The Con’s Of Having A Gold Backed IRA (continued):

The premise of holding wealth inside of a pre-tax or tax deferred investment vehicle like a gold IRA is that later on in life, when you are retired and no longer earning a large annual income, you will be in a lower tax bracket than you are now. The thinking goes something like this; if you are allowed to use a portion of your paycheck or earnings, and not pay any taxes on those earnings now, and then buy gold bars or gold bullion with these funds, you will end up with more gold bars and gold bullion since you were able to deposit more and buy more gold coins for your gold IRA because there were no taxes taken out initially and therefore you will be better off in the long-run. Of course, this premise hinges fully on the idea, yes a mere idea, that the tax rate you retire at will be less than the tax rate you currently taxed at now. Unfortunately, with our current deficits, tax and spend strategy, growing size of governmental entities, and growing interest on the National Debt, the strategy of counting on taxes to decrease over time, rather than increase over time, looks to be somewhat flawed. The truth of the matter is that we live in a world of tax brackets and inflation, and the more you make the higher you are taxed, and the less you have left over for yourself and your family, and the less you have to contribute to your gold IRA. When you put inflation into the picture, you can pretty much count on your U.S. Dollar buying less, and your U.S. Taxes going up.

An Example To Illustrate This Point

For instance, when I started working minimum wage was $3.15 an hour. Regular (yes, regular) gasoline was 69 cents (yes, cents) a gallon. Today minimum wage is the topic of much debate, and $10.00 an hour or so is the new number being kicked around. Currently gasoline is about $3.35 a gallon, and minimum wage is $7.25 an hour. A minimum wage job back then would allow you to purchase 4.56 gallons of gas for an hour’s wage. The chances of owing any Federal Income Tax at the end of the year was quite low, even with some overtime hours paid at $4.73 an hour added in. Today with minimum wage at $7.25 an hour, and gasoline at $3.35 a gallon, one hour’s worth of work will purchase 2.16 gallons of gasoline, less than half of what I could put in my tank when I was in High School. Conversely, however, even earning minimum wage and a few hours of overtime every week paid at $10.88 an hour will subject you to Federal Income Tax and probably State Income Taxes, unless you can either itemize deductions or claim dependents. With the U.S. Dollar buying less, and the tax structure wanting more, the idea of taxes going down over time seems tenuous at best.

As I stated before, gold backed IRA’s and placing gold bullion and gold coins inside of them, will work for some, but not all. If you are considering a gold backed IRA, call ITM Trading, we are here to be of service.