SEP Gold IRA 101: Everything You Need To Know

When considering investment options for your retirement, the choices can feel overwhelming. Many retirement accounts exist, offering varying advantages, and you can fund these accounts with numerous assets beyond basic cash if you want to amplify your retirement savings. A SEP gold IRA is an excellent choice for many freelancers, small business owners, and contractors (and their employees) seeking a way to protect their wealth so they can enjoy a stress-free retirement. 

At Oxford Gold Group, we specialize in gold-funded individual retirement accounts. Below, our experts share everything you need to know about a Simplified Employee Pension (SEP) gold IRA, including how it works, how it compares to other retirement accounts, advantages and risks, how to contribute, considerations, and more. 

What Is a SEP Gold IRA?

A Simplified Employee Pension (SEP) gold IRA is a self-directed Individual Retirement Account (IRA) funded by eligible gold assets. The Internal Revenue Service (IRS) designed SEP IRAs for self-employed individuals and their employees. You can use your SEP IRA to invest in physical precious metals, artwork, real estate, non-tangible assets, and more. 

SEP gold IRAs are excellent for individuals with fluctuating levels of income who may be in a lower tax bracket upon retirement or anyone hoping to max out their contributions. Unlike other IRAs with relatively low maximum contribution requirements, SEP IRAs allow you to contribute up to 25% of your annual income, or a maximum of $66,000 per year. 

How Do SEP Gold IRAs Work? 

woman thinking about sep ira

Gold SEP IRAs work by opening an individual retirement account and funding it with your preferred gold asset type, which we’ll cover below. You can open accounts that work as traditional or Roth SEP IRAs, depending on when you wish to pay taxes on your wealth. The tax rules and withdrawal process for each are as follows:

  • Traditional SEP IRA: Traditional IRAs allow you to contribute funds without paying taxes, which means you’ll have to assume the taxes upon withdrawal. Your contributions may be tax deductible. If you wish to withdraw early, the assets will join your income tax and you’ll have to pay a penalty. 
  • Roth SEP IRA: When you create a Roth IRA, you pay taxes at each time of contribution, allowing you to withdraw tax-free. Early withdrawals will still include penalties. The IRS only recently began introducing the Roth option for SEP IRAs in 2022 with the SECURE Act 2.0

Gold IRAs follow the same rules, though you contribute gold assets to your IRA rather than U.S. dollars, which may include physical gold coins, gold ETFs, mutual funds, etc. Typically, you can fund your account with cash, and the company you choose to control your IRA will help you invest the cash in your chosen asset. Upon withdrawal, you can sell the assets for cash to fund your retirement. 

Comparing Types of IRA Accounts

As a small business owner or freelancer, you have numerous retirement savings options. If you want to open a retirement account funded by gold, SEP gold IRAs aren’t your only option, though they do offer a few advantages over the other popular account types. Everyone has different financial goals, so it’s important to consider your personal objectives when weighing the pros and cons of each account type. 

Consider the following retirement accounts that you may also fund with gold:

  • SIMPLE IRAs: A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows the employer and employee to contribute to the fund, while SEPs only allow the employer to contribute. If you’re the sole account you’re concerned with (the business owner and only employee), a SIMPLE IRA may not make sense, though if you have a decent size team, this option may work better. SIMPLE IRAs have a lower contribution limit of $15,500
  • Roth and Traditional IRAs: Roth and Traditional IRAs are the classic retirement account options anyone can contribute to, including non-employed individuals, spouses, etc. Each plan has a significantly lower contribution limit of $6,500 (higher if you’re older than 50) because they work best for individuals with consistent income flows. 
  • 401(k)s: 401(k)s are employer-sponsored plans that allow employees to contribute up to $22,500 per year, with their employers matching funds. You can contribute pre-taxed or untaxed funds to 401(k)s, depending on your account type preference, though standard 401(k)s may not allow gold bullion contributions. Self-employed individuals can open a Solo 401(k), which has a higher contribution limit of $66,000, similar to a SEP IRA, and allows all forms of approved gold. 

What Are the Advantages of a SEP Gold IRA? 

man celebrating success in the mountains

SEP gold IRAs come with numerous advantages. Investing in any retirement account allows you to reap benefits, though investing with gold can improve your rewards. 

Investment Control

SEP IRAs offer ideal investment flexibility over many other types of retirement accounts. Depending on your risk preferences, investment knowledge, market strengths, and financial goals, you can invest in numerous asset classes. You may invest in various physical gold assets, non-tangible stocks, and more in the gold sector alone. 

With this level of flexibility, you gain more control over how your asset performs. You can monitor the market and adjust accordingly. 

Tax Benefits

A SEP gold IRA offers ideal tax advantages with different ways to benefit. You can pay taxes when you contribute, allowing you to withdraw your assets tax-free, even if they’re worth more. Or, you can avoid paying taxes up front, which will require you to assume the tax upon withdrawal, though it will still be advantageous. 

You may also be able to write off your contributions as deductions when you file your tax return, depending on the assets you contribute and how you file your taxes.

