Gold IRA vs. Physical gold: Which one is best for you?

For many reasons, gold is a popular investment product: it can diversify your portfolio and act as an inflation hedge. It can also mitigate risk.

However, buying physical gold is not the only way to invest. Investors are opening gold IRAs to supplement or replace their physical gold investments.

There are many benefits to investing in physical gold and gold IRAs. Understanding the differences can help you make better investment decisions. Continue reading to find out everything you need about investing in a IRA that holds gold versus physical gold.

What is a Gold IRA and how can it help you?

A gold IRA can be described as a type or individual retirement account. There are two types of IRAs: a Roth IRA or a traditional IRA. The "self-directed IRA" is a type of traditional IRA called a gold IRA.

Your IRA broker will invest the money you have contributed in a traditional IRA. You can also invest in precious metals if you have a self-directed IRA.

Individual retirement accounts that hold gold can also include silver, platinum, and paledium. You can also invest in a gold ETF or a gold mining company with your self-directed IRA.

Retirement accounts are a great way to diversify your portfolio beyond the traditional mutual funds. You can also enjoy the benefits of investing directly in precious metals, without the need to store it.

What is Physical Gold?

Physical gold is exactly what it sounds like — physical, tangible gold products. There are a few places you can purchase physical gold:

  • Dealers in gold, pawn shops and rare coin shops
  • Individuals
  • Websites that are gold

You can also purchase physical gold in many forms.

  • Collectible gold coins
  • Coins made from gold bullion
  • Bars of gold bullion
  • Decor and jewelry made of gold

Collectible coins and bullion make the best investments in gold. The rare and collectible faces of gold coins are what make them valuable, but their value can fluctuate with time. Private mints and refineries produce gold bullion, which includes gold bars, rounds and non-collectible coin.

There is a difference between physical gold and an IRA.

Two of the most popular options for gold investing are physical gold and gold IRAs. Knowing the differences can help you decide which option is best for your investment portfolio.

These are the key differences between a physical gold IRA and a gold IRA:


You cannot physically take possession of precious metals when you invest in a Gold IRA. You will need to find a place to store your gold investments.

Many custodians of gold IRAs have at least one to two depositories that they use to store physical gold clients have in their IRAs. These depositories are available for you to choose from or you can do your research to find the best storage location.

You have complete control over the storage of gold you buy. You have the option of storing the gold in a bank safe deposit box, in your basement safe, in your backyard safe deposit box, or in your home.

But, great power also comes with great responsibility. If you decide to invest in real gold, then you will be responsible for its safety and consequences. For safety reasons, many people who invest in precious metals opt to store their products inside vaults.


Security and storage go hand-in-hand. You can be confident that your precious metals and gold will be safe from theft or natural disasters if they are stored in a certified repository. If they aren’t, they can still be insured.

Specialized storage facilities for gold are available with a variety of features that will keep precious metals safe. These storage facilities include:

  • Provide round-the-clock, armed security
  • High-quality cameras should be available at all times
  • Use temperature-controlled facilities to keep gold safe and preserved

You have two options: segregated storage for your gold, or commingled storage which will save you money.

Investing in a gold IRA is generally safer than buying real gold and storing it. However, if your gold is stored in a deposit box, it will be as safe as your self-directed gold IRA.

Additional fees

There are varying fees when you invest in gold IRAs instead of physical gold.

When you open a gold IRA, your custodian may charge you a few different fees, such as:

  • One-time account set up fee, usually between $50 and $150
  • Brokerage fees are typically between $50 and $150 annually
  • You pay storage fees directly to the storage facility, or your custodian.

Before you make any investments in your retirement account, your IRA custodian must disclose all fees.

You don't need to pay any upfront fees if you buy gold direct. Only your storage options will cost you. Your investment in gold may not be subject to fees if you keep it at home.

Tax Implications

Precious metal IRAs as well as physical gold offer different tax consequences and tax benefits.

No matter if you have a Roth or traditional gold IRA, the tax laws applicable to your retirement account will apply. These accounts allow you to grow your assets and not pay taxes. Roth IRAs are pre-tax dollars while traditional IRAs are funded with pre-tax money.

Both cases grant gains tax-free. You can delay paying taxes on traditional IRAs (as well as many self-directed gold IRAs) until you withdraw your retirement assets.

