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Gold IRA Statistics

Introduction

Are you thinking of investing in a precious metals IRA? You are not alone. As many people are seeing the advantages of Gold IRA accounts and either investing in them or rolling over funds from other retirement accounts into their Gold IRA.

Gold prices have surged in the last couple of years because people are beginning to turn in mass to this investment vehicle. However, you must understand the intricacies, facts, and statistics about gold IRAs before you take the move.

Opening a gold IRA is a wise investment decision if you want to diversify your retirement portfolio effectively. According to recent statistics, more Americans are beginning to hold gold and other precious metals in their IRAs in an attempt to hedge funds against inflation and volatility.

More recent surveys show that the number of people owning gold has grown steadily over the last few years. With this information in mind, it is vital to properly understand the basics of gold IRAs and their tax benefits. You must also know the risks of opening a gold IRA and the benefits of diversifying your retirement portfolio using precious metals.

When you properly understand these facts, you can decide whether investing in a gold IRA is best for you.

Y need to be aware of how well gold performs, its comparison to other investment assets, and gold IRA returns against regular IRAs.

Now, let's look at these concepts and the statistics generally.

401k gold free gold

A Brief Definition of Terms

One of the first things we will do in this article is to understand some of the terms associated with IRAs.

Individual Retirement Account (IRA)

IRAs are self-managed portfolios that allow individuals to select parts of their income that they want to send into the portfolios for investment purposes. These individuals can only withdraw these funds at maturity. Usually, investment withdrawals are only eligible when these investors reach 59 ½ years old. If you decide to withdraw before the eligible age, you will attract an extra 10% tax withdrawal penalty.

Traditional IRA

Contributions made to this type of IRA may be partially or fully tax-deductible based on your income and filing status. However, the amounts in your IRA account (earnings and gains) will not be taxed until you take distributions or withdrawals from your IRA.

ROTH IRA

Contributions made to a Roth IRA are not tax-deductible. However, eligible withdrawals are tax-free.

Bidens attack on gold IRa TAx rules

Roth vs Traditional IRA

As regards gold IRAs, Traditional vs Roth IRAs is a critical debate. It is a detail that every serious-minded investor must pay attention to. As an investor who wants to open a traditional gold IRA, you can only fund it with pre-tax dollars. However, for a Roth gold IRA, you can only invest in it with post-tax dollars. In other words, your money in a Roth IRA will grow tax-free, and you will not need to pay taxes when taking eligible retirement distributions.

You will also get similar tax breaks to a Roth or traditional IRA. Traditional and Roth IRAs allow you to leverage the potential of gold's value appreciation with time and the benefits of using gold to diversify your investment portfolio.

Nevertheless, it would be best to note the risks associated with gold IRA investments or investing. Some of these include the probable increase in the gold IRA fees and price volatility.

Gold IRA

A precious metals IRA is a Self Directed Individual Retirement Account (SDIRA) that permits interested individuals to hold physical precious metals like gold coins and gold bullion in their retirement portfolio. However, owning precious metals in a gold IRA must be in compliance with IRS rules.

There are three basic types of gold IRAs and each has its uniqueness.

  • Traditional gold IRA
  • Roth gold IRA
  • SEP (Simple Employed Pension) gold IRA

Any of these gold IRAs is primarily an IRS-approved account that works like regular IRAs. However, the gold IRA account can only hold precious metals approved by the IRS. These metals must have certain purity levels to be IRA eligible.

For instance, IRA-eligible gold products must have a purity of 99.5%. Under this IRS rule, the American Gold Eagle coin is the only excused gold product. A gold IRA as a retirement account is used to hedge your funds against inflation while offering tax advantages. Gold IRA investments can give investors extra diversification benefits and also stabilize their retirement portfolios in the long term.

 

Self-Directed IRA

A self-directed IRA allows investors to invest directly in collectibles like fine wine, antiques, arts, and precious metals. However, when investors buy most of these investments, the IRS counts them as distributions. As such, they become subject to the 10% tax penalty for taking distributions before their eligible withdrawal year (59.5 years old).

