or custodian-to-custodian transfer, purchasing IRA-approved precious metals, and storing precious metals in an accredited IRS-approved depository. Usually, Gold IRA companies have established relationships with traditional IRA custodians, IRS-approved accredited depositories, and precious metal dealers, which makes the process seamless for clients.

It is crucial to understand that under federal law if you open a self-directed IRA (including a Precious Metals IRA), you must have a custodian.

This is solely dependent on your personal preferences. What Gold IRA company you choose is contingent on what components are most important to you, whether it is storage options, ratings, or client services, amongst other factors. Once you have decided on your personal preferences, select numerous companies, then contact them to receive more information pertaining to both the respective firm and products offered.

Sometimes any movement of money from one retirement plan to another is often referred to as a “rollover”. However, the IRS has specific definitions for a rollover and a transfer. As per the IRS definition, a rollover occurs when the funds being moved are paid to you directly, and you then deposit the money into the other retirement vehicle.

The IRS has strict regulations and rules pertaining to an IRA rollover. The guidelines outlined by the IRS for an IRA rollover include having 60 days to deposit the money you have received, in the custodian of your choice. If you are under 59 ½, failing to do so within the 60-day timeframe from initially receiving the funds, will result in a 10% early-withdrawal penalty tax being levied on said funds.

If you receive distributions from a retirement plan and you rollover into another retirement plan, as per the IRS rules there will be no taxation on those funds. In addition, funds can only be rolled over once in a 365-day period from a specific IRA.

In a trustee-to-trustee transfer (as the IRS has deemed it) you request that the original IRA custodian transfers the funds to the new IRA custodian. With a trustee-to-trustee transfer, you never touch the funds and the money transferred is not subject to taxation.

preferences, shortlist numerous companies, then contact them to receive more information pertaining to both the respective company and products offered.