Gold has been an effective hedge against inflation and financial instability for centuries. The precious metal is also valuable for retirement planning because it provides tax benefits when investing in a gold IRA.

It’s not unheard of for people to have several different types of IRAs, perhaps one from another company with better investment options or even multiple Roth IRAs. When you’re ready to open a Gold IRA, here’s what you need to know about eligibility, contribution limits, and other requirements.

A gold IRA refers to an Individual Retirement Account focused on investing primarily in Gold. There are different types of gold IRAs available for investors today. However, not all are created equal. Let’s take a closer look at the pros and cons of investing in a Gold IRA—and what you should look out for before making your final decision.

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The first step to opening a Gold IRA is determining whether or not you are eligible. The requirements to open a Gold IRA are the same as those for any other type of IRA, with two exceptions.

The first difference is that investors must be at least 18 years old to open a Gold IRA and have earned income to contribute. This means you cannot open an account for your child or minor and add them as a beneficiary.

The second difference is that the maximum contribution limit for an individual is $6,000 instead of $5,500 for other types of IRAs. However, the amount you can contribute does depend on your tax status and income level. For example, if you are not eligible to participate in an employer-sponsored retirement plan such as a 401(k), you may be able to contribute more than $6,000 per year. If you earn more than $117,000 per year as an individual or more than $185,000 per year as a married couple filing jointly (in 2018), you will be subject to higher contribution limits based on your adjusted gross income (AGI). For example, suppose your AGI exceeds $133,000 per year (single) or $196,000 per year (married filing jointly). In that case, the contributions caps increase by $1 for every dollar over this limit until the maximum allowed at age 70½ ($3,400 in 2018). Finally, if you are over 50 years old when starting the account, you can contribute an additional $1,000 per year.

If you are eligible to contribute to a Roth IRA and would like to do so, you should be aware of some differences between traditional and Roth IRAs. First, the contribution limit is significantly lower than the limit for a traditional IRA. The maximum contribution is $5,500 per year or $6,500 if you are over 50 years old when starting your account. However, contributions to a Roth IRA are made with after-tax dollars instead of pre-tax dollars as with a traditional IRA. This means that your money grows tax-free and will not be taxed upon withdrawal in retirement, provided certain conditions are met. You can find out more about these conditions here.

The third difference is how withdrawals from these accounts work at retirement age. Withdrawals from a traditional IRA are not subject to income tax until you retire; however, escapes from a Roth IRA are subject to income tax and 10% penalty tax if certain conditions aren’t met (such as withdrawing more than what has been contributed). The fourth difference is that there is no requirement for minimum distributions (RMDs) upon reaching age 70½; therefore, you have the option of leaving your money invested in the account until the death. If RMDs apply and distributions must begin at age 70½, they can be made in equal installments over five years or in the form of one lump sum payment – whichever is more beneficial to you.

The final difference is the tax treatment of contributions. Contributions to a traditional IRA are made with pre-tax dollars and, therefore, can be deducted from your gross income in the year they are contributed. Contributions to a Roth IRA are made with after-tax dollars; therefore, no deduction is allowed.

The most significant advantage of a Roth IRA is that withdrawals at retirement age will be completely tax-free. The most crucial disadvantage is that you must pay taxes on your contributions upfront; however, if your marginal tax rate at retirement age is lower than when you were contributing, this would be an advantage. The most significant advantage of a traditional IRA is that you get an up-front tax deduction for your contribution; however, if your marginal tax rate at retirement age is higher than it was during the time you were contributing, then this would be a disadvantage for you.

As you can see, there are several differences between Roth IRAs and traditional IRAs. The most crucial difference is in the timing of taxes. With a traditional IRA, your contributions are tax-deductible, but you will pay taxes on withdrawals at retirement. With a Roth IRA, your contributions are not tax-deductible, but you will pay no taxes on withdrawals at retirement.