Precious Metals
One question people ask themselves when beginning their retirement planning is, what is an IRA, and do I need one? The more you know about what an IRA is and how it works, the better you can help plan for your retirement.
IRAs are one tool among many when it comes to planning for retirement, and they can be an important one. As much as we read about 401(k) millionaires, Americans actually hold more money today in IRA accounts than they do in 401(k) accounts.
If you’re looking to save as much money as possible for retirement, knowing more about what IRAs are and how they work could help you in your quest. Read on to learn more about IRA accounts and their benefits.
IRAs have been in existence for a little over 50 years, starting with the enactment of the Employee Retirement Income Security Act (ERISA) in 1974. They were created to give American employees not covered by workplace retirement plans additional options when it came to retirement savings.
Over the past half century IRAs have become a nearly indispensable part of Americans’ retirement planning, with Americans currently holding $16.8 trillion in IRA accounts.
One of the best known advantages of an IRA is the tax advantages it offers. Assets held in IRAs are able to accrue gains, including capital gains and dividends, tax-free while they are held in an IRA.
Compare that to assets held in a normal brokerage account, whose capital gains and dividends are taxed each tax year. The tax advantages of an IRA can help increase the size of your asset holdings versus a similar amount in a conventional brokerage account.
Taxes are only paid on IRA gains when it comes time to take a distribution. Distributions from Traditional IRAs are taxed at ordinary income tax rates, while qualified distributions from Roth IRAs are made tax-free.
IRAs work by taking contributions and using them to purchase assets such as stocks, bonds, CDs, ETFs, etc. The range of assets available to acquire with an IRA is often broader than with a 401(k), and can include alternative assets such as precious metals.
IRAs can also be a useful retirement savings vehicle for people who aren’t covered by a workplace retirement plan, which is around 56 millions Americans today.
There are numerous types of IRAs, not all of which are available to everyone. Here are some of the key types of IRAs to know about.
When you hear people talking in general about IRAs, they’re probably referring to Traditional IRAs, as these are the most common IRAs you’ll encounter.
Traditional IRAs use pre-tax dollars to acquire assets, gains accrue tax-free, and you pay taxes when assets are distributed. Some IRA contributions may also be tax-deductible, and there can be potential penalties imposed on early distributions.
Roth IRAs were created in 1997, and allow you to acquire assets with post-tax dollars. Those assets accrue gains tax-free, and qualified distributions are tax-free.
Roth IRAs also have different rules regarding distribution penalties, when you can take a distribution, and required minimum distributions (RMDs) than Traditional IRAs do.
Self-directed IRAs aren’t a third type of IRA, but rather a description of an IRA that allows you to acquire alternative or non-traditional assets such as precious metals, real estate, commodities, or other assets to which you may not have access through a normal IRA custodian.
Precious metals IRAs such as gold IRAs and silver IRAs are one example of a type of self-directed IRA.
Self-directed IRAs allow you to put yourself in control of your assets and can give you greater choice of asset selection.
A self-directed IRA can be set up either as a Traditional IRA, funded with pre-tax dollars, or as a Roth IRA, funded with post-tax dollars.
A rollover IRA again isn’t a separate type of IRA but rather describes an IRA that is funded through a rollover from a 401(k), 403(b), TSP, or similar retirement account.
IRA accounts are subject to annual contribution limits, which are $7,000 for 2025, or $8,000 for those over age 50. But rollovers from other accounts into an IRA aren’t subject to those limits.
So if you want to roll $100,000 from your 401(k) into an IRA to access a broader array of potential assets, you can do that. The IRS rollover chart provides useful information on what types of accounts can roll over funds into an IRA.
SEP IRA stands for Simplified Employee Pension IRA. It’s a type of IRA that was developed to allow self-employed individuals and small business owners to benefit from an IRA.
SEP IRAs are normally intended for sole proprietors or small business owners who have few employees, and they allow significantly greater annual contributions than regular IRAs.
For 2025 the SEP IRA contribution limit is 25% of an employee’s total compensation limit, up to $70,000, which far exceeds the normal $7,000 limit for Traditional and Roth IRAs.
SIMPLE IRA stands for Savings Incentive Match Plan for Employees IRA. It’s designed for small businesses with fewer than 100 employees to offer their employees a tax-advantaged retirement plan that’s cheaper to administer than a 401(k) plan.
Contribution limits to a SIMPLE IRA are $16,500 in 2025, or $20,000 for those age 50 or older. Additionally, some of the rollover rules for SIMPLE IRAs differ from those for other IRAs and tax-advantaged plans.
If you’re already covered by a 401(k) plan, you may wonder whether you want or need an IRA. While there’s nothing wrong with 401(k) plans, there are differences between 401(k)s and IRAs that you should keep in mind.
