Are you looking at a Gold IRA vs physical gold for your investment strategy? Learn the details of how a Gold IRA works, the pros and cons, and how you can get started.
74% of Americans are concerned about the price of food and consumer goods. Meanwhile, business leaders like Elon Musk worry about America’s continued growing debt.
Investors who want to protect their money often seek safety by buying gold. If that’s you, consider using your traditional IRA to invest in gold coins or bars.
What’s the difference between a Gold IRA and buying physical gold? They can be the same thing. An IRA is a type of retirement account, and you can actually own physical gold inside of it.
This article covers how a Gold IRA works, why people choose it, the tax benefits, and some drawbacks to consider. You’ll also learn what to look for in a gold dealer and the steps to get started setting one up.
Get a full understanding of Gold IRA options to see if they’re the right fit for your retirement plans.
What is a Gold IRA?
A Gold IRA is a retirement account where you get all the tax advantages of traditional IRAs but the benefits of owning physical gold. You set this up as a self-directed IRA, which gives you the flexibility to invest in alternative assets like gold, real estate, and crypto.
The types of accounts you can use include:
Traditional gold IRAs: You add pre-tax funds to this individual retirement account that grow tax-deferred. You can also potentially deduct annual contributions to the account.
Roth Gold IRAs: For this retirement account type, you contribute after-tax dollars. This means you can withdraw your contributions at any time since you have already paid taxes on them. The benefit of this retirement account is that any growth of your account is tax-free.
SEP (Simplified Employee Pension) Gold IRAs: If you are self-employed or a small business owner, you can use this type of account for your retirement funds.
SIMPLE (Savings Incentive Match Plan for Employees) Gold IRAs: Small businesses use this plan type for employer and employee contributions.
It’s common to have questions about how Gold IRAs work in practice. For example, a user named Ok_Acanthaceae_6691 on Reddit’s r/Gold forum asked:
“I have seen some advertisements, where you can transfer a Roth IRA to a gold portfolio? Can anyone help explain this better? For reference, I have a Roth IRA with Edward Jones. Also, does the account purchase physical gold and it gets sent to me? Or does it invest in gold mining companies? Thanks for helping my confusion.”
These are common questions investors have, and answers include:
Yes, you can transfer or roll over an existing Roth IRA into a Gold IRA.
A Gold IRA purchases physical gold, not paper assets like shares in gold mining companies.
The gold dealer doesn’t send the gold to you directly; it’s stored in an IRS-approved depository.
What is physical gold?
Physical precious metals like gold, silver and platinum are actual tangible assets that you own. They come in the form of bullion, like gold coins or bars. Note that these investment coins differ from collectible coins because their value depends on the amount of metal they contain rather than on perceived value.
Investment coins have different brands and designs, including:
American Eagle
Gold American Buffalo
Canadian Maple Leaf
South African Gold Krugerrand
Gold British Britannia
Gold Austrian Philharmonic
Gold Mexican Libertad
Gold Australian Kangaroo
Chinese Gold Panda
Gold Somalian Elephant
Brands of gold bars include:
PAMP Suisse
Royal Canadian Mint
Valcambi
Perth Mint
Metalor
Asahi Refining
Sunshine Minting
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Steps to own physical gold in an IRA
You might be already familiar with how you can invest in traditional assets via these retirement accounts. You set up a physical Gold or Precious Metals IRAs with any of these methods:
Converting a portion of your traditional IRA to Gold.
Rollovering your previous employer plan 401(k) to Gold
Opening a new Gold IRA
The steps to do this include:
Step 1: Precious metals dealer
Most people start with a dealer who helps guide them on the process for setting up a precious metals IRA. Swiss America helps many investors through this process including understanding the pros and cons of a Gold IRA account.
Step 2: IRA custodian
If you don’t already have a precious metals custodian in mind, we can recommend one for you. The custodian manages your account and complies with IRS regulations. Their role includes buying and selling gold or other precious metals on your behalf, arranging for secure storage of your metals, and annual IRA reporting.
You’ll open accounts with both your custodian and precious metals dealer.
Step 3: Fund your IRA
If you are opening an IRA from scratch, funding means providing the money to your chosen custodian so that they can buy gold and other physical precious metals at your direction.
For existing IRAs or 401(k) plans that you want to roll over to a precious metals IRA, follow these steps:
Contact your current administrator, whether it’s your employer plan or traditional IRA manager, and tell them how much you’d like to roll over.
