Gold-backed IRA Pros and Cons

Investment strategies can be daunting and require careful consideration. For those looking to add gold to their retirement portfolio, a gold-backed IRA may be the best way to do so.

As with any investment, one should do their research and understand the pros and cons before investing.

Gold IRA Pros

Gold backed IRA

Permanent Hold Physical Gold

One of the most significant advantages is the permanent hold that gold offers. Gold has been a reliable and stable form of currency for centuries, and its value has consistently increased over the years.

This makes it a reliable investment that can help to protect your retirement savings from the risks of inflation, market volatility, and currency devaluation.

Greater Command

With a gold-backed IRA, investors are able to choose the type of gold they hold in the account, such as an individual retirement account, as well as the amount and purity of the gold, providing them with greater flexibility when it comes to diversifying their retirement planning.

Gains from Taxes

With a gold-backed IRA, investors can benefit from the capital gains tax exemption, which means they will not have to pay taxes on any profits they make from their investments.

The tax rules for gold-backed IRAs are generally more favorable than those for other types of retirement accounts, making them an attractive option for those wanting to minimize their tax liability.

Furthermore, the potential for higher returns is much higher with gold-backed IRAs than with traditional investments, making them an even more attractive choice.

Gold IRA cons

Higher Prices and Funding Limitations

Gold prices are notoriously volatile and can swing significantly in a short period of time, meaning that investors can potentially pay too much for their actual gold if they do not keep a close eye on the market.

The value of gold can also be affected by a wide range of geopolitical and economic factors, which can be difficult to predict and navigate.

As a result, it is important for investors to be aware of the risks associated with a gold IRA account, such as losing money or cash-out costs, and exercise caution when investing.

An inflation hedge in a gold-backed IRA is an attractive option for those seeking a safe and secure way to invest their funds.

There may be fees associated with purchasing gold for a gold-backed IRA, including the cost of purchasing and storing the gold, which can further reduce the individual’s return.

Furthermore, the cost of gold may be higher than the current market value, and an individual may not be able to take advantage of potential increases in the gold price.

Having No Tax Advantages

One of the major drawbacks to having a gold-backed IRA is that it offers no tax advantages. While having a traditional IRA account allows you to deduct your contributions from your taxable income and defer taxes until you take distributions, no such tax benefit exists with a gold-backed IRA.

This means that the full amount of your contributions will be subject to income taxes each year, which can significantly reduce the amount of money you have available for retirement.

Any distributions you take from the account will also be subject to taxes at your marginal tax rate, meaning you could owe a significant portion of your retirement savings to the IRS.

Investment Requirements for Gold IRA

In order to be successfully IRA eligible, one must meet certain requirements and regulations.

1.      The investor must be at least 18 years of age and have the financial means to invest.

2.      The investor must be a permanent resident.

3.      The investor must open a self-directed IRA account with a financial institution that specializes in precious metal investments.

4.      The investor must purchase gold coins or bars that meet the Internal Revenue Service’s requirements.

5.      The investor must arrange for the physical storage of the gold coins or bars with the custodian of the IRA.

6.      The investor must make sure that all transactions are properly documented and reported to the Internal Revenue Service.

Precious Metals Dealer

Precious Metals Dealer

Precious metals dealers provide customers with a valuable service by helping them to purchase, sell and store approved precious metals such as gold, silver, platinum, and palladium.

As a trusted source, they are able to offer sound advice to anyone looking to enter the precious metals market.

They understand the various markets, trading, and laws involved in the sale and purchase of other approved precious metals.

Tax Benefits of Gold IRAs

Tax-deferred growth potential and tax-free distributions

This means that any profits from investments in a gold IRA are not subject to taxation until the funds are withdrawn from the account.

As such, any profits can be reinvested to increase the overall value of the retirement investment, all without paying taxes on the gains. And this benefit allows an investor to access funds from their retirement account without accruing any tax liability.

Any investments made with funds from a traditional Gold IRA are not subject to capital gains tax. This is a tremendous advantage for those looking to build wealth for the future, as it allows them to make investments without being subject to the tax burden associated with them.

Learn more about moving a 401k to gold without penalty.

Ability to convert existing IRAs into gold IRAs

This allows investors to leverage their existing retirement funds to invest in gold and to take advantage of the benefits of gold ownership. Those benefits include protection against inflation and market volatility, as well as the potential to realize significant profits through the appreciation of gold.

Types of Physical Gold IRA Investments

When buying precious metals, a purchaser can choose from a variety of forms, such as gold and silver coins, rounds, bars, and bullion.

Gold Bullion Coins, American Gold Eagles, and Gold Bars

Gold bullion coins are precious metal coins made from gold that are typically valued based on their weight and purity. They are typically produced by governments and mints and are legal tender backed by the issuing government.

American Gold Eagles are a type of physical gold IRA investment that has been popular with investors for many years. These coins are produced by the United States Mint and are composed of 22-karat gold, with the remainder being a mix of silver and copper.

Gold bars are yellow metals that offer investors an affordable and convenient way to invest in physical gold assets. These bars are available in a variety of sizes and weights, ranging from 1 oz to 400 oz, and can be crafted from a variety of gold alloys. Gold bars are a globally recognized and trusted form of gold investment and are accepted by gold refineries, financial institutions, and governments around the world.

Gold Mining Stocks

Gold mining stocks refer to stocks in companies that mine for approved gold, either directly or through a process of exploration and extraction. These stocks are often a good option for investors who want to speculate on the price of gold and take advantage of the potential for price appreciation.

Exchange-Traded Funds (ETFs)

Exchange-Traded Funds are investment vehicles that are traded on the stock exchange, and the fund is made up of a basket of assets such as traditional assets and physical assets. ETFs offer investors the opportunity to purchase a variety of gold-related investments, including gold stocks, gold miners, and gold itself.

Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.