Your Guide to Gold IRAs: Find Out if They're a Smart Move for You

You may be able to use a gold IRA to invest in physical gold in a tax-advantaged fashion, but is it a good idea?

Your Guide to Gold IRAs: Find Out If They're a Smart Move for You
Updated May 13, 2024
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Investing in a diversified portfolio allows you to spread out your risk when you’re saving for retirement. Fortunately, you have a variety of options to diversify your portfolio depending on your financial goals and investment style.

You may have seen commercials advertising the ability to invest in physical gold within an Individual Retirement Account (IRA). The product these commercials are promoting is a gold IRA. But are gold IRAs a good investment option to help you diversify or are they a common retirement money mistake?

Here’s what you need to know to make the right decision about gold IRAs based on your situation.

In this article

Why people buy gold

Each person may buy gold for different reasons, yet a few common themes pop up. Many people believe gold is an essential part of how to diversify your portfolio. A diversified portfolio aims to hold some investments that may perform well while other investments perform poorly and vice versa. This helps balance overall returns over long time periods.

The idea behind including gold in a diversified portfolio is that it is one of many alternative assets that could outperform stocks during a market crash. While this may not always be the case, many people strongly believe in this argument. In reality, gold’s returns have historically lagged behind the Dow Jones Industrial Average.

Others believe in gold as a physical representation of value. If the value of the U.S. dollar drastically decreases, gold may be a store of wealth you could sell for other currencies or barter for goods. While this is true, bartering a one-ounce gold coin for small dollar-value items would be impractical due to the gold’s immense worth compared to everyday needs like food.

Gold also is a finite resource. There is only so much gold that exists on the planet. Some people speculate its price may increase as humans continue to mine, process, and use gold to the point where it becomes cost-prohibitive to mine more.

What is a gold IRA?

Usually, the IRS defines gold as a collectible. You cannot hold collectibles in retirement accounts, including an IRA. But an exception to these IRS rules was introduced in 1986 that allows investing in gold coins in certain IRAs and was later expanded to allow investing in 99.5% pure gold bullion. A gold IRA is this special type of IRA account that allows you to buy actual gold and certain other precious metals within an IRA. These IRAs are also sometimes called silver IRAs.

Physical metals you can invest in with a precious metals IRA include:

  • U.S. American Eagle gold coins minted by the Treasury Department (one, one-half, one-quarter, or one-tenth ounce)
  • U.S. American Eagle silver coins minted by the Treasury Department (one ounce)
  • Certain platinum coins
  • Certain gold, silver, palladium, and platinum bullion

How does a gold IRA work?

You must follow specific guidelines to hold physical gold within a gold IRA. First, you cannot physically hold the gold yourself. You’ll have to open a self-directed IRA account with a bank or an IRS-approved non-bank trustee who will keep the gold on your behalf. These accounts enable you to invest in non-traditional investments such as physical real estate and gold.

Not all companies that offer self-directed IRAs offer this service, though. Instead, you’ll have to find a custodian or trustee willing to hold the gold on your behalf at an approved depository. A depository is just a fancy name for a place to hold things, such as a bank vault. You then purchase gold through a broker and the custodian takes physical possession of the gold by storing it at the depository.

Self-directed gold IRAs can be either a traditional or Roth IRA depending on your preferences. No matter which option you choose, the contribution limits for both types of IRAs are the same for a gold IRA as a regular IRA. In 2023, you can contribute up to $6,500 to the account if you qualify. People aged 50 or older can contribute up to $7,500. The limit increases in 2024, up to $7,000 if you're younger than 50 or $8,000 if you're 50 or older.

A traditional IRA may allow a tax deduction when you make account contributions. Any earnings grow tax-deferred until you withdraw the money, at which time you have to pay ordinary income taxes on it.

The Roth IRA does not give taxpayers any tax benefit for their contributions. But the investments within the account grow tax-free and you can withdraw them tax-free after you reach age 59.5 as long as you meet all the requirements.

How to do a 401(k) to gold IRA rollover

Many people invest in their workplace’s 401(k) plan. Unfortunately, these plans don’t typically allow you to invest in physical gold. When you retire or leave the job, you can roll over your 401(k) to an IRA. This means you could move the funds from your 401(k) to a self-directed gold IRA if you wish.

A rollover is a tax-free transfer of assets from a 401(k) plan to another tax-advantaged retirement plan, such as an IRA. You must handle rollovers carefully to ensure you don’t accidentally make distributions that would result in income tax consequences. First, you must open the gold IRA you wish to transfer your funds into. Once the account is open, you can have the 401(k) plan and gold IRA custodian work together to transfer the funds from your 401(k) to your new IRA.

