Withdraw Roth IRA Contributions for Physical Gold

[stuper1]

Our PP is spread across my 401k, my Roth IRA, my wife's Roth IRA, and our non-retirement accounts.  About 85% is in the retirement accounts.  Currently, we have less than 1% in physical gold, and the remainder is in IAU/GTU/PHYS in the 401k brokerage window and Roth IRAs.  We could take out some or all of our Roth contributions and buy more physical gold.  We're trying to decide whether that's a good idea.  Any thoughts?

[rocketdog]

Our PP is spread across my 401k, my Roth IRA, my wife's Roth IRA, and our non-retirement accounts.  About 85% is in the retirement accounts.  Currently, we have less than 1% in physical gold, and the remainder is in IAU/GTU/PHYS in the 401k brokerage window and Roth IRAs.  We could take out some or all of our Roth contributions and buy more physical gold.  We're trying to decide whether that's a good idea.  Any thoughts?

If it's physical gold you seek, why not just take the $ from your non-retirement accounts and leave the retirement accounts alone? 

[stuper1]

Good question.  I should have covered that.  We can't buy any more gold with our non-retirement money, because that's our emergency fund plus some savings toward some future big purchases.

[Libertarian666]

Our PP is spread across my 401k, my Roth IRA, my wife's Roth IRA, and our non-retirement accounts.  About 85% is in the retirement accounts.  Currently, we have less than 1% in physical gold, and the remainder is in IAU/GTU/PHYS in the 401k brokerage window and Roth IRAs.  We could take out some or all of our Roth contributions and buy more physical gold.  We're trying to decide whether that's a good idea.  Any thoughts?

I think it is an excellent idea.
But then I'm always in favor of people buying more physical gold. 

[stuper1]

Here's the tradeoff in my mind.  If we leave it in the Roth, it grows tax free, but it's paper gold.  If we take it out and buy physical, we have it against possible WCS, but we lose the tax benefits, which probably isn't that big a deal, because we'll probably die without ever selling it and just leave it to our kids (and I doubt our estate will be large enough to pay inheritance taxes).  We'd probably only go up to about 5% physical gold at this point, and no more than maybe 15% at some point in the future, so we'll always have paper gold for rebalancing.

[craigr]

I would not withdraw from any retirement account, and pay penalties, taxes, etc. to buy physical gold. I would simply use the paper gold for now and build up your physical supply if you want by contributing less to the IRA, etc. going forward if that applies to you.

[stuper1]

I wouldn't even think of it if there were any penalties or taxes to be paid, but withdrawing contributions from a Roth IRA doesn't trigger any of that.

But once it's out, it's out.  There's no putting it back in if we change our minds and decide we'd rather have stocks or bonds instead of gold.

[rocketdog]

I personally wouldn't short-fund my retirement accounts just to accumulate some extra physical gold.  Maybe buy a few different gold funds where the gold is held in various countries?  Y'know, like SGOL (Switzerland), GTU (Canada), AGOL (Singapore), IAU (U.S.), etc. 

It's not a guarantee, mind you, but neither is holding a substantial quantity of physical gold (due to the risk of theft during storage or transport, difficulty rebalancing, etc.) 

[craigr]

I wouldn't even think of it if there were any penalties or taxes to be paid, but withdrawing contributions from a Roth IRA doesn't trigger any of that.

But once it's out, it's out.  There's no putting it back in if we change our minds and decide we'd rather have stocks or bonds instead of gold.

My thinking is still the same that I'd leave it alone and just try to build up the physical if you want in some other way. The tax deferral of the IRA funds are worth preserving.

As a general across the board opinion for me: I don't think touching retirement accounts early is ever a good idea outside of some very dire emergency. I don't even think it's a good idea to use them for "loans" or buying homes, etc. I think they should be contributed to and left alone. But that's just my view.

[rocketdog]

I wouldn't even think of it if there were any penalties or taxes to be paid, but withdrawing contributions from a Roth IRA doesn't trigger any of that.

But once it's out, it's out.  There's no putting it back in if we change our minds and decide we'd rather have stocks or bonds instead of gold.

My thinking is still the same that I'd leave it alone and just try to build up the physical if you want in some other way. The tax deferral of the IRA funds are worth preserving.

As a general across the board opinion for me: I don't think touching retirement accounts early is ever a good idea outside of some very dire emergency. I don't even think it's a good idea to use them for "loans" or buying homes, etc. I think they should be contributed to and left alone. But that's just my view.

+1.  Although my wife and I did take a 401K loan a few years back to cover the downpayment on a new house, but only because our financial advisor said it was okay to do.  We paid it all back within 6 months, and the market was essentially flat the entire time, so we made out okay.  But it was a nerve-wracking 6 months until we sold our previous house. 

[systemskeptic]

It's unfortunate to lose the Roth benefit, but on the flip side, if there is a crisis in the paper Gold market, you won't receive any tax savings if your holdings are wiped out.

[systemskeptic]

My advice here would be to:

1. Sell the paper Gold in your Roth and leave it in "Cash"
2. Buy physical Gold with your current emergency fund
3. Use the Roth as your new emergency fund.

[sophie]

I second Craig's advice:  Roth space is too valuable/limited for you to be considering withdrawing for something that isn't an emergency.

If you managed to save the emergency funds in the first place, you'll be able to save enough to buy physical gold eventually.  Go ahead and buy the paper gold in the Roth.  When you start acquiring physical gold in taxable, you can sell the equivalent shares in the Roth to maintain your total gold investment.

Slightly off topic...I've been wondering about an interesting wrinkle with PPs that are spread across, say, taxable accounts and 401Ks.  If the bulk of your gold is in physical, then you bought it with after-tax money but are counting it equally with pre-tax money in the 401K.  Is that a problem???  If so, there's not a lot I would do about it, except to notice that such a PP (like mine, say) is even more gold-heavy than the 4x25 allocations would indicate. 

[whatchamacallit]

Slightly off topic...I've been wondering about an interesting wrinkle with PPs that are spread across, say, taxable accounts and 401Ks.  If the bulk of your gold is in physical, then you bought it with after-tax money but are counting it equally with pre-tax money in the 401K.  Is that a problem???  If so, there's not a lot I would do about it, except to notice that such a PP (like mine, say) is even more gold-heavy than the 4x25 allocations would indicate.

Ugh. I feel very gold heavy all of a sudden.

[smurff]

My advice here would be to:

1. Sell the paper Gold in your Roth and leave it in "Cash"
2. Buy physical Gold with your current emergency fund
3. Use the Roth as your new emergency fund.

This is a great idea.  Advisors recommend 3 to 12 months of salary/wages in an emergency fund.  You'd at most need about 1 month of that to be easily accessible, like in a savings account.  But the rest can still be liquid in a Roth IRA (SHV, etc.), where it would take a few days to get a check from whatever company is holding the Roth.

If you want to buy physical gold now, systemskeptic's advice is great.  Otherwise, I'd leave the Roth alone (as far as taking out $ to buy gold) and acquire it gradually from current earnings.

[notsheigetz]

I pondered the same question lately when I first made my decision to buy physical gold and was looking at ways to do it.

I decided against it. To me, Roth was a long-term strategy of a different nature and I decided to stick with it rather than cashing out my chips and investing in physical gold.

[portart]

The mental thing about physical gold is that you don't see it when you look at your account value in your portfolio. It's almost like you don't have it because your unlikely to sell very often like you might do with equities. I had a substantial amount of physical gold at one time but decided to pay down some debt on my mortgage but I did keep about 13 ozs. I have since balanced my accounts using SGOL which you see as part of your portfolio value but I don't know how safe the paper gold is.