Disclosure: Some of the links you’ll encounter are affiliate links. If you click and buy something, I’ll get a commission. If you’re reading a review of some precious metals company, please understand that some of the links are affiliate links that help me pay my bills and write about what I love with no extra cost to you. Thank you!
What is a gold IRA?
Is it a good idea to invest in a gold IRA in 2023?
Read below to find out.
Table of Contents
What is a Gold IRA? How Do Gold IRAs Work?
Gold IRA (also called “precious metals IRA”) is a specialized individual retirement account (IRA) that lets investors hold gold and other precious metals as a qualified retirement investment.
Investors and savers can open gold IRAs through a specialized precious metals IRA company or through a custodian (a bank or brokerage firm that manages the account).
Gold IRA owners can hold within their portfolio physical metals such as gold bars and coins, or products minted from other IRS-approved precious metals, such as silver, platinum and palladium.
Gold IRA is kept separate from the traditional retirement account (stocks, mutual funds, or other traditional investments) of the investor, although the rules involving contribution limits and distributions are the same.
All gold, silver and other precious metals must be stored in an IRA-approved depository.
What are the Types of Gold IRA?
There are three types of Gold IRAs:
- Traditional gold IRA.
- Roth gold IRA.
- SEP gold IRA.
Traditional Gold IRAs
Traditional gold IRAS are retirement accounts funded with pretax dollars.
They are a good choice for people who expect their retirement income to be lower than their current income.
When you withdraw funds (at your income rate at the time), your money will be taxed at a lower rate than if it were taxed when you contributed it.
- Eligibility– You’re eligible if you’ve earned income.
- Funding method– pre-tax dollars.
- Contribution limit: $7,500 or $8 000 for those ages 50 or older for the tax year 2024.
- Tax-deductible contributions– Yes.
- Are withdrawals taxed– Yes.
- Early withdrawal rules- If you withdraw funds before age 59 ½, you’ll face a 10% penalty tax.
- Required minimum distributions (RMDs)- You’re required to begin taking distributions once you turn 73.
Roth Gold IRAs
Roth gold IRAs are a good option for people who expect a higher income in retirement. They’re funded with after-tax money, meaning you get no immediate tax advantage. Instead, you’ll pay taxes when it comes time to begin taking distributions at retirement.
- Eligibility– Your income must be under a certain limit ($228,000 for married couples filing jointly for tax year 2023 and $153,000 for individuals).
- Funding method- after-tax dollars (the money you contribute is taxed).
- Contribution limit– $7,500 or $8 000 for those ages 50 or older for the tax year 2024.
- Tax-deductible contribution– no.
- Are withdrawals taxed- no.
- Early withdrawal rules- You can withdraw funds at any time penalty-free and tax-free.
- Required minimum distributions (RMDs)- None.
SEP Gold IRAs:
SEP (Simplified Employee Pension) gold IRAs are available to self-employed individuals and employees of small businesses.
SEP gold IRAs have all the same features as traditional gold IRAs, except their contribution limit is significantly higher.
- Eligibility- self-employed individuals, small-business owners and employees of small businesses.
- Funding method- pre-tax dollars.
- Contribution limit- up to 25% of your self-employed compensation or $66,000 (whichever is greater) for the tax year 2023.
- Funding method- pre-tax dollars.
- Tax-deductible contribution- yes.
- Early withdrawal rules- You can withdraw money from a SEP gold IRA without penalty once you reach age 59 1/2. If you withdraw funds before then, you’ll need to pay taxes on the money withdrawn and face a 10% penalty.
