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, but there are also disadvantages. Understanding the differences between gold IRAs and physical gold IRAs 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 basement safe deposit box, or in your yard.

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, storing your gold in a deposit box will make it just as secure as if it were stored in 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.

Methods of funding

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 coins, gold bullion and gold bars.

You can only invest in a gold IRA if you are 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 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 can even 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

How is gold taxed in Roth IRA?

The tax on an investment account is based on its current value, not what you originally paid. All gains, even if you have invested $1,000 in a mutual funds stock, are subject to tax.

If you place the money in a traditional IRA, 401(k), or other retirement plan, there is no tax when you take it out. You pay taxes only on earnings from dividends and capital gains — which apply only to investments held longer than one year.

The rules governing these accounts vary by state. For example, in Maryland, you must take withdrawals within 60 days after reaching age 59 1/2 . Massachusetts allows you to delay withdrawals until April 1. New York is open until 70 1/2. You should plan and take distributions early enough to cover all retirement savings expenses to avoid penalties.

How much of your portfolio should you hold in precious metals

To answer this question, we must first understand what precious metals are. Precious metals refer to elements with a very high value relative other commodities. This makes them valuable in investment and trading. Gold is by far the most common precious metal traded today.

However, many other types of precious metals exist, including silver and platinum. The price of gold tends to fluctuate but generally stays at a reasonably stable level during periods of economic turmoil. It is also not affected by inflation and depression.

In general, all precious metals have a tendency to go up with the market. They do not always move in the same direction. For example, when the economy is doing poorly, the price of gold typically rises while the prices of other precious metals tend to fall. This is because investors expect lower rates of interest, which makes bonds less attractive investments.

In contrast, when the economy is strong, the opposite effect occurs. Investors favor safe assets like Treasury Bonds, and less precious metals. Because they are rare, they become more pricey and lose value.

Diversifying across precious metals is a great way to maximize your investment returns. Additionally, since the prices of precious metals tend to rise and fall together, it's best to invest in several different types of precious metals rather than just focusing on one type.

Can I keep physical gold in an IRA?

Gold is money. Not just paper currency. People have been using gold for thousands of years to store their wealth and protect it from economic instability and inflation. Today, investors use gold as part of a diversified portfolio because gold tends to do better during financial turmoil.

Today, Americans prefer precious metals like silver and gold to stocks and bonds. It's not guaranteed that you'll make any money investing gold, but there are several reasons it might be worthwhile to add gold to retirement funds.

One reason is that gold historically performs better than other assets during financial panics. Between August 2011 to early 2013, gold prices rose close to 100 percent while the S&P 500 fell 21 per cent. During those turbulent market conditions, gold was among the few assets that outperformed stocks.

Another advantage of investing in gold is that it's one of the few assets with virtually zero counterparty risk. Your shares will still be yours even if your stock portfolio drops. You can still own your gold even if the company where you invested fails to pay its debt.

Finally, gold is liquid. You can sell your gold at any time without worrying about finding a buyer, which is a major advantage over other investments. It makes sense to buy small quantities of gold, as it is more liquid than other investments. This allows you take advantage of the short-term fluctuations that occur in the gold markets.

Is it a good idea to open a Precious Metal IRA

You should be aware that precious metals cannot be covered by insurance. There are no ways to recover the money you lost in an investment. This includes losing all your investments due to theft, fire, flood, etc.

This type of loss can be avoided by investing in physical silver and gold coins. These items have been around thousands of years and are irreplaceable. If you were to offer them for sale today, they would likely fetch you more than you paid when you bought them.

Consider a reputable business that offers low rates and good products when opening an IRA. It is also a smart idea to use a third-party trustee who will help you have access to your assets at all times.

Remember that you will not see any returns unless you are retired if you open an Account. So, don't forget about the future!

Can I hold a gold ETF in a Roth IRA?

This option may not be available in a 401(k), but you should look into other options such as an Individual Retirement account (IRA).

An IRA traditional allows both employees and employers to contribute. A Employee Stock Ownership Plan, or ESOP, is another way to invest publicly traded companies.

An ESOP can provide tax advantages, as employees are allowed to share in company stock and the profits generated by the business. The tax rate on money that is invested in an ESOP is lower than if it was held in the employees' hands.

A Individual Retirement Annuity is also possible. An IRA lets you make regular, income-generating payments to yourself over your life. Contributions to IRAs will not be taxed

How much gold should your portfolio contain?

The amount of money you need to make depends on how much capital you are looking for. A small investment of $5k-10k would be a great option if you are looking to start small. Then as you grow, you could move into an office space and rent out desks, etc. This will allow you to pay rent monthly, and not worry about it all at once. You just pay per month.

You also need to consider what type of business you will run. In my case, I run a website-creation company. Our clients pay us between $1000-2000/month and depending on their order. This is why you should consider what you expect from each client if you're doing this kind of thing.

Freelance work is not likely to pay a monthly salary. The project pays freelancers. So you might only get paid once every 6 months or so.

So you need to decide what kind of income you want to generate before you know how much gold you will need.

I recommend starting with $1k to $2k of gold, and then growing from there.

Is gold a good investment IRA?

For anyone who wants to save some money, gold can be a good investment. It is also an excellent way to diversify you portfolio. But gold has more to it than meets the eyes.

It has been used throughout the history of currency and remains a popular payment method. It is often called “the most ancient currency in the universe.”

But gold, unlike paper currency, which is created by governments, is mined out from the ground. That makes it very valuable because it's rare and hard to create.

The supply and demand for gold determine the price of gold. When the economy is strong, people tend to spend more money, which means fewer people mine gold. The result is that gold's value increases.

On the flip side, people save cash for emergencies and don't spend it. This means that more gold is produced, which reduces its value.

This is why it makes sense to invest in gold for individuals and companies. If you invest in gold, you'll benefit whenever the economy grows.

Additionally, you'll earn interest on your investments which will help you grow your wealth. If gold's value falls, you don't have to lose any of your investments.


  • Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (
  • You can only purchase gold bars at least 99.5% purity. (
  • Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (
  • 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. (
  • 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) (

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How To

Three ways to invest in gold for retirement

It's essential to understand how gold fits into 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. A custodial account can be opened by a brokerage firm like Fidelity Investments if you already have an IRA. If you don't have any precious metals yet, you might want to buy them from a reputable dealer.

If you do invest in gold, follow these three simple rules:

  1. Buy Gold With Your Cash – Do not use credit cards to purchase gold. Instead, instead, transfer cash to your accounts. This will protect you from inflation and help keep your purchasing power high.
  2. Physical Gold Coins You Should Buy – Physical gold coins should be purchased over a paper certificate. It's easier to sell physical gold coins rather than certificates. Physical gold coins are also free from storage fees.
  3. Diversify Your Portfolio – Never put all of your eggs in one basket. In other words, spread your wealth around by investing in different assets. This helps reduce risk and gives you more flexibility during market volatility.

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

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