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Pros and cons of gold IRA…
What are the advantages and disadvantage of gold IRAs? And is it still worth it getting a gold IRA account?
Learn about it in my guide right below.
Gold IRA Pros:
- Pro 1- Inflation Protection
- Pro 2- Portfolio Diversification
- Pro 3- Tangible Asset Security
- Pro 4- Tax Advantages
- Pro 5-Self-Directed Investment Control
Gold IRA Cons:
- Con 1- Additional Costs
- Con 2- No Immediate Access to Funds (Lower Liquidity)
- Con 3- High Volatility
- Con 4- Limited IRA-Eligible Products
- Con 5- Home Storage isn’t Allowed
- Con 6- Plenty of Gold IRA Scams
Table of Contents
The Pros and Cons of Gold IRA Overview
Here are the pros and cons of gold and silver IRAs:
| Gold IRA Pros | Gold IRA Cons |
|---|---|
| Inflation protection | Aditional costs |
| Portfolio diversification | No Immediate Access to Funds (Lower Liquidity) |
| Tangible asset security | High volatility |
| Tax advantages | Home storage isn't allowed |
| Self-directed IRA investment control | Limited IRA-Eligible Products |
| / | Plenty of gold IRA scams |
Gold IRA Pros
Gold IRA pros are:
Pro 1- Inflation Protection
A gold IRA has many of the same advantages as investing in gold does.
Gold is frequently used as a hedge against inflation, allowing investors to bet against uncertainty in the wider market. While it is possible for the price of a specific stock or bond to fall to zero, the price of gold can never fall to zero.
And it’ll never be zero as long as gold’s usage across various industries remains strong. For example, at least 11% of all gold mined in a given year is used across various industries ranging from medicine to space exploration).
Bottom line: a gold IRA can serve as a good hedge against inflation but is also concentrated in a single asset class, which is a risk on its own.
Pro 2- Portfolio Diversification
The primary advantage of a gold IRA investment is diversification. Successful investors typically spread their funds across various assets or companies, making sure not to put all their eggs in one basket.
This precautionary strategy is rooted in the unpredictability of individual assets or companies – they might experience a decline or a total crash leaving you with significant losses or with noting.
It’s where gold and other precious metals come in. Precious metals is an asset class that doesn’t immediately get impacted by stock market failures.
Hence, diversifying your investment portfolio with gold, silver platinum and palladium might help limit your losses even if one specific investment fails to provide profits.
Pro 3- Tangible Asset Security
Gold and other precious metals are tangible assets with practical applications, making them a secure investment option for a gold IRA.
The metals’ diverse uses in electronics, medicine and even space exploration show their inherent value and enduring demand.
By opening a gold IRA and filling it with diverse precocious metal bullion you’ll be securing a tangible asset that can offer a dose of stability and security in times of high inflation and turbulent economic situation.
Of course the market is unpredictable so there’re no real guarantees. Speak with your financial advisor before doing anything.
Pro 4- Tax Advantages
A huge benefit of a gold IRA investment are potential tax advantages that come with it.
How does taxation in gold IRA accounts work?
You open and fill your gold IRA account with pre-taxed money. You get distributions on that money (gold) once you reach your retirement age (when you reach age 73),
The clear pro and advantage here is that you only get taxed once in this investment.
In an ordinary situation, you must pay income tax when you earn money. Afterwards, you must also pay capital gains tax when you withdraw the money from your investment.
But with a gold IRA investment, you save more by paying a one-time tax.
This tax is charged at a specific time, either when you fund your IRA account (in a Roth gold IRA) or seek withdrawals from it (in a traditional gold IRA).
Pro 5-Self-Directed Investment Control
Some would say this is a con, but most investors feel that (with the help of a qualified financial advisors) they can make their own decisions.
Gold IRA Cons
Gold IRA cons are:
Con 1- Additional Costs
Gold IRA accounts come with additional costs that don’t exist with other types of IRAs.
First, you need to pay a gold IRA company to open your account. This is always a one-time account setup fee.
The gold IRA companies with the lowest fees are Augusta Precious Metals, and Birch Gold Group.
Augusta Precious Metals even waive all fees for up to 10 years for all of their customers.
You can read my Augusta Precious Metals review here and Birch Gold Group review here.
Then you need to pay fees for custodians and precious metals IRA depositories.
And you have to pay these fees for as long as you keep your gold IRA account open and until you liquidate your precious metals (unless you use Augusta Precious Metals as they will waive all fees for full 10 years).
That could be a lot of money to pay depending on your age and when you’ve opened your gold IRA account.
However, the fees you pay are truly minuscule compared to the value of gold and silver you’ve stored in your account.
Most legitimate US gold IRA companies only charge between ~$180-$200/yr for storage, insurance and security of your precious metal bullion. It’s not nothing, but it’s close.
For example, you’ll pay 1 thousandth part of the full value of the metals you own if you buy gold worth $200 000, and you pay $200 account maintenance fees.
Again, there’re no fees with Augusta Precious Metals for up to 10 years. All customers qualify for this savings feature.
Con 2- No Immediate Access to Funds (Lower Liquidity)
Gold is an excellent store of value and precious metals in your IRA are always going to be worth something. But, gold is a highly illiquid asset, especially when selling large quantities of it quickly.
Meaning it can be hard to sell your precious metals and make profit while doing it.