Decide between a direct or indirect rollover. A direct rollover is usually the best option since the administrator sends the funds directly to your IRA custodian.
Monitor to make sure the custodian receives the funds.
Step 4: Buy metals
Next, you get to choose what gold, silver, or other precious metal you want to add to your retirement account. The IRS has certain rules about which metals qualify for precious metals IRAs, so you can’t buy just any bullion coins or bars without following these guidelines.
The Swiss America team has worked with thousands of investors on these IRAs and can help you understand what your options are.
Once you choose which silver or gold coins or bars you want to buy, you’ll instruct your custodian to buy them on your behalf. From there, the custodian directs precious metals dealers to ship your bullion products to an IRS-approved depository for storage.
Step 5: Monitor investment
The last step is to monitor your investment. Swiss America customers benefit from an online portal that provides real-time status of the value of your metal holdings.
Why investors hold precious metals in their IRAs
Some of the common reasons why investors choose to hold gold and other precious metals inside of their retirement accounts include:
Safe haven investment
Many of the investors we work with want to own physical gold and other precious metals as a way to preserve their wealth. Most of the time, Gold IRA investing isn’t to make huge returns but rather to act as insurance against economic uncertainty or other chaos.
Since most investors see gold as a safety net, whenever there is a crisis, stock market volatility or political unrest, they buy gold, which raises prices.
Many individual investors feel this way. As an example, user No-Firefighter-5410 posted in Reddit’s r/Gold forum:
I have a self directed IRA with $72k in it. I look at the state of the economy and the way the US Gov is printing $1T every 3 months – inflation MUST continue to rise, and at some point the collapse of the dollar is eminent. Would like to hear thoughts on whether it would be better to liquidate the Roth IRA and take 10% hit up front to buy gold bullion coins and physically hold it, or to invest in self directed IRA thru a company like Swiss America, and take a 10-12% hit and have the gold bullion coins and have it held in repository through a self-directed IRA company like GoldStar? I would be interested to hear from people who have experience and a track record of investing in Gold.”
Inflation hedge
Similar to the concept of a safety net, investors also consider gold a way to protect their wealth from the effects of inflation. The market reacts to changes in federal policy, and gold prices usually increase when the Federal Reserve lowers interest rates.
The chart below, from the U.S. Treasury website, shows the growing U.S. debt, which impacts the dollar’s value and increases inflation.
Supply/Demand
We only have a certain amount of gold and other precious metals and no one can just manufacture more. Investors like this scarcity, which is very different from paper money, which the government can print more of.
No counterparty risk
Precious metals are physical assets that don’t require third-party involvement to impact the amount you hold. Whatever physical gold or other precious metals you own — you own them no matter what other parties do.
Compare this to paper assets like mutual funds, public companies, real estate, or even savings accounts at a bank. All of these assets depend on someone else to perform or hold up their end of a commitment. The risks here can include:
Default
Poor performance
Market volatility
Failed contracts
Diversify portfolio
Experts usually recommend diversifying retirement accounts with 5-15% in gold, silver, or other approved precious metals. Adding these to your portfolio can help you reduce the risk of losing all of your wealth if there’s market volatility, geopolitical issues, or other crises.
No cyber risk
If you hold physical gold in your IRA, you have protection against cyber risks like the recent Crowdstrike outage which grounded thousands of flights across the U.S. You’ll also have protection against cyber attacks which can steal your identity, your money or your access to paper investment accounts.
Gold investments do not have this risk. Your physical metals don’t require internet access, digital portals or any online infrastructure for you to own them.
Unfortunately, cybercrime isn’t going away anytime soon. The chart below shows Statista’s predictions for continued growth in annual costs through 2028:
Tax advantages
Gold IRAs have all the same tax benefits as IRAs that hold paper assets. These tax benefits and rules include:
Tax-deferred growth
If you funded your IRA with pre-tax dollars, your gold, silver, or platinum bullion can grow tax-free. You won’t owe taxes until you withdraw the funds at retirement age, which the IRS defines as 59 1/2.
Tax-free growth
You can set up a Roth Gold IRA by funding your account with after-tax dollars. Your portfolio’s value grows tax-free. In this scenario, you can withdraw your contributions at any time, and you can withdraw the earnings on your initial investment at retirement age.
