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Pros and cons of gold IRA in 2024…
What are the advantages and disadvantage of gold IRAs in 2024?
Learn about it in my guide right below.
And use these jump links to get there faster:
Gold IRA Pros:
- Pro 1- Inflation Protection
- Pro 2- Potential for Growth
- Pro 3- Portfolio Diversification
- Pro 4- Tangible Asset Security
- Pro 5- Tax Advantages
- Pro 6-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- Lower Returns Compared to Other Investment Vehicles
- Con 6- Home Storage is Not Allowed
- Con 7- 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 IRA for 2024:
| Gold IRA Pros | Gold IRA Cons |
|---|---|
| Inflation protection | Aditional costs |
| Potential for growth | No immediate access to funds |
| Portfolio diversification | High volatility |
| Tangible asset security | Limited IRA-eligible products |
| Tax advantages | Lack of dividends |
| Self-directed IRA investment control | Lower returns compared to other investment vehicles |
| / | Home storage is not allowed |
| / | Plenty of gold IRA scams |
Gold IRA Pros
Gold IRA pros in 2024 are:
- Pro 1- Inflation protection
- Pro 2- Potential for Growth
- Pro 3- Portfolio diversification
- Pro 4- Tangible asset security
- Pro 5- Tax advantages
- Pro 6- Self-directed investment control
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 will never be zero as long as gold’s usage across various industries remains strong (at least 11% of all gold mined in a given year will be 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- Potential for Growth
Gold is known to generally and gradually grow in value with the passage of time. But sometimes that growth can be fast and exponential. For example, gold rose from $35 per ounce to over $850 per ounce between 1971 and 1980.
This was a stupendous gain of over 2,000% for gold investors and holders.
Take a look at the graph below and also notice how the price of gold is resistant to high inflation. In fact, as inflation rose so did the value of gold.
And inflation eats the value of your paper money.
Another example closer to home is that during the recent global COVID-19 pandemic in August 2020, gold’s value reached $2,037 per troy ounce.
And don’t forget that at the beginning of 2020 gold’s price hovered around $1,500 per ounce.
These two example serve to show you how economic hardships usually propel the price of gold onward netting huge profits for gold (and gold IRA) owners and investors.
Pro 3- 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.
This is 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 will help limit your losses even if one specific investment fails to provide profits.
Pro tip: there’s diversification in asset classes i.e., investing in both precious metals and stocks and bonds. But there’s also diversification within the chosen assets class.
In precious metals’s case it’s often better to invest in gold, silver, platinum and palladium combined then to just invest in gold or sliver or platinum or palladium.
Why?
Because you don’t want to tie your fortune to one precious metal even if you’re 100% sure it will appreciate in the future (and there’s never 100% certainty with any investment).
It’s probably best to hedge your bets by investing in 4 different precious metals so that you at least break even if, for example, the price of gold drops but the value of platinum rises at the same time.
When it comes to gold IRAs, most companies only sell gold and silver because there’s way more of those precious metals compared to platinum and palladium.
However, there are exceptions and a company like Birch Gold Group will be able to sell you bullion made of all four precious metals.
Pro 4- 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.
Pro 5- Tax Advantages
As with any other retirement account, a huge benefit of a gold IRA investment are tax advantages that come with it.
So, how does taxation in gold IRA accounts work?
Well, you open and fill your gold IRA account with pre-taxed money. Once you reach your retirement age (when you reach age 73), you get distributions on that money (gold).
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 can 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 6-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.
What do you think about it? Do you prefer to make your own investing decisions? Or do you like to follow the pack?
Gold IRA Cons
Gold IRA cons for 2024 are:
- Con 1- Additional Costs
- Con 2- No immediate access to funds
- Con 3- High Volatility
- Con 4- Limited products IRA eligible
- Con 5- Lack of Dividends
- Con 6- Lower returns compared to other investment vehicles
- Con 7- Home Storage is Not Allowed
- Con 8- Plenty of gold IRA scams
Con 1- Additional Costs
Gold IRA accounts come with additional costs that don’ 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.
Then you need to pay a fixed custodian and precious metals depository fees. And then you have to pay the latter two fees for as long as you keep your gold IRA account open and until you liquidate your precious metals.
Depending on your age that could be a lot of time and a lot of fees to pay.
That said, the fees you pay are truly minuscule compared to the value of gold and silver you have stored in your account.
Most legitimate 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 if you buy gold worth $200 000, and you pay $200 account maintenance fees, then you pay 1 thousandth part of the full value of the metals you own.
