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What’s a Gold IRA?
How does gold IRA work and are gold IRA’s a good idea?
Read below to find out.
TLDR version:
- A gold IRA is a retirement account that lets investors hold gold bullion (gold coins and bars) and other precious metals as investments.
- You can set up a gold IRA with after-tax or pretax dollars through a specialized custodian or broker.
- The IRS allows self-directed IRA holders to purchase gold, silver, platinum, and palladium bars, coins to include in their IRA accounts.
- Gold IRAs carry higher fees than ordinary IRAs since they require purchasing and storing precious metals with gold IRA depositories.
- IRS caps the annual contributions.
Here’s an awesome quiz about gold IRAS based on this post. Take if after you’ve read my guide for best results.
Table of Contents
What’s a Gold IRA? How Do Gold IRAs Work?
Gold IRA (also called “precious metals IRA”) is a specialized individual retirement account that lets investors hold gold and other precious metals as a qualified retirement investment.
Investors and savers open gold IRAs through a specialized precious metals IRA companies or through a custodian (a bank or brokerage firm that manages the account).
Gold IRA owners can hold within their portfolio physical gold bars and coins. Or they can hold coins and bars minted from other IRS-approved precious metals (silver, platinum and palladium).
Gold IRA is kept separate from the traditional retirement account (stocks, mutual funds and other traditional investments) of the investor, although the contributions and distributions rules are the same.
All IRA gold, silver, platinum and palladium must be stored in an IRA-approved depository.
What are the Types of Gold IRA?
There’re three types of Gold IRAs:
- Traditional gold IRA.
- Roth gold IRA.
- SEP gold IRA.
Traditional Gold IRAs
Traditional gold IRASÂ are retirement accounts funded with pretax dollars.
They’re a good choice for people who expect their retirement income to be lower than their current income.
Meaning when you withdraw funds your money will be taxed at a lower rate than if it were taxed when you contributed it.
Traditional gold IRA requirements:
- Eligibility– You’re eligible if you’ve earned income.
- Funding method–Â pre-tax dollars.
- Contribution limit: $7,500 or $8 000 for those ages 50 or older.
- Tax-deductible contributions– Yes.
- Are withdrawals taxed– Yes.
- Early withdrawal rules- You’ll face a 10% penalty tax if you withdraw funds before age 59 ½.
- Required minimum distributions (RMDs)-Â 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.
Roth gold IRA is funded with after-tax money. Meaning you get no immediate tax advantage and instead, you pay taxes when it comes time to begin taking retirement distributions.
Roth gold IRA requirements:
- Eligibility– Your income must be under a certain limit ($228,000 for married couples filing jointly 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.
- 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 same features as traditional gold IRAs, with a significantly higher contribution limit.
SEP gold IRA requirements:
- Eligibility- self-employed individuals, small-business owners and small business employees.
- Funding method- pre-tax dollars.
- Contribution limit- up to 25% of your self-employed compensation or $66,000 (whichever is greater).
- Funding method-Â 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. You’ll pay taxes on the withdrawn money and face a 10% penalty if you withdraw funds before then.
- 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 small business employees. |
| Eligibility | Eligible if you've earned income. | Your income must be under a certain limit ($228,000 for married couples filing and $153,000 for individuals) | self-employed individuals, small-business owners and small business employees. |
| 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. | $6,500 or $7,500 for those ages 50 or older. | Up to 25% of your self-employed compensation or $66,000 (whichever is greater). |
| Tax-deductible contribution | Yes | No | Yes |
| Are withdrawals taxed | Yes | No | Yes |
| Early withdrawal rules | You face a 10% penalty+ taxes if you withdraw funds before age 59 ½, | Penalty-free and tax-free funds withdrawal at any time | Withdraw money from a SEP gold IRA without penalty once you reach age 59 1/2. You'll need to pay taxes on the withdrawn money 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- Spreading your investments across several asset classes can potentially maximize your returns and minimize the risk of losing it all.
None of this is financial advice. Always talk to a professional before investing.
Gold IRA Disadvantages
- Gold prices are highly volatile. Meaning 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 aren’t 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’s difficult to find a buyer for large gold quantities without giving large discounts.
- Potential for a financial loss- Investing in gold comes with risks (like all forms of investing). You’ll take a hit and lose money if gold prices go down.
None of this is financial advice. Always talk to a professional before investing.
Is Gold IRA Investment a Good Idea?
Note: I’m not a financial advisor and this isn’t 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 high inflation and economic uncertainty.
Gold IRA isn’t a good idea if you want guaranteed and fast returns on your investment. There’re 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.
How to Set up a Gold IRA Account?
Setting up a gold IRA account isn’t possible with traditional custodians and brokers.