The only way to evade this 10% tax penalty for investing in a self-directed IRA is to open a gold IRA through an IRS-certified custodian and buy precious metal investments through your custodian. In this case, the IRS treats your investments like regular bonds or stocks. Hence, your gold investments will be subjected to similar IRS taxation guidelines for Roth and Traditional IRAs.

How Many IRA Assets are in the United States?

gold ira stats
tax compliant Gold IRA

Fig 1. By investment type, the total value of individual retirement accounts (IRA) assets in the United States from 1995 to 2021.

Source: Statista 2023

The image above shows the total value of Individual Retirement Account assets in the U.S. From the data in the picture, we deduced the following;

  • The total IRA values have increased over the years. In 2021, United States citizens held $14 trillion in IRA retirement assets.
  • According to the data in the image, "other assets" is the most popular type. It just shows that many people invest in other vehicles that are not mutual funds. Hence, "Other Assets" is worth $5.6 trillion, making it the most significant single amount.
  • The second largest investment is in mutual funds. The total mutual fund assets are worth $5.5 trillion. It shows that many investors keep huge amounts of money in mutual funds.

How Many People Own an IRA?

We have seen the raw data of IRA assets held in the United States. Now, let us look at the number of people that own IRAs.

Fig 2. Total number and percentage of households that own IRAs in 2021.

Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey and U.S. Census Bureau

The most recent data from the Investment Company Institute shows that about 36.7% (47.7 million) of United States households own at least one IRA type. The most popular type of IRA in the United States is the Traditional IRA, and 28.2% (36.6 million) of the households in the U.S. own it. The second most popular IRA type is the Roth IRA, owned by 21.0% (27.3 million) of United States households.

Hence, 63.9 million households own either a Roth or Traditional IRA. The remaining 6.6% (8.6 million) of U.S. households own other IRA types like SIMPLE, SEP, or SAR-SEP IRAs.

These figures are not 2023 figures, but they are recent figures. These numbers will keep increasing this year because more people are beginning to turn to IRA investments. However, the numbers show that there is still much work to do to convince the general public that retirement accounts like Roth and Traditional IRAs offer tremendous benefits.

How Many People Make IRA Contributions

According to the most recent data from Investment Company Institute, many United States households were qualified to make IRA contributions. Still, only a few contributed to their Roth or Traditional IRAs in the 2020 tax year.

37% of U.S. households owning Roth or Traditional IRAs in mid-2021 contributed to their IRAs in the 2020 tax year. It means that 63% did not contribute, perhaps these are some of the reasons for this;

  • Lack of available cash to make an additional contribution.
  • Lack of knowledge about the ability to roll over parts of 401k.
  • Preference towards saving money in the bank for easy withdrawals anytime.

The households that own traditional IRAs and did not make contributions tended to have 60% rollovers or 73% Defined Contributions (D.C.) plan accounts. 44% of the households that own traditional IRAs without contributions were retired.

IRA Ownership Tends to Go Up with Age and Income

Fig 3. Percentage of United States households within each age group that own IRAs in 2021

Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey

The truth is that not everybody has the spare cash to invest in an IRA. That is the reason the statistics in the figure above should interest you. Surprisingly, in 2021, the number of people younger than 35 who own IRAs was just 31% of the entire IRA holders. It is surprising because the age bracket is arguably the best time to open an IRA, even if you will not make huge contributions to it yet.

The age brackets with the highest percentages are 55 to 64 (43%) and 45 to 54 (39%). Although these figures are higher, they are still not high enough comparing the number of households in the United States.

Furthermore, we see from the data in the image above that the percentage of U.S. households that own IRAs increased with age. However, there is a significant decline in the 65 and above age brackets. Mainly because people within this age bracket would have taken their IRA distributions as they are in their retirement years.

American Gold Ownership Survey Results

According to a survey conducted by Gold IRA Guide in 2020, 10.8% and 11.6% of Americans own gold and silver, respectively. In 2022, there was an increase in the percentage of gold owners to 12%. This survey, however, did not define whether the gold was held in an IRA or physically. But a gold IRA can allow investors to own physical gold and other precious metals in their accounts.

In addition, when you know the facts and figures surrounding gold ownership, you will make a better-informed decision about whether you should invest in gold, silver, platinum, and palladium for your retirement or not.