401(k) accounts are employer-sponsored retirement plans, which means that your access to one is dependent on your employer participating in such a plan. That may not be an issue if you work for a larger company, but many smaller companies don’t offer 401(k) plans.
About 56 million Americans don’t have access to workplace 401(k) plans, which means that IRAs may be their only way to save money for retirement in a tax-advantaged manner.
IRA accounts are open to anyone with earned income, or to the spouses of people who have earned income, so just about anyone who works for a living can start an IRA.
Contribution limits also differ significantly between 401(k) and IRA accounts.
For 2025, contribution limits to 401(k) accounts are capped at $23,500, or $30,000 for those over age 50. Because employers can also contribute to 401(k) accounts, the combined employer/employee contribution limit for 401(k) accounts is $70,000.
The IRA contribution limit, by comparison, is $7,000 for 2025, or $8,000 for those over age 50. That’s significantly lower than the 401(k) contribution limit.
With Americans being able to contribute so much more money to 401(k)s than to IRAs, how is it that Americans hold more money in IRAs than in 401(k)s?
Well, one potential reason is that annual contributions aren’t the only way to fund an IRA account. IRAs can be funded with rollovers from 401(k), 403(b), TSP, IRA, or similar retirement accounts, in many cases tax-free.
If your 401(k) plan allowed you to perform in-service rollovers, meaning that you could roll over funds from your 401(k) to an IRA while you’re still employed, then you could max out your 401(k) contributions each year and roll them over into an IRA, allowing you to build up your IRA balance since IRA rollover contributions are not subject to the annual contribution limit.
But what about the reverse? Can you roll funds from an IRA into a 401(k)?
The answer is generally yes, if the 401(k) plan allows you to do that. The IRS rollover chart demonstrates which account types are able to roll over into which other accounts.
For most people, however, there’s no incentive to do that, as IRA accounts normally offer far more asset options than 401(k) plans.
Workplace 401(k) plans normally are funded with pre-tax dollars, meaning that the money you contribute to that 401(k) doesn’t count towards your taxable income. Therefore the more money you contribute to a 401(k), the lower your current tax liability may be.
Contributions to a Traditional IRA are also made on a pre-tax basis, but they are only tax-deductible in certain circumstances, based on whether you or your spouse are covered by a retirement plan at work, as well as your income level.
Roth IRA contributions are not tax-deductible. If you have questions about whether your IRA contributions are tax-deductible, you may want to consult with a tax professional or financial advisor to determine your eligibility.
401(k) plans are generally limited to assets chosen by their plan administrator, which can limit your asset choices. Some 401(k) plans may offer more choices than others, but if your employer only offers a handful of options, you may have to look elsewhere if you want to expand your options.
IRAs generally offer more asset options, although many custodians may not offer alternative asset options such as real estate, precious metals, or private equity. For those alternative assets, you would need to find a custodian that manages those types of assets and start a self-directed IRA.
The choice of whether to start an IRA or a 401(k) is one you’ll have to make after taking into account your current situation and your future goals, as well as possibly talking to your financial advisor.
You don’t have to have a 401(k) or an IRA to save for retirement, or you could have both an IRA or 401(k), or multiples of each type of account. That choice is completely up to you.
But if you have a 401(k) or an IRA and you’re looking for alternatives to the standard array of assets, maybe it’s time to start looking into precious metals and how they can benefit you.
Many Americans have started looking toward gold as a safe haven asset to help protect themselves against growing economic uncertainty. And while you can’t own gold in a 401(k), you can own physical gold coins or gold bars in a gold IRA.
Goldco has helped thousands of Americans purchase gold for their gold IRAs, and with over $3 billion in precious metals placements and over 7,000 5-star reviews from our customers, we have worked hard to make ourselves one of the best gold companies in the country.
If you want to learn more about how you can benefit from a gold IRA, call Goldco and talk to a representative today.
This article was originally published in April 2019 and was updated in August 2025.
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DISCLAIMER: This site is general in nature and not tailored to the specific goals of any individual. Purchasing precious metals may carry risk. Some of those risks associated with precious metals include the following: prices may rise and fall, which means the value of your metals may go up or down over time and you may sell for more or less than you paid. Past performance does not guarantee future results. Goldco cannot guarantee, assure, or promise future market movement, prices, or profits. Customers should understand that all purchases have some degree of risk. Customers should make certain that they understand the correlation between risk and return. Commodities involve risk and are not suitable for all investors. There is no assurance that commodities, i.e. precious metals, will achieve their objectives. Return and principal value will fluctuate and your portfolio, when redeemed, may be worth more or less than the original cost. Even though Goldco and its representatives are precious metals specialists, we are not licensed financial advisors and do not give financial advice. Additionally, Goldco cannot provide tax or legal advice and will not advise as to the tax or legal consequences of purchasing or selling precious metals or opening a Precious Metals IRA. Individuals should consult with their investment, legal or tax professionals for such services.
