Gold IRA vs. Physical Gold

Gold IRA vs. Physical Gold | Which Is the Better Option for 2023

When most people think of alternative investments besides keeping money in their 401(k) accounts, the options that spring to mind are either a Roth IRA or a Traditional IRA.

While opening a self-directed IRA such as either of these two accounts is a perfectly sound decision for any investor to make, other options are proving to be quite popular.

Do you know that you can choose to invest in physical gold and other precious metals? Yes, owning gold coins and bullion is quickly becoming a popular means to safeguard one’s financial future.

Paper assets, such as mutual funds, stocks, and bonds are quickly taking the backseat in the face of mounting economic uncertainty and the rise in inflation.

This has caused many shrewd investors to seek the safety of self-directed gold IRAs and owning physical gold. The advantages of buying gold bullion and opening precious metal IRAs are just too many to ignore.

If you are an investor and you are thinking of ways to diversify your retirement portfolio, this is the right article for you. Read on to find out the better option for your retirement accounts, between gold IRAs and physical gold.

Gold IRA vs. Physical Gold - The Key Points

Before you can safely choose between buying gold bars and investing in a traditional gold IRA, there are a few important considerations you need to make.

One thing that has to be clear from the onset is that both these options are valid investment opportunities that will benefit your retirement accounts in many ways.

All that is left to do is look closely at the various features of each investment option to decide which one is better suited to your current needs as an investor.

To do this, you need an in-depth understanding of how each type of investment works, the pros and cons of gold IRAs and buying physical gold, as well as how IRS requirements come into play.

We will start by looking at gold IRAs and the six important factors you need to know about this kind of self-directed IRA.

Gold IRAs

A gold IRA is a retirement portfolio whose value is linked to that of the gold, silver, and other precious metals held in its safety deposit box.

It is one of the easiest and most direct ways in which any investor with some retirement funds can invest in precious metals. It is a fairly simple (read how to buy gold for IRA here) concept to understand as long as you have a firm grasp of the following key aspects:

Contribution limits

If you have ever come across the limitations imposed by the IRS on various types of self-directed IRAs, such as a Roth IRA or traditional IRA, you already have an idea of what we mean by contribution limits.

Since the money being used to fund your gold IRA is coming from another retirement account, you cannot just take as much as you want and use it to buy gold.

Doing this would be considered a distribution and would incur a heavy penalty. The only way is to take only as much as the IRS will allow you over a 12-month limit. You cannot at any point exceed these contributions.

The contribution limits for investors opening a gold IRA in 2022 were $6,000 per year and $7,000 for those older than 50 years.


One of the major considerations you have to make when opening a gold IRA is the fees that are associated with the opening and managing of the account.

If you are not careful, these fees have the potential to take a huge portion of the gains you are supposed to make from your gold IRAs.

The fees you are expected to pay may include, start-up fees, custodial fees, annual and miscellaneous fees, and brokerage fees. The only way to avoid making losses through high fees is by looking carefully at the custodian or trustee you choose to work with, asking about their specific rules and fee structure, and watching