However, real gold investment has less tax benefits. The capital gains rate is used by the IRS to tax gold as a collectible. This rate is not higher than 28%

Selling precious metals requires that you comply with all IRS reporting requirements. To report gold transactions, you will need to file Form 1099B with your taxes. Responsible investors must be familiar with the IRS reporting requirements.

Gold IRAs are exempted from capital gains tax and only subject to the rate of taxable income.

Funding Methods

happy couple buying physical gold online using laptop and credit card

The majority of gold IRA custodians require that you fund your new IRA via an IRA rollover. You cannot give them cash to purchase the gold in your gold IRA. You will need to transfer funds from an existing Roth or traditional IRA via a process called gold IRA rollovers.

You can still pay for actual gold using cash, check or any other payment method that your merchant accepts. You don't have to wait for your IRA rollover process to complete. You can purchase gold today to increase your portfolio.

Limits on Contribution

You must adhere to the same contribution limits for gold IRAs as you do for traditional IRAs when you invest in them. These limits may vary. In 2022 they were $6500 per year with an additional $1,000 for investors who are 50 years old or older.

There is no limit to how much actual gold you can purchase in a single year. Experts recommend that you don't invest more than 5%-10% of your portfolio in gold. However, it is up to each individual to make the right decision.

Different types of products available

You can select any level of purity that you want when you invest in physical precious metallics. You may opt for less pure gold if you have a smaller budget. You have the option to choose from gold bullion and gold bars as well as gold coins.

You can only invest in a gold IRA if you are allowed to choose products at least 99.5% pure. This includes certain types of gold coins, most gold bullion, and gold bars products.

Physical Gold Investment Options

french gold coins with different gold jewelries

There are many options when it comes to buying gold as an investment. You have the option to buy any kind of gold product that you want, keep it for as long or as little as you like, and then sell it when you are ready. Your taxes will change depending on how long the gold is held.

Your sale of gold that you have held for less than one year will be subject to short term capital gains tax. If you hold physical gold for longer than one year, it is subject to long-term capital gain tax.

You can choose from a variety of gold products to invest in your retirement savings portfolio. These are:

  • Physical gold coins
  • Rounds of gold
  • Bars of gold
  • Collectible gold coins

You can also buy items with a small amount of gold, such as jewelry, art and decor.

You can invest in any level of gold, but understanding the purity notations will help you decide if a product made from gold is worth your investment.

Most likely, you've heard gold described in terms of its "carats."

  • 24 carat: 100% pure gold
  • 18 carat – 75% purity
  • 14-carat: 58.3% purity
  • 10 carat – 1.7% purity

The minimum standard for caratage in the United States is 10 carats.

We recommend that you search for gold products that are at least 99 percent pure when looking for an investment. These products will be easier to sell and are more valuable than lower-carat alternatives.

Types of Gold You Can Add to Your Gold IRA

The self-directed gold IRAs that are self-directed must meet certain standards. These standards go beyond the requirements of physical gold investing. First, the IRS requires gold IRAs to be managed by gold custodians. We mentioned that you cannot store or hold your gold by yourself. You need a custodian.

The IRS regulates what types of gold can be included in a gold IRA. Products must be at least 99.5% pure.

Certain collectible gold coins are eligible for IRA gold products.

  • American Buffalo coins
  • Australian Kangaroo coins

American Eagle coins are the exception to this rule. These coins have a 91.67% yield but can be used to hold IRA gold.

You will need to verify the purity of any gold product before you add it to your gold IRA account.

Many companies that offer gold IRA services take the guesswork out when it comes to choosing which gold products you want to keep in your IRA. You can only select eligible products and they will add them to your account. They'll store them for free.

Benefits of Investing In Physical Gold and a Gold IRA

hand stacking wooden cube with plus sign

There are many benefits to investing in a gold IRA and owning gold. These are the benefits of both investing options:

Pros and Cons of Gold IRAs:

  • Acceptable to include any approved precious metals such as platinum, silver, and palladium
  • Custodians can help you store and manage your gold investments.
  • Capital gains taxes are not applicable. However, there are tax benefits.
  • Can you directly fund your retirement account?

The pros and cons of physical gold:

  • Get immediate access to your physical gold coins, and other products
  • Give yourself more control over your gold investments
  • No cash-out or distribution requirements

Are They at the Same Risk?

Both physical gold and gold IRAs have the same market risk. Your investment's value will fluctuate depending on the gold price.

But, gold storage comes with its own risks. You run the risk of losing your entire precious metal investment if you try to keep it at home. Your investment could be stolen, burned, or misplaced.