If you wish to buy gold with the funds coming from your 401(k), you’ll need to sell the investments and buy gold. One easy way to do this is to sell the 401(k) investments before the transfer. Then, you transfer the cash to the gold IRA and use that cash to purchase gold through a precious metals dealer.

You may have an existing IRA that you’ve used in the past that has built up a considerable investment balance. Unless that IRA is a self-directed IRA with a custodian, you won’t be able to buy physical gold within that IRA. But, like with a 401(k), you could do an IRA to gold IRA rollover.

In general, rolling over a traditional IRA or traditional 401(k) to a traditional gold IRA, and rolling a Roth IRA or Roth 401(k) to a Roth gold IRA is the smarter option. However, you could rollover a traditional IRA or 401(k) to a Roth IRA. This is called a conversion. If you convert a traditional account to a Roth account, you’ll owe income taxes on the amount converted. This can add up quickly. Before you do this, you should consider consulting your tax advisor on how this could impact your tax situation.

Are gold IRAs a good idea?

Gold IRAs could be a good idea or a bad idea depending on your financial goals and how you fit a gold IRA into your overall financial plan.

Gold IRAs are unique in that you can hold physical gold in a tax-advantaged retirement savings account. Unfortunately, you can’t keep the gold in your physical possession. Instead, a custodian must take physical control of it. This severely limits the usability of having physical gold should you have to barter for goods and services if the economy collapses.

Those looking to own physical gold as a way to combat inflation or add diversification to their portfolio might be happy knowing the gold is safely secured in the depository’s control. Gold IRAs may be a good fit for people who have built an extensive portfolio and want to diversify a small portion of their investments into a physical asset.

Gold IRAs may not be a good fit for people that would rather invest in financial instruments that track gold’s prices without the extra costs of holding physical gold with a custodian.

Pros of gold IRAs

Gold IRAs have a few benefits that you should consider.

  • Same tax benefits as a regular IRA: The tax-advantages of a gold IRA are the main reason for holding physical gold within an IRA. Contributions may be tax-deductible and earnings are tax-deferred until they get withdrawn from the traditional gold IRA account.
  • Buy-and-hold retirement strategy: People saving for retirement who believe in the long-term future of gold prices could use a gold IRA to buy and hold physical gold as a portion of their retirement portfolio in a tax-advantaged way.
  • Self-directed IRAs give you more control: A gold IRA is a type of self-directed IRA. Just as you can hold gold in a self-directed IRA, you can also hold additional atypical IRA investment options such as real estate and other non-stock-related investments.

Cons of gold IRAs

Gold IRAs do have significant drawbacks to think about.

  • Custodian fees: Custodians willing to manage your self-directed gold IRA must take precautions to do so and likely charge fees to provide these services.
  • Storage costs: Custodians must hold physical bullion in a secure depository in a qualified storage facility. This is yet another cost you’ll have to pay for your gold IRA.
  • Required minimum distribution complications: Once you reach age 72, the IRS requires you to take RMDs from traditional IRAs to capture the tax revenue from the money in the account. If you have no other traditional IRAs, you’d have to sell gold to take the distribution and pay taxes on it.
  • No earnings other than appreciation: Physical gold doesn’t pay dividends or capital gains distributions like mutual funds or individual stocks may provide.
  • Costs to buy and sell gold: The mechanics of how to buy gold are cumbersome. Each time you buy or sell gold, you won’t likely get the market price. Instead, brokers charge a fee above the market price to sell you gold. They also take a cut when you use their services to sell gold you already own. These extra costs add yet another cost above other non-physical gold investing options.

How to get started with a gold IRA

After examining how a gold IRA works, you may be ready to open one yourself. Here’s what you need to do to get started.

  • Research and find a reliable custodian that offers self-directed gold IRAs.
  • Open an account with the most suitable custodian you can find.
  • Purchase gold from a broker to have it stored within the gold IRA at a depository to start building your stash of physical gold held within your gold IRA.

Alternatives to a gold IRA

While a gold IRA allows you to invest in physical gold, alternatives exist to invest in gold in other ways. Here are a few options you might consider.

Gold ETFs in an IRA

You may be able to hold a gold ETF (exchange-traded fund) within most IRAs as long as they’re an investment that your brokerage offers. ETFs are a diversified group of assets similar to mutual funds but they trade throughout the day rather than once per day.