Contributions
Both of these account types allow you to add more funds each year. In some cases, your contributions might be deductible, but you should consult with a financial advisor to confirm those details for your situation. The IRS contribution limits for 2024 include:
Traditional Gold IRAs
Contribution limits per the IRS are $7,000 if you’re under 50 and $8,000 if you’re 50 or older.
Gold Roth IRAs
Your ability to add to your Roth Gold IRA depends on your modified adjusted gross income (MAGI). If your MAGI is below $146,000, you can contribute the same amounts as for traditional Gold IRAs.
If it’s up to $161,000, the IRS allows a partial contribution, but once your income exceeds that amount, you can no longer contribute.
For those married and filing jointly, the MAGI limit is up to $230,000 for a full contribution, up to $240,000 for a partial contribution, and you can’t contribute after that.
Cons of a Gold IRA
Before you set up a self-directed IRA to invest in gold, you should also consider the drawbacks of this approach, which include:
Storage
With a Gold IRA, you can’t physically possess the gold at home or in a safety deposit box. The IRS considers personal possession a distribution, which triggers taxes and penalties. Instead, your IRA custodian stores your gold and other metals in a secure, IRS-approved depository. Once you reach retirement age, you can withdraw your metals.
Insurance
You’ll have incremental costs for insurance to protect your precious metals and you’ll want to include these costs in your financial planning analysis.
No income generation
Gold doesn’t generate cash flow, dividends, or other income. It’s an investment meant to preserve wealth and may grow in value as it appreciates, but most investors see it as an insurance policy. Since gold tends to retain value during risk events, it provides stability when other assets may lose value.
Gold future outlook
Gold is on a roll right now, and research analysts recommend gold as a strategy to reduce risks in the current market.
Goldman Sachs recently stated, “Gold is our strategists’ preferred near-term long, and it’s also their preferred hedge against geopolitical and financial risks.” At that time, the analysts thought gold would reach $2700/ounce by January 2025. It’s already $2700/oz, and new forecasts place gold at $2900/oz in 2025.
Meanwhile, Citi Research recently raised its 6 to 12-month forecast to $3000/oz.
Why is everyone predicting higher gold prices? Economic uncertainty about the labor market, trade sanctions, and lower interest rates lead individual investors to find safe-haven assets. Meanwhile, central banks have bought record numbers of gold so far this year, which also drives up the overall price.
Other ways to invest in gold
There are other ways to invest besides owning physical assets in your IRA. You might invest in gold with:
Mutual funds or EFTs
Gold mining companies
Gold futures
The challenge with these investments is that they are paper assets. This means you won’t get the same benefits of a physical asset that we discussed above.
Choosing a Gold IRA company
When you look at Gold IRA companies, here are some ways you can evaluate your options:
Longevity
Research companies to see how long they’ve been in business. Swiss America’s 40+ year history means you can count on our ability to navigate market ups and downs.
Resources
The best Gold IRA companies provide education and resources to help investors make the best decisions about their retirement accounts. Swiss America’s weekday news articles, regular podcast episodes, and free resource guides can provide the information you need to make your decision.
Reviews
Gold IRA investors should check out a potential company’s customer reviews. Look for high ratings on their website, in Google and through other sites like the Better Business Bureau.
Transparency
Be sure the dealer you choose provides transparent pricing on premiums, IRA set-up fees, and any other transaction costs like shipping fees.
Buy-back program
When you reach retirement age, it’s best to work with a dealer that has a buy-back program to sell your gold. You don’t have to go this route but it might be convenient depending on timing and your situation.
Credentials
The dealer you work with should be part of third-party organizations that mandate quality standards and compliance. Swiss America is a member of the American Numismatic Association, the Industry Council for Tangible Assets, Numismatic Guaranty Corp, and several other industry groups.
IRA gold account final thoughts
Now that you know how a Gold IRA works, you can decide if this approach is the right fit for your situation. Consider your retirement goals, risk tolerance, and current portfolio mix.
If you want to learn more about how to diversify with precious metals, contact Swiss America today!
Is a Gold IRA physical gold?
Yes, a Gold IRA means that you hold physical gold inside of your retirement account.
Can I cash out my IRA and buy gold?
You can, but you don’t have to. You can buy gold inside your IRA by working with a precious metals custodian and a gold dealer.
Is gold a good retirement plan?
Adding some gold to your retirement account gives you a tangible asset that many see as a hedge against inflation, economic uncertainty, and stock market volatility.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