Minimum Investment

Physical gold and Gold IRAs have different minimum investments requirements.

Gold IRA

Although the IRS doesn't have a minimum amount for gold IRAs (or any other investment type), most custodians have minimum amounts, usually at least $10,000.

Physical gold

For physical metal products, there is no minimum investment. You can buy a small amount gold with a few hundred dollars and gradually increase your investment.

How much gold can you invest in a Gold IRA

womans hand counting dollar bills for investing in gold ira

The IRS caps the amount that you can invest each year in a gold IRA. This limit will be $6,500 in 2023. You can also contribute $1,000 each year if you are over 50.

How much physical gold can you own?

You can have as much physical gold and silver as you want. The U.S. has no restrictions on gold ownership.

What is the best option for you?

You now have a better understanding of the differences between buying real gold and investing in a gold IRA. Now you can decide which investment option suits you best.

Who should invest in physical gold?

People who are:

  • You want total control over your precious metal investments
  • You want more investment options (including gold of lower purity)
  • You don't want to be bound by IRA rules
  • You do not want the tax benefits offered by IRAs

Who should invest in a Gold IRA?

For people who are:

  • You want a hands-off approach for gold investing
  • You can take advantage of IRA tax deductions and tax benefits
  • You don't want to be responsible in storing or owning gold
  • For the extra security of your IRA investment, don't mind paying fees

To learn more about investing in gold, check out our articles at Learn About Gold.

Frequently Asked Questions

How is gold taxed in an IRA?

The fair market value at the time of sale is what determines how much tax you pay on gold sales. Gold is not subject to tax when it’s purchased. It’s not considered income. If you sell it later, you’ll have a taxable gain if the price goes up.

Gold can be used as collateral for loans. Lenders try to maximize the return on loans that you take against your assets. For gold, this means selling it. This is not always possible. They may hold on to it. They may decide to resell it. Either way you will lose potential profit.

You should not lend against your gold if it is intended to be used as collateral. You should leave it alone if you don’t intend to lend against it.

Should You Open a Precious Metal IRA?

It is essential to be aware of the fact that precious metals do not have insurance coverage before opening an IRA. There is no way to recover money that you have invested in precious metals. This includes any loss of investments from theft, fire, flood or other circumstances.

You can protect yourself against such losses by purchasing physical gold and silver coins. These items are timeless and have a lifetime value. You would probably get more if you sold them today than you paid when they were first created.

You should choose a reputable firm that offers competitive rates. Consider using a third-party custody company to keep your assets safe and allow you to access them at any time.

If you decide to open an account, remember that you won’t see any returns until after you retire. So, don’t forget about the future!

What precious metals could you invest in to retire?

Silver and gold are two of the most valuable precious metals. They’re both easy to buy and sell and have been around forever. They are a great way to diversify your portfolio.

Gold: Gold is one the oldest forms currency known to man. It is also extremely safe and stable. This makes it a good option to preserve wealth in uncertain times.

Silver: Silver has been a favorite among investors for years. It’s an ideal choice for those who prefer to avoid volatility. Silver tends to move up, not down, unlike gold.

Platinium is another precious metal that is becoming increasingly popular. It is very durable and resistant against corrosion, much like silver and gold. It is, however, more expensive than its competitors.

Rhodium: Rhodium is used in catalytic converters. It’s also used in jewelry making. It is also very affordable in comparison to other types.

Palladium: Palladium, which is a form of platinum, is less common than platinum. It is also cheaper. For these reasons, it’s become a favorite among investors looking to add precious metals to their portfolios.

Is gold a good IRA investment?

Anyone who is looking to save money can make gold an excellent investment. It is also an excellent way to diversify you portfolio. There’s more to gold that meets the eye.

It’s been used throughout history as a currency, and even today, it remains a popular form of payment. It’s often referred to as “the world’s oldest currency.”

But gold is mined from the earth, unlike paper currencies that governments create. It is very valuable, as it is rare and hard to create.

The supply and demand factors determine how much gold is worth. People tend to spend more when the economy is healthy, which means that fewer people are able to mine gold. Gold’s value rises as a result.

The flip side is that people tend to save money when the economy slows. This results in more gold being produced, which drives down its value.

This is why it makes sense to invest in gold for individuals and companies. You’ll reap the benefits of investing in gold when the economy grows.

Your investments will also generate interest, which can help you increase your wealth. In addition, you won’t lose any money if gold falls in value.