Most custodians don’t offer specialty accounts like gold IRAs. Instead, you need to get in touch with a specialized custodian or a gold IRA company that can handle all the tax documentation and reporting necessary to maintain a gold IRA.
The rules are the same even though opening a gold IRA account is different from traditional IRAs.
Means you can’t go over your annual contribution limits and you must follow the regulations involving distributions when it comes to making withdrawals.
Owning a gold IRA doesn’t mean you 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. It’ll be counted as a withdrawal If you do and you’ll have to pay early withdrawal taxes.
The solution is to store gold IRA metals in IRS-approved storage facilities (specialized banks and depositories).
Good examples of IRA-approved depositories are Delaware Depository and Texas Precious Metal Depository.
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. I recommend you use a service like Augusta Precious Metals.
Augusta Precious Metals is the best gold IRA company on the US market. They’ve excellent customer support and they’re the only gold IRA company without a single complaint on BBB and other consumer watchdog websites.
Read my Augusta Precious Metals review here. 2 other companies I highly recommend are Birch Gold Group (read my Birch Gold Group review here) and American Hartford Gold (read my American Hartford Gold review here).
Gold IRA and Investing in Gold IRA (FAQ)
Are Gold IRA’s Safe? Do They Help Protect Against Recession?
Yes, gold IRA’s are safe because gold as a precious metal can never be worth zero.
Meaning there will always be value to your gold bullion no matter what’s happening in the world.
The demand for gold and other precious metals usually rises during a recession. It’s because these are tangible assets investors can physically hold onto.
That said, gold’s market value is highly volatile. And while the price of gold tends to rise during high inflation and recession, it can also drop during “peaceful” times.
What’s an IRA-Approved Gold?
IRA-approved gold is gold that meets specific purity and other standards.
- Gold rounds and bars- These 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 with 91.67% purity. Coins must also come with a certificate of authenticity, be in mint condition and be encapsulated in their original packaging.
Is it Possible to add Silver, Platinum and Palladium Precious Metals to a Gold IRA Account?
Yes, it’s possible to add silver, platinum and palladium precious metals to a gold IRA account.
Just because it’s called “gold IRA” it doesn’t mean you must invest in physical gold only.
Is it Possible to add Rhodium to a Gold IRA Account?
No, it isn’t possible to add rhodium to a gold IRA account. Rhodium isn’t an IRA-approved precious metal. Rarely an American gold IRA company stocks rhodium bars and coins.
The 3 other “exclusive” precious metals are Iridium, Osmium and Ruthenium.
- You can’t add Iridium to your gold IRA account because Iridium isn’t an IRA-approved precious metal.
- You can’t add Osmium to your gold IRA account because Osmium isn’t an IRA-approved precious metal.
- You can’t add Ruthenium to your gold IRA account because Ruthenium isn’t an IRA-approved precious metal.
Is it Possible to add Rare, Numismatic Coins to a Gold IRA Account?
No, it’s not possible to add rare, numismatic coins to a gold IRA account.
Rare numismatic coins aren’t IRA approved.
Is Gold IRA the Same as Silver IRA?
Yes, gold IRA is is the same as silver IRA.
Both gold IRA and silver IRA are SDIRA’s that allow let you add gold, silver platinum and palladium bullion to them.
Is Gold IRA the Same as Platinum IRA?
Yes, gold IRA is is the same as platinum IRA.
Both gold IRA and platinum IRA are SDIRA’s that let you add gold, platinum, silver and palladium bullion to them.
Is Gold IRA the Same as Palladium IRA?
Yes, gold IRA is is the same as palladium IRA.
Both gold IRA and palladium IRA are SDIRA’s that let you add gold, palladium, silver and platinum bullion to them.
What are the Ways to Fund a Gold IRA Account?
There’re three ways to fund a gold IRA account.
Transfers– Your original IRA custodian can transfer funds directly to your new custodian on your behalf when you open a gold IRA. These transfers don’t 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-Â 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?
Yes, 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 I Own Physical Gold Outside of My Gold IRA?
Yes, 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 physical gold outside of your IRA because gold bullion from your 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 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.
You’ll be able to pick where you want your IRA gold stored if you work with Augusta Precious Metal. It’s one of the many perks this gold investment company offers to its US customers.
Can I Own a Gold IRA Without a Custodian?
Yes, 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.
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?
Yes you are allowed to see your precious metals in your gold IRA. And depending on the depository you’ll be able to 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: Contact the IRA company you worked with so they can arrange a visit to the depository for you.
Can I add Bitcoin and Other Cryptocurrencies to My Gold IRA Account?
No, you can’t add 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 and other approved precious metals (silver, platinum and palladium).
You can also invest your gold IRA funds in gold-related paper investments, such as:
- Stocks 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.