- Are withdrawals taxed- yes
- Required minimum distributions (RMDs)- after you turn 73.
| Type of IRA | Traditional Gold IRA | Roth Gold IRA | SEP Gold IRA |
|---|---|---|---|
| Best for | People who expect their retirement income to be lower than their current income. | People who expect a higher income in retirement | Self-employed individuals and employees of small businesses. |
| Eligibility | Eligible if you've earned income | Your income must be under a certain limit ($228,000 for married couples filing jointly for tax year 2023 and $153,000 for individuals) | self-employed individuals, small-business owners and employees of small businesses. funding method- pre-tax dollars |
| Funding method | pre-tax dollars | after-tax dollars (the money you contribute is taxed) | pre-tax dollars |
| Contribution method | $6,500 or $7,500 for those ages 50 or older for the tax year 2023 | $6,500 or $7,500 for those ages 50 or older for the tax year 2023 | Up to 25% of your self-employed compensation or $66,000 (whichever is greater) for the tax year 2023 |
| Tax-deductible contribution | Yes | No | Yes |
| Are withdrawals taxed | Yes | No | Yes |
| Early withdrawal rules | If you withdraw funds before age 59 ½, you face a 10% penalty+ taxes | You can withdraw funds at any time penalty-free and tax-free | You can withdraw money from a SEP gold IRA without penalty once you reach age 59 1/2. If you withdraw funds before then, you'll need to pay taxes on the money withdrawn and face a 10% penalty. |
| Required minimum distributions | once you turn 73 | None | after you turn 73 |
What are the Pros and Cons (Risks) of Gold IRA?
There are plenty of pros and cons to gold IRAs.
Gold IRA Advantages
- Gold in an IRA acts as a hedge against inflation. Throughout history, many stocks and bonds have lost value but gold has never been worth zero. Gold IRA allows investors and savers to bet against uncertainty in the wider market.
- Tax advantages. A gold IRA offers similar tax advantages to an ordinary IRA, allowing interest to accumulate tax-free until the owner is ready to retire.
- Portfolio diversification- You need to spread your investments across several asset classes to maximize your returns and minimize the risk of losing it all. Portfolio diversification is essential to your long-term success as an investor. You should also find proprietary investment opportunities that can help you achieve your financial goals. By exploring a variety of investment options, you can build a diversified portfolio that suits your specific needs and helps you achieve your financial objectives.
Gold IRA Disadvantages
- Gold prices are highly volatile. This means the price can rise or fall both sharply and quickly. Gold IRA owners must take distributions when they turn 73 so they can find themselves forced to sell their assets for a lower price than they’d like.
- Gold IRAs have higher maintenance fees than other types of IRAs. Higher maintenance fees come from additional costs that are not present with other types of IRAS (brokerage fees, account setup fees, paying the IRA-approved custodian, markup, storage and insurance).
- Gold is a highly illiquid asset. It is difficult to find a buyer for large gold quantities without giving large discounts.
- Potential for a financial loss- Investing in gold comes with risk (like all forms of investing). If gold prices go down you will take a hit and lose money.
Is Gold IRA Investment a Good Idea?
Note: I’m not a financial advisor and this is not financial advice. Work with a professional if you intend to invest in gold and silver bullion.
Gold IRA investment could be a good idea for you if you want to diversify your IRA and have physical gold as a hedge against the incoming high inflation and economic uncertainty.
Gold IRA is not a good idea if you want guaranteed and fast returns on your investment. There are no guarantees when investing in gold and other precious metals and in the short term the prices may go down having you lose money in the process.
That said, bad economic times are brewing and historically gold has performed well during extended periods of financial uncertainty and volatility.
Still, any investment comes with inherent risk.
How to Set up a Gold IRA Account?
Setting up a gold IRA account is not possible with traditional custodians like conventional brokers.
Most custodians don’t offer specialty accounts like gold IRAs. Instead, you need to get in touch with a speciality custodian or a gold IRA company that can handle all the tax documentation and reporting necessary to maintain a gold IRA.
Although opening a gold IRA account and investing in gold is different from traditional IRAs, the rules are the same.
This means you can’t go over your annual contribution limits and you must follow the regulations involving distributions when it comes to making withdrawals.
- The IRS set contribution limits at $6,500 for 2023, increasing to $7,000 for 2024. You can contribute an additional $1,000 if you are 50 or older for a total of $7,500 in 2023 and $8,000 in 2024.
- You can start taking distributions without incurring any penalties from your IRA after you turn 59½. Withdrawals made before that age are subject to an extra tax of 10%.
Owning a gold IRA doesn’t mean you can have physical gold in your house. You can’t hold your gold bullion and coins under your mattress or even in a home safe box. If you do it’ll be counted as a withdrawal and you’ll have to pay early withdrawal taxes.