How much of your portfolio should you hold in precious metals

To answer this question we need to first define precious metals. Precious Metals are elements that have a very high relative value to other commodities. They are therefore very attractive for investment and trading. Gold is by far the most common precious metal traded today.

There are many other precious metals, such as silver and platinum. While gold’s price fluctuates during economic turmoil, it tends to remain relatively stable. It is not affected by inflation or deflation.

The general trend is for precious metals to increase in price with the overall market. However, the prices of precious metals do not always move in sync with one another. If the economy is struggling, the gold price tends to rise, while the prices for other precious metals tends to fall. This is because investors expect lower rates of interest, which makes bonds less attractive investments.

However, when an economy is strong, the reverse effect occurs. Investors are more inclined to invest in safe assets, such as Treasury Bonds, and they will not demand precious metals. They become less expensive and have a lower value because they are limited.

To maximize your profits when investing in precious metals, diversify across different precious metals. Because precious metals prices are subject to fluctuations, it is best to invest across multiple precious metal types, rather than focusing on one.

What are the pros and disadvantages of a gold IRA

An Individual Retirement Account is a more beneficial option than regular savings accounts. You don’t pay taxes on any interest earned. An IRA is a good choice for those who want a way to save some money but don’t want the tax. But, this type of investment comes with its own set of disadvantages.

You may lose all your accumulated savings if you take too much out of your IRA. The IRS may prohibit you from withdrawing funds from your IRA before you are 59 1/2 years of age. You will likely have to pay a penalty fee if you withdraw funds from an IRA.

You will also need to pay fees for managing your IRA. Many banks charge between 0.5%-2.0% per year. Others charge management fees that range from $10 to $50 per month.

If you prefer to keep your money outside a bank, you’ll need to purchase insurance. A majority of insurance companies require that you possess a minimum amount gold to be eligible for a claim. It is possible that you will be required to purchase insurance that covers losses of up to $500,000.

If you are considering a Gold IRA, you need to first decide how much of it you would like to use. Some providers restrict the amount you can own in gold. Others allow you the freedom to choose your own weight.

Also, you will need to decide if you want to buy physical gold futures contracts or physical gold. Gold futures contracts are more expensive than physical gold. Futures contracts offer flexibility for buying gold. They let you set up a contract that has a specific expiration.

You also need to decide the type and level of insurance coverage you want. The standard policy doesn’t provide theft protection or loss due fire, flood, or earthquake. It does include coverage for damage due to natural disasters. If you live in a high-risk area, you may want to add additional coverage.

You should also consider the cost of storage for your gold. Storage costs are not covered by insurance. Additionally, safekeeping is usually charged by banks at around $25-$40 per monthly.

If you decide to open a gold IRA, you must first contact a qualified custodian. Custodians keep track of your investments and ensure compliance with federal regulations. Custodians aren’t allowed to sell your assets. Instead, they must maintain them for as long a time as you request.

Once you have chosen the right type of IRA to suit your needs, it is time to fill out paperwork defining your goals. You must include information about what investments you would like to make (e.g. stocks, bonds and mutual funds). It is also important to specify how much money you will invest each month.

Once you have completed the forms, you will need to mail them to your provider with a check and a small deposit. The company will then review your application and mail you a letter of confirmation.

Consider consulting a financial advisor when opening a golden IRA. A financial planner can help you decide the type of IRA that is right for your needs. You can also reduce your insurance costs by working with them to find lower-cost alternatives.


  • Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (
  • If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item’s value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (
  • The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (
  • If you take distributions before hitting 59.5, you’ll owe a 10% penalty on the amount withdrawn. (

External Links

How To

Guidelines for Gold Roth IRA

Starting early is the best way to save for retirement. Start saving as soon and as often as you’re eligible (usually around 50 years old) and keep going until retirement. You must contribute enough each year to ensure that you have adequate growth.

You also want to take advantage of tax-free opportunities such as a traditional 401(k), SEP IRA, or SIMPLE IRA. These savings vehicles allow you the freedom to contribute without having to pay tax on your earnings until they are withdrawn. This makes them a great choice for people who don’t have access employer matching funds.

It’s important to save regularly and over time. You will lose any potential tax advantages if you don’t contribute enough.


By: Learn About Gold
Title: Gold IRA vs. Physical Gold: Which Is Right For You?
Sourced From:
Published Date: Mon, 23 Jan 2023 23:20:31 +0000

Recent Posts
Latest Featured Posts
Latest News Posts