Diversification Benefits

Portfolio diversification is important for many investors, as it protects your wealth if one of your investments fails. A SEP gold IRA is an excellent way to diversify your portfolio with a stable, appreciating asset class that can act as a secure backbone to your other, riskier investment strategies. When you retire, you can rely on this wealth to fund your future. 

Inflation Protection

Gold is a tried and trusted inflation hedge. When the U.S. dollar loses value, investors, central banks, and large organizations spike demand for gold, thus increasing its price, allowing it to perform well while cash plummets. People want to protect their purchasing power during periods of inflation, so they seek stable assets with appreciating values, like gold. 

For example, the Great Recession occurred from December 2007 to June 2009. In that period, gold prices increased from $795.78 per ounce to $951.70 per ounce

Strength During Economic Uncertainty

When inflation rates soar and other asset classes fail, traders often choose gold, as it retains its value from the increased demand during economic uncertainty. A perfect example of this occurred in early March 2023. 

On March 10, a major U.S. bank, SVB Financial, failed, causing ripple effects throughout the U.S. market. Over the next six weeks, gold prices increased from $1,815.26 per ounce to $2,039.83 per ounce. 

Potential for Higher Returns

SEP IRAs offer higher return potentials than many other retirement accounts because of the higher contribution limits, allowing you to increase the amount of wealth building in your investment account, especially if you contribute untaxed assets. Gold also provides a higher potential for returns than other assets, like fiat money, because of its ability to gain value during periods of inflation. For example, if you contributed $1,000 in cash now that would be worth only $800 in 30 years due to inflation, that $1,000 in gold could be worth $1,300. 

Are There Potential Risks of Investing in a SEP Gold IRA? 

stack of one hundred dollar bills

Like all investments, SEP gold IRAs still come with risks that you should consider before opening your account:

  • Limited liquidity: Gold will always be more challenging to buy, sell, and trade than basic fiat money, which will automatically work in your bank account. 
  • Reliance on market conditions: Gold prices fluctuate with the market. For example, prices often rally during poor market conditions, though performance levels may dip with high interest rates. You must prepare for volatility.
  • High fees and expenses: SEP gold IRAs typically require additional storage fees, insurance costs, custodian expenses, and more, as you must pay to secure your physical gold investment in an IRS-approved vaulting facility.
  • No catch-up contributions: Traditional and Roth IRAs offer catch-up contributions if you open the account after 50 years old, though SEP IRAs do not. Luckily, SEP IRAs have much higher contribution limitations, allowing you to quickly catch up, if necessary.
  • Employee contributions: SEP IRAs only allow the employer to contribute, so if you have employees beyond yourself, you must contribute to their accounts the same amount as you do to your own. 

Speak with your financial advisor about gold investment advantages and risks concerning your personal goals and finances.

What Forms of Gold Are Allowed in SEP Gold IRAs?

You can contribute the following forms of gold to your SEP gold IRA:

  • Gold stocks or equities
  • Shares of mutual funds
  • Gold exchange-traded funds (ETFs)
  • IRS-approved gold bullion

IRS-approved gold bullion must meet certain purity standards and come from specific mints. A few popular IRS-approved gold coins you can contribute to your SEP gold IRA include the following:

SEP Gold IRA Rules and Regulations

gavel and legal documents in one table

For your SEP gold IRA to meet IRS requirements, you must adhere to various rules and regulations. A few important restrictions to keep in mind include the following:

  • Contribution limits: SEP IRAs have high contribution limitations of 25% of your annual earnings or $66,000, whichever is lower. 
  • Required minimum distributions: SEP IRAs require you to begin withdrawing funds by age 72 at the latest. You can use the IRS worksheet to determine your minimum distributions based on your account. 
  • Tax implications: The IRS allows you to contribute taxed or untaxed funds to your SEP gold IRA, depending on whether you want to pay taxes upon withdrawal. Early withdrawal will include a penalty regardless. 

How To Open a SEP Gold IRA Account 

To open a SEP gold IRA, follow these steps:

  1. Select a gold IRA company of your choice (see considerations below)
  2. Open a SEP gold IRA account
  3. Roll over funds from an existing retirement account, wire money, or contribute funds
  4. Use the funds in your account to purchase gold
  5. Store the gold in an IRS-approved depository (your chosen company will walk you through this)

Things To Consider Before Choosing a Company for Your Gold Investment

The company you select for your SEP gold IRA should make the process simple and secure. Consider the following factors:

  • Selection of IRS-approved gold products
  • IRS-approved storage options
  • Vaulting insurance
  • Depository and insurance fees
  • Account setup minimums
  • Annual account fees
  • All additional expenses
  • Buyback options (will the company buy back your gold when you’re ready to withdraw?)

Oxford Gold Group: Helping You Invest in Your Future

a helping hand reaching out

With Oxford Gold Group, we make opening a SEP gold IRA a simple, seamless process. Learn more about our gold IRA options by calling Oxford Gold Group today at (833) 600-GOLD.

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