It isn't easy to track gold-holding data and how much gold is held in IRA accounts. However, here are some general figures for context.

Data on who holds gold and how much it is in IRA accounts can be challenging to hunt down. Here are some general numbers for context.

  • SDIRA only maintains 3 to 5% of the total retirement accounts in the United States.
  • This figure encapsulates all types of SDIRA, not just gold IRAs.
  • Gold owners are just 12% of the entire American population.

From what we deduced while studying this data, we concluded that gold IRA ownership does not represent the 12% that was reported.

Getting the demographic data of investors who invest in gold IRAs is challenging because the records are private. Hence, the survey we refer to here does not report on people who own Traditional or Roth gold IRAs.

More direct research showed the following results;

  • The percentage of males between 45 to 54 years owning gold and silver is 14.3%.
  • The percentage of males between 35 to 54 years owning only gold is 5.1%.
  • The percentage of females between 35 to 44 years owning only silver is 7.8%.
  • The percentage of males between 35 to 44 years owning only silver is 1.8%.

If gold and silver IRA investments follow these trends, then its significant investors are males between 35 and 54 years old.

Average Annual Returns of Gold

average gold ira return statistics

Fig 4. The average annual return of gold and other assets worldwide from 1971 to 2022

Source: Statista

It is no longer a secret that precious metals, especially gold, are becoming popular investment vehicles for Americans. The figure above shows that gold's average annual return (yearly profits) between January 1971 and December 2022 is 7.78%.

In addition, the figure shows that gold performed better than most of the assets in the investment vehicle classes.

The data again shows that gold IRA investments are an excellent way of diversifying your retirement portfolio and hedging your funds against volatility and inflation while getting significant returns.

Benefits of Gold IRAs

We will examine the benefits of Roth or Traditional gold IRAs by comparing them with stocks, the United States Dollars and Traditional IRAs. Then, we will look at its tax implications.

Gold versus Stocks

50 year gold vs stocks statistical performance

Fig 5. Gold Outperformed S&P 500 in the Last 50 Years

Source: Optuma

In the chart above, at the beginning of 1971, the CPI, S&P 500, and gold values were indexed to 1. Without dividends, that is the price data for the S&P 500. Looking at the chart, you will see that gold has performed better.

The blue line shows that both investments have skillfully beat inflation. The slight inflation increase is probably because of the measurement issues on the Consumer Price Index (CPI).

The truth is that at different times, stocks performed better than gold. However, a dramatic turn occurred when Nixon took the U.S. off the gold standard. Before then, gold had a fixed price.

Between 1934 and 1971, gold was valued at $35 per ounce in the United States. Hence, because $1 was worth 0.03 gold ounces, the movement range of gold’s price in London was narrow.

For example, the price of gold in London ranged from $34.85 to $35.17. Immediately after gold moved out of that band, Central Banks got in because it allowed them to profit as the United States gold window opened. Nixon was responsible for the move.

Right from 1971, after Nixon’s action, gold price moved from $35 per ounce to almost $2,000 in 50 years. It means the gold investments gave long-term investors a 7.78% average annual profit. Within a similar timeframe, the average yearly gain S&P 500 gave long-term investors was 6.32%. Gold has had a 50-year returns (profits) of more than 4,000% gross costs since December 1971.

These data show that gold could be your best investment choice over stocks for the next 50 years.

Gold vs the U. S Dollar

Fig 6. Gold vs. the United States Dollars

Source: Federal Reserve Bank of St. Louis

One of the benefits of gold is that has outperformed the U.S. Dollars in the last 50 years. The constant increase in the inflation rates over the years has led to a continuous decline in the worth or value of the U.S. Dollars.

Meanwhile, over the same timeframe, gold’s price has increased, even in the midst of the increasing inflation rates. Hence, gold has become the ideal investment for investors who want to hedge their funds against inflation.

The chart above shows that in the early 1970s, USD and gold spiked when Nixon freed gold and closed the window. However, if you observe, you will find out that the most prominent spikes did not happen simultaneously. You will also see an inverse relationship there.