Gold ETFs may take a few different forms, depending on which type you choose to invest in. Some gold ETFs track the market price of physical gold. Others may invest in a handful of companies that mine gold.

Holding these investments within an IRA provides the same tax treatment as a gold IRA. Contributions may be tax-deductible, earnings grow tax-deferred, and withdrawals after age 59 1/2 get taxed as ordinary income.

One significant difference between a gold IRA and gold ETFs held in an IRA is that the ETF may provide dividends or other distributions to help provide returns above the appreciation of the investment price itself.

Individual stocks

A number of companies take part in the process of mining and selling gold. Rather than investing in physical gold, you may decide to invest in the companies that profit from mining and processing gold.

Most of these companies mine more than just gold, which could result in better or worse performance depending on how the other mined goods perform. Additionally, mining companies face risks that a gold mine could turn out to have more or less of the precious metal than anticipated.

The company could also be poorly managed or be subject to political disruptions in other parts of the world. These risks could impact the returns of gold mining or production stocks.

Storing gold at home

Rather than investing in a gold IRA, you might buy gold bars or coins outside of an IRA and store them in your home or a local safe deposit box. Many gold investors believe in the value gold holds should the U.S. Dollar drastically decrease in value or become worthless due to market volatility.

Investing in a gold IRA could hedge against this risk, but you don’t have the gold in your physical possession. Investing in gold and keeping it at home won’t offer you the same tax benefits as a gold IRA. However, you’ll have physical access to the gold should you need it to barter in the future.


Is a gold IRA a good investment?

You must decide if a gold IRA is a good investment for your personal situation. If investing in a gold IRA helps you meet your specific goals, it could be a good fit. Even so, other opportunities may be a more suitable fit than investing in a gold IRA. Make sure you consider all of your options before choosing an investment.

How is gold taxed in an IRA?

Gold in a gold IRA is taxed like any other investment held in the IRA. Contributions to the account could qualify for a tax deduction depending on your situation. Any earnings you get from buying or selling gold within the IRA are taxed on a tax-deferred basis. 

When you withdraw money from the IRA after age 59 1/2, you pay ordinary income taxes on the distribution. Early withdrawals are subject to the standard 10% early withdrawal penalty and ordinary income tax rates.

Is a gold IRA safe?

A gold IRA might be safe as long as you take the proper precautions. You must carefully vet all providers you use in the process of setting up a gold IRA to make sure they’re legitimate. Even if you find reliable companies to set up a gold IRA, gold is an investment that might experience price swings. 

You would still technically own the gold since it would remain safely in the depository’s hands, but your investment could drastically decrease in value if the pricing of gold plummets.

Can I take physical possession of gold in my IRA?

While some people claim there are ways to take physical possession of gold in your IRA through loopholes, it generally isn’t the smartest idea. The IRS discourages this practice and explicitly states you should not do this.

Can I purchase gold with my 401(k)?

You generally cannot buy physical gold in your 401(k) as you could with a gold IRA. You may be able to buy assets that invest in gold, though. Your 401(k) may offer investment options, such as a mutual fund, that track precious metals including gold.

That said, investing in a 401(k) is limited to the investment options your particular plan offers. If a gold-based investment is not included, you won’t be able to invest in gold-based assets within your 401(k).

Bottom line

If you’re trying to figure out how to invest money in gold bullion coins or bars within an IRA, gold IRAs may be what you’re looking for. They’re a unique form of self-directed IRA that allows you to invest money in physical gold and certain other physical precious metals.

You can’t hold the gold yourself, though. Instead, you must establish an account with a custodian or trust company that stores and manages your physical gold for you. You must purchase gold through a broker and transfer it to the custodian to hold on your behalf.

Unfortunately, gold IRAs add many intermediaries that reduce the potential returns you might receive from your gold investment. You have to pay fees to the custodian and broker to buy, store, and eventually sell your gold. Alternatives such as gold ETFs or gold mining company stocks might provide similar value depending on your investing goals.

You could also purchase and hold physical gold yourself outside of a gold IRA. This allows you to take advantage of the benefits of having physical gold in your possession. Unfortunately, you’ll also miss out on the tax benefits an IRA provides as physical gold held outside of an IRA is taxed at the higher collectibles tax rate.

So whether you’re buying gold to have in case of an emergency or you think it’s a good way to diversify your retirement funds beyond the stock market, carefully consider your goals before you choose your investment path.

Author Details

Lance Cothern

Lance Cothern, CPA is a personal finance writer and founder of Lance's work covering several personal finance topics has been published in U.S. News & World Report, Business Insider, Credit Karma, Investopedia, and several other publications.