You’ll need to make a compromise on price and potentially incur a net loss with a sale, especially if you urgently need the money.
Pro tip: check to see whether your company has a precious metal buyback program. They almost certainly will have and it’s going to be the fastest and safest way for you to quickly liquidate your precious metals
Gold investment companies with excellent buyback programs are Noble Gold Investments, Advantage Gold and Preserve Gold.
None of these companies have liquidation fees for people looking to sell back their coins and bars.
Read my Noble Gold Investments review, Advantage Gold review, and my Preserve Gold review here.
You can also get in touch with JM Bullion and sell your precious metals to them. JM Bullion are a huge online precious metal dealer and they’re always hungry for more precious metals to acquire and then later resell.
Go to JM Bullion’s “sell-to-us” tool and begin the process of liquidating your metals.
Read here my JM Bullion review.
Con 3- High Volatility
Investing in gold is risky business as gold’s price is highly volatile and fluctuates daily. Just as it’s possible gold will appreciate, it’s also possible it’ll lose value which will automatically lower the value of your gold IRA bullion.
Think strategically when investing in gold and other precious metals. For example, while in short term they may lose value, over a 10 year period they might greatly appreciate netting you a nice profit.
But, you’ll need to start liquidating your gold once you reach your retirement age and it might happen that at that point gold is worth far less than when you bought it.
You’ll incur a loss from your sell.
Platinum is the most volatile out of the four IRA-approved precious metals. Because platinum has a smaller market share and lower trade volume. Gold is the least volatile noble metal while silver and palladium fall in the middle of volatility charts.
Con 4- Limited IRA-Eligible Products
Only a handful of coins and bars are IRA-approved even though there’re hundred of different coins and bars you can buy across the four main precious metals.
Meaning you’ll be able to fill your gold IRA account with a limited number of different types of coins and bars.
For example, Augusta Precious Metals offer dozens of gold and silver coins you can buy. But only a small handful of them are IRA-approved gold coins and bars.
Con 5- Home Storage isn’t Allowed
The IRS doesn’t allow savers and investors to keep their gold IRA precious metals at their homes or anywhere else save from approved depository’s.
It’s a con because most people would like to have their coins and bars as close to them as possible.
The saving grace here is that you’ll be able to pick the depository physically closest to you to store your metals if you work with a legitimate gold IRA company.
And the company you chose will be able to arrange for you to visit your bullion anytime you want.
You can also pay a little bit extra to have your bullion physically segregated from other peoples valuables. This ensures the coins and bars you initially bought are always assigned to your name and aren’t exchanged with any other bullion.
Con 6- Plenty of Gold IRA Scams
Another con to gold IRAs is the prevalence of gold IRA scams on the web. There’re plenty of scammers and fraudsters trying to cheat honest people out of their hard-earned retirement money.
For example, read my guide to the common gold IRA scams and learn how one scammer (Tyler Gallagher, the former CEO of Regal Assets) defrauded hundreds of people of millions of dollars of their retirement savings.
Tyler later disappeared and is yet to be found and the money he stole is lost forever.
A more recent example is that of Oxford Gold Group.
Recently, this seemingly legit gold IRA company was found out to be scamming people out of their retirement savings.
According to Law Commentary:
“A Beverly Hills gold investment group is under federal investigation amid a brewing class action lawsuit. Oxford Gold Group is facing mounting allegations of fraud and deceptive practices as allegations emerge that it did not invest client funds appropriately and instead used the money for its own gain.”
How to Pick a Gold IRA Company?
Gold IRA scams abound, but it’s also very easy to avoid all of these scams. All you need to do is pick a reputable gold IRA company.
- Pick a company that’s transparent about their fees and pricing;
- Pick a company that’s been doing business for a long time. Longer=better, though there are exceptions to this rule.
- Pick a company that’s flexible and caters to your approach. One-size-fits-all approach isn’t optimal when choosing a gold IRA company.
- Pick a company that that has all the legally required licenses, registrations, insurance, and bonds to protect your investment.
- Pick a company that sells real gold bullion.
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Pros and Cons of Gold-Backed IRA: Gold Investment Advantages and Disadvantages Explained! (Conclusion)
My guide to the pros and cons of gold IRA is over.
It’s up to you to decide whether you want to open a gold IRA account or not.
Carefully consider all the pros and cons of owning a self-directed gold IRA account and then decide. Speak with your financial advisor before you invest in gold or any other precious metals.
Here are the pros and cons of gold IRA repeated right below.
Gold IRA Advantages (Pros) are:
- Pro 1- Inflation Protection
- Pro 2- Portfolio Diversification
- Pro 3- Tangible Asset Security
- Pro 4- Tax Advantages
- Pro 5-Self-Directed Investment Control
Gold IRA Disadvantages (Cons) are:
- Con 1- Additional Costs
- Con 2- No Immediate Access to Funds (Lower Liquidity)
- Con 3- High Volatility
- Con 4- Limited IRA-Eligible Products
- Con 5- Home Storage isn’t Allowed
- Con 6- Plenty of Gold IRA Scams
Nikola Roza
Nikola Roza is a blogger behind Nikola Roza- SEO for the Poor and Determined. He writes for bloggers who don't have huge marketing budget but still want to succeed. Nikola is passionate about precious metals IRAs and how to invest in gold and silver for a safer financial future. Learn about Nikola here.