Note: the gold IRA companies with the lowest fees are Augusta Precious Metals, and Birch Gold Group.
You can read my Augusta Precious Metals review here and Birch Gold Group review here. Any of these links will open in a new tab so you won’t lose your place here.
Con 2- No Immediate Access to Funds (Lower Liquidity)
Gold in your IRA is always going to be worth something, as gold is an excellent store of value. But, the problem is that gold is also a highly illiquid asset, especially when selling large quantities of it. This means it can be hard to sell your precious metals and make profit while doing it.
Especially if you urgently need the money then you will need to make a compromise on price and potentially incur a net loss with a sale.
Pro tip: if you bought precious metals via a gold IRA company, then make sure you 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 here, my Advantage Gold review here and my Preserve Gold review here.
Another option you have to 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.
Simply go to JM Bullion’s “sell-to-us” tool and begin the process of liquidating your metals.
Note: you can read here my JM Bullion review.
Con 3- High Volatility
Gold’s price is highly volatile which makes investing in gold a risky business. Just as it’s possible that gold will appreciate it’s also possible it’ll lose on value which will automatically lower the value of your bullion.
It’s key to think strategically when investing in gold and other precious metals. For example, while short term they may lose value, over a 10 year period they might greatly appreciate netting you a nice profit.
But once you reach your retirement age you’ll need to start liquidating your gold and it might happen that at that point gold is worth far less that when you bought it. If you sell then you’ll incur a loss.
Pro tip: you can ameliorate this problem by taking the total amount of your RMDs from other traditional IRAs.
Note: out of the four IRA-approved precious metals gold is the least volatile while platinum is the most volatile (because it has a smaller market share and lower trade volume). Silver and palladium fall in the middle even though their prices can also jump up and down depending on demand.
Con 4- Limited IRA-Eligible Products
Although there are hundred of different coins and bars you can buy across the four main precious metals (gold, silver, platinum and palladium), only a handful of these are IRA-approved.
This means 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.
Read my guide to IRA-eligible gold here.
Con 5- Lower Returns Compared to Other Investment Vehicles
Gold and other precious metals don’t pay any dividend or yield to the owner. This is in stark contrast to stocks and bonds which gradually make their owner richer YoY.
With precious metals, the only opportunity for profit comes from the appreciation of the precious metal prices themselves.
Given that the stock market typically rises by about 10% in an average year, it would be very rare for a gold IRA to outperform other types of retirement investments.
Con 6- Home Storage is Not Allowed
The IRS doesn’t allow savers and investor to keep the gold-IRA-account precious metals at their homes or anywhere else save from approved depository’s.
This is a con because most people would like to have their coins and bars closer to them, if not under their mattress or floorboards.
The saving grace here is that if you work with a legitim gold IRA company you’ll be able to pick the depository closest to you to store your metals. And the company you chose (and the custodian you pick to work with) 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 no exchanged with any other bullion.
Con 7- Plenty of Gold IRA Scams
Another con to gold IRAs is the prevalence of gold IRA scams on the web. Because there’s a lot of money in the gold IRA niche, there are plenty of scammers and fraudsters trying to cheat honest people out of their hard-earned retirement money.
For example, if you read my guide to the common gold IRA scams you’ll 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 all the money he stole is probably lost forever.
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.
You can check the link above to learn more which company I deem are the best, but in general:
- 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 (for example, Oxford Gold Group are a shining example of both a young and excellent gold investment company. Read my Oxford Gold Group review here.)
- Pick a company that’s flexible and caters to your approach. One-size-fits-all approach is not optimal when choosing a gold IRA company.
- Pick a company that that has all the appropriate and required licenses, registrations, insurance, and bonds to protect your investment.
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The Pros and Cons of Gold IRA- (Conclusion)
My guide to the pros and cons of gold IRA in 2024 is over.
It’s up to you to decide whether you should open a gold IRA account or not. You need to carefully consider all the pros and cons and then decide, hopefully with the help of a qualified financial advisor.
Just as a reminder here are the pros and cons of gold IRA repeated right below. You can use these jump links to quickly go to the section that interests you the most.
Gold IRA Pros in 2024 are:
- Pro 1- Inflation Protection
- Pro 2- Potential for Growth
- Pro 3- Portfolio Diversification
- Pro 4- Tangible Asset Security
- Pro 5- Tax Advantages
- Pro 6-Self-Directed Investment Control
Gold IRA Cons in 2024 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- Lower Returns Compared to Other Investment Vehicles
- Con 6- Home Storage is Not Allowed
- Con 7- 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.