Gold IRA vs. Physical Gold: Which Is Right 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 stores
  • 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 are not, they can be insured to their value.

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 (or self-directed gold IRAs) until you withdraw your retirement money.

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 limited to 99.5% pure gold products. 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 with a purity at least 99 percent 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 will 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 benefits as well as tax deductions
  • 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

Do you need to 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. It is impossible to get back money if you lose your investment. This includes losing all your investments due to theft, fire, flood, etc.

Investing in physical gold and silver coins is the best way to protect yourself from this type of loss. These items have been around thousands of years and are irreplaceable. They are likely to fetch more today than the price you paid for them in their original form.

You should choose a reputable firm that offers competitive rates. A third-party custodian is a good option. They will protect your assets while giving you easy access whenever you need them.

Remember that you will not see any returns unless you are retired if you open an Account. Do not forget about the future!

How much money should my Roth IRA be funded?

Roth IRAs can be used to save taxes on your retirement funds. These accounts cannot be withdrawn until you turn 59 1/2. You must adhere to certain rules if you are going to withdraw any of your contributions prior. First, your principal (the deposit amount originally made) is not transferable. This means that regardless of how much you contribute to an account, you cannot take out any more than you initially contributed. If you take out more than the initial contribution, you must pay tax.

The second rule states that income taxes must be paid before you can withdraw earnings. Withdrawing your earnings will result in you paying taxes. Consider, for instance, that you contribute $5,000 per year to your Roth IRA. Let's say you earn $10,000 each year after contributing. On the earnings, you would be responsible for $3,500 federal income taxes. That leaves you with only $6,500 left. Since you're limited to taking out only what you initially contributed, that's all you could take out.

If you took $4,000 from your earnings, you would still owe taxes for the $1,500 remaining. Additionally, half of your earnings would be lost because they will be taxed at 50% (half the 40%). Even though you had $7,000 in your Roth IRA account, you only received $4,000.

There are two types if Roth IRAs, Roth and Traditional. Traditional IRAs allow for pre-tax deductions from your taxable earnings. To withdraw your retirement contribution balance plus interest, your traditional IRA is available to you. You have the option to withdraw any amount from a traditional IRA.

Roth IRAs don't allow you deduct contributions. Once you are retired, however, you may withdraw all of your contributions plus accrued interest. There is no minimum withdrawal required, unlike a traditional IRA. It doesn't matter if you are 70 1/2 or older before you withdraw your contribution.

What Is a Precious Metal IRA?

An IRA with precious metals allows you to diversify retirement savings into gold and silver, palladium, rhodiums, iridiums, osmium, or other rare metals. These are called “precious” metals because they're very hard to find and very valuable. These are excellent investments that will protect your wealth from inflation and economic instability.

Bullion is often used for precious metals. Bullion refers only to the actual metal.

Bullion can be bought via various channels, such as online retailers, large coin dealers and grocery stores.

A precious metal IRA lets you invest in bullion direct, instead of purchasing stock. This will ensure that you receive annual dividends.

Precious metal IRAs are not like regular IRAs. They don't need paperwork and don't have to be renewed annually. Instead, you pay only a small percentage tax on your gains. Additionally, you have access to your funds at no cost whenever you need them.

How Much of Your IRA Should Include Precious Metals?

It is important to remember that precious metals can be a good investment for anyone. You don’t need to have a lot of money to invest. There are many ways that you can make money with gold and silver investments, even if you don't have much money.

You might think about buying physical coins such a bullion bar or round. Shares in precious metals-producing companies could be an option. You might also want to use an IRA rollover program offered through your retirement plan provider.

Regardless of your choice, you'll still benefit from owning precious metals. Although they aren’t stocks, they offer the possibility for long-term gains.

They also tend to appreciate over time, unlike traditional investments. So, if you decide to sell your investment down the road, you'll likely see more profit than you would with traditional investments.

How can I withdraw from a Precious metal IRA?

You first need to decide if you want to withdraw money from an IRA account. Next, ensure you have enough cash on hand to pay any penalties or fees that could be associated with withdrawing funds.

An IRA is not the best option if you don't mind paying a penalty for early withdrawal. Instead, open a taxable brokerage. This option is also available if you are willing to pay taxes on the amount you withdraw.

Next, you need to determine how much money is going to be taken out from your IRA. This calculation is affected by many factors, such as the age at which you withdraw the money, the amount of time the account has been owned, and whether your plans to continue contributing to your retirement fund.

Once you have an idea of the amount of your total savings you wish to convert into cash you will need to decide what type of IRA you want. Traditional IRAs allow you to withdraw funds tax-free when you turn 59 1/2 while Roth IRAs charge income taxes upfront but let you access those earnings later without paying additional taxes.

After these calculations have been completed, you will need to open a brokerage bank account. A majority of brokers offer free signup bonuses, as well as other promotions, to get people to open accounts. However, a debit card is better than a card. This will save you unnecessary fees.

When it comes time to withdraw your precious metal IRA funds, you will need a safe location where you can keep your coins. While some storage facilities accept bullion bars and others require that you purchase individual coins, others will allow you to store your coins in their own safe. You will need to weigh each one before making a decision.

Bullion bars are easier to store than individual coins. You will need to count each coin individually. However, keeping individual coins in a separate place allows you to easily track their values.

Some prefer to store their coins in a vault. Some people prefer to store their coins safely in a vault. No matter what method you use, it is important to keep your bullion safe so that you can reap its benefits for many more years.


  • 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. (
  • You can only purchase gold bars at least 99.5% purity. (
  • Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (
  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (
  • Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (

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How To

3 Ways to Invest Gold for Retirement

It is important to understand the role of gold in your retirement plan. You can invest in gold through your 401(k), if you have one at work. You may also be interested in investing in gold beyond your workplace. If you have an IRA (Individual Retirement Account), a custodial account could be opened at Fidelity Investments. If you don't have any precious metals yet, you might want to buy them from a reputable dealer.

These are three easy rules to remember if you invest in gold.

  1. Buy Gold with Cash – Avoid using credit cards or borrowing money to fund investments. Instead, instead, transfer cash to your accounts. This will help protect you against inflation and keep your purchasing power high.
  2. Physical Gold Coins You Should Buy – Physical gold coins should be purchased over a paper certificate. Physical gold coins can be sold much faster than paper certificates. Also, there are no storage fees associated with physical gold coins.
  3. Diversify Your Portfolio – Never put all of your eggs in one basket. By investing in multiple assets, you can spread your wealth. This can reduce market volatility and help you be more flexible.


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

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