After some years, gold began to rise faster than the U.S. Dollar. The gold trend line accelerated upwards while that of the U.S. Dollar declined. If these curves continue, gold will keep hitting new highs in a few years, and USD will fall hard.

Hence, the chart shows that gold has outperformed the U.S. Dollar by almost two to one over the years.

Gold IRA Performance vs Traditional IRA

Every investment vehicle will bring a unique return based on its non-comparable market forces. If you made a $1,000 gold investment and another $1,000 investment in Dow Jones, you would see the following:

  • $4,419, i.e., a profit of $3,419 on your gold investment.
  • Stock gains worth $11,878.

However, if you have kept that $1,000 in savings rather than investing in a gold IRA or stocks, the money would have lost twice its purchasing power today.

Gold IRA Tax Implications

You must know the tax implications of gold investments because they are taxed differently, whether you hold them as collectibles or in a precious metals IRA account. According to recent research by the Journal of Accounting, here are the data and the tax rates they reflect at the time of the study.

For someone who earns $60,000, the annual returns on investments worth $10,000 after paying fees to brokers and taxes would be;

  • Traditional IRA (8.94%).
  • Roth IRA (6.88%)
  • Physical investments (5.85%)

For someone who earns $398,500, the taxes will be higher, and the annual returns would be;

  • Traditional IRA (7.94%)
  • Roth IRA (5.68%)
  • Physical investment (3.71%)

Considering tax implications, these returns show that earners in the lower tax brackets (25% at the investment time and 15% at retirement) have a smaller advantage than investors with more money.

Gold IRA Diversification Benefits

Gold IRA allows investors to properly and effectively diversify their retirement portfolios. Diversifying your investment portfolio using gold will prevent it from depending heavily on bonds and stocks. In addition, portfolio diversification using gold IRAs will help you reduce the effect of volatility on your portfolio.

Throughout history, gold has helped investors hedge their funds against geopolitical issues and inflation. This benefit has made it an appealing investment to add to retirement portfolios.

One World Gold Council survey showed that over 50% of the people who own gold mentioned that their primary reason for owning gold is portfolio diversification. A gold IRA has long-term growth potential and tax advantages, making it a very effective retirement portfolio diversification method.

Risks Involved with Gold IRA Investments

There are some risks associated with gold IRA investments. Like every other investment vehicle, there will always be fluctuations in the market, which can lead to a decline in value. In addition, gold IRA investment may not be as liquid as other investments. Hence, it may take some time to convert them into cash.

You must also pay taxes when selling off your gold IRA investments. Since gold IRA investments are long-term, they can accrue significant tax liabilities.

Finally, remember that gold IRA contribution limits are similar to other IRAs. Hence, it would be best to research and properly understand the risk involved before investing in a gold IRA.

Conclusion

At Bear Lake Gold, we believe that a gold IRA is very effective for your retirement portfolio diversification and hedging your funds from inflation. Currently, gold prices are at their highs historically, making it the best time to invest in gold because it will keep hitting new highs.

Gold IRAs allow investors to hold precious metals (gold, silver, platinum, and palladium) in a retirement account with tax advantages.

In addition, throughout history, gold has performed better than other investment vehicles. It has given investors consistently steady returns. However, you must adequately understand gold IRA tax implications before investing. You can seek the help of a financial advisor where needed.

Suppose you have gone through this document and have decided to diversify your retirement portfolio by investing in a gold IRA. In that case, we recommend you do it through a reputable gold IRA company.

After evaluating various gold and silver IRA companies in the gold investment industry, we found Augusta Precious Metals, Goldco, and American Hartford Gold to be the best. These companies are the best in the United States according to their various ratings on trusted third-party rating sites like BBB (Better Business Bureau), BCA (Business Consumer Alliance), Trustpilot, and Trustlink. They have 5-star ratings on these platforms because customers say positive things about them.

They also offer amazing first-time bonuses to their customers. For instance, when you set up your gold IRA through Goldco, you will get free silver worth $10,000 if you qualify for a rollover. We found other unique features about these companies, and we have put them in their various review documents for your download free of charge.

Just click the relevant links in the next section, input your details, and their review guides will be yours in no time.

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