The solution is to store them in IRS-approved professional precious metals storage facilities (specialized banks and depositories).
Pro tip: properly setting up a gold IRA on your own is hard. You need professional help to get it done correctly and to help you with all the tax paperwork too. I recommend you use a service like Augusta Precious Metals.
Augusta Precious Metals is the best gold IRA company on the US market, they have excellent customer support, and they’re the only gold IRA company without a single complaint on BBB and other consumer watchdog websites.
You can read my Augusta Precious Metals review here. 3 other companies I highly recommend are Goldco Precious Metals (read my Goldco review here), American Hartford Gold (read my American Hartford Gold review here), and Oxford Gold Group (read my Oxford Gold Group review here).
Gold IRA and Investing in Gold IRA (FAQ)
Is Gold IRA Safe? Does it Help Protect Against Recession?
Gold IRA is safe because gold as a precious metal can never be worth zero. This means there will always be value to your gold bullion no matter what’s happening in the world. Especially during recession and lean years, your gold will serve as a hedge to keep you afloat.
Usually, the demand for gold and other precious metals rises during a recession because they are tangible assets investors can physically hold onto and can help diversify one’s investment portfolio.
That said, gold’s market value is highly volatile and while it tends to rise during high inflation and recession it can also drop during “peaceful” times.
What is an IRA-Approved Gold?
IRA-approved gold is gold that meets specific purity and other standards.
- Gold rounds and bars- These types of gold products must be produced by an approved mint and be 99.5% pure. Small bars must meet exact weight specifications.
- Gold coins- Gold coins must be 99.5% pure, with the only exception being the popular American Gold Eagle coin which has 91.67% purity. Coins must also come with a certificate of authenticity, be in mint condition and be encapsulated in their original packaging.
Can You Add Platinum and Palladium Precious Metals to Your Gold IRA?
You can add both platinum and palladium products to your gold IRA. Just because it’s called “gold IRA” it doesn’t mean you must invest in physical gold only.
Platinum IRA, palladium IRA and silver IRA are common alternative choices.
Can I Add Rhodium to My Gold IRA?
You can’t add rhodium to your gold IRA. Rhodium is not an IRA-approved precious metal. Barely a gold IRA company operating on the American market stocks rhodium bars and coins.
What are the Ways to Fund a Gold IRA Account?
There are three ways to fund a gold IRA account.
Transfers– When you open a gold IRA your original IRA custodian can transfer funds directly to your new custodian on your behalf. These transfers do not require government reporting and you can make them without penalties.
401 rollover- You can roll over your 401(k) balance or other qualified retirement plan into a precious metals IRA. You can do an indirect or a direct rollover.
Cash purchases- you can use cash to fund your new gold IRA account. It’s easy to do either by yourself or with the help of a gold IRA company.
Is Gold IRA a Self-Directed IRA?
Gold IRA is a self-directed IRA.
A self-directed individual retirement account is an IRA that allows alternative investments for retirement savings.
In a self-directed gold IRA, a custodian administers the account, but the account’s holder makes the investing decisions.
This type of IRA is directly managed by the account holder, which is why it’s called a self-directed IRA.
Can You Own Gold in an IRA?
You can own gold in an IRA. You can buy IRA-approved gold bullion, but you must store it in an IRA-approved depository.
Can I Own Gold Outside of My Gold IRA?
You can own gold outside of your gold IRA. For example, you can buy gold coins and bars from a precious metals dealer company and have those delivered to your home.
The key is to purchase gold outside of your IRA because gold bullion in the IRA can’t be stored in your home. You must deposit it in a IRA-approved depository or bank.
Where Will the Gold in My Gold IRA Be Stored?
The gold in your gold IRA will be stored in IRA-approved depositories.
The biggest IRA-approved depositories are:
- Delaware Depository Service Company (DDSC), Wilmington, DE
- International Depository Services (IDS), New Castle, DE, Toronto, Canada, and Ontario, Canada
- Brink’s Global Service, Los Angeles, CA, Salt Lake City, UT, and Springfield Gardens, NY
- CNT Depository, Bridgewater, MA
- First State Depository, Wilmington, DE
Note: if you decide to open your gold IRA with a company like Goldco or Augusta Precious Metals they will let you pick where you want your bullion to be stored. For your convinces you can store it closest to your home.
What are the Best Gold IRA Companies?
The best gold IRA companies are:
- Augusta Precious Metals;
- Birch Gold Group (read my Birch Gold Group review here);
- American Hartford Gold;
- Advantage Gold;
- Oxford Gold Group;
- Patriot Gold Group;
- Regal Assets;
- American Bullion, Inc;
- Silver Gold Bull Inc;
- Noble Gold Investments (read my Noble Gold Investments review here);
- Lear Capital, Inc;
- Goldco Direct LLC.
Is it Hard to Find a Custodian To Manage My Gold IRA?
It is hard to find a custodian to manage your gold IRA.
Primary custodians will not receive your gold or take steps to facilitate the purchase and transfer of gold or other precious metals.
This leaves you with the option of searching for specialized custodians by yourself.
Or you can employ the service of a gold IRA company that can connect you with the right custodian through their network.
I suggest you do the latter, it’s much easier.
Gold IRA companies specialize in helping American savers invest in gold and silver and their job is to ensure all documents are completed properly and in order.
These companies are also really affordable. For example, if you go with Augusta Precious Metals as your choice you will pay just $200/yr management fees (learn about Augusta Precious Metals fees here)
And Augusta will do all the work for you.
Can I Own a Gold IRA Without a Custodian?
You can own a gold IRA without a custodian. But it’s not easy.
You can open what’s known as a “checkbook IRA,”
Checkbook IRA is a self-directed IRA that doesn’t require custodial management.
However, setting up a checkbook IRA is complicated because you need to have a business checking account and you must be registered as an LLC (limited liability company) (LLC).
Pro tip: On a checkbook IRA you’re allowed to purchase and hold gold American Eagles, a U.S. Treasury–minted coin. You don’t need a custodian and you don’t need to pay storage fees to a depository.
No other coin types are allowed on checkbook IRA.
Am I Allowed to See the Precious Metals in My Gold IRA? And How Often?
You are allowed to see your precious metals in your gold IRA. And you can visit your gold as many times as you want.
All you need to do is contact your custodian and arrange for a visit to a depository that’s storing your gold.
Pro tip: If you opened your gold IRA via a precious metals IRA company then contact them first so they can arrange a visit to the depository.
Will I Need to Pay a Penalty for Withdrawing My Gold Early?
You will need to pay a 10% penalty for early withdrawals from your gold IRA. Early withdrawals are those you make before you turn 59 1/2.
The reason for this 10% penalty is that retirement funds are invested from your pre-tax income (meaning they’re not taxed).
Should I Get a Loan to Open a Gold IRA Account?
You shouldn’t be getting in debt to open a gold IRA account. Getting help from reputable loan companies (a good example I’ve used in the past is NowLoan.co.uk) is useful in times of economic urgency and crisis, but that’s not the case when opening a gold IRA account.
Instead, rollover part of your traditional IRA into a gold IRA.
Can I add Bitcoin and Other Cryptocurrencies to My Gold IRA Account?
You can’t add neither Bitcoin nor any other type of cryptocurrency to your gold IRA account. Your gold IRA account can only hold coins and bars minted from gold or other approved precious metals, such as silver, platinum, or palladium.
You can also invest your gold IRA funds in gold-related paper investments, such as:
- Stock in gold mining companies
- Precious metals commodity futures
- Precious metals mutual funds
- Exchange-traded funds (ETFs)
Check out my iTrustCapital review if you’re interested in opening a crypto IRA. My guide to the best Bitcoin IRA companies is also a valuable read.
What is a Gold IRA? Is Investing in Gold IRA a Good Idea (Conclusion)?
A Gold IRA is a self-directed Individual Retirement Account that allows investors to hold physical precious metals (palladium, platinum, silver and gold) as investments within the account.
Gold IRA works similarly to a traditional IRA.
It has the same tax advantages attached to it but comes with the added benefit of holding valuable precious metals that serve as a hedge against inflation and economic turmoil.
Do you now know what a gold IRA is?
LMK in the comment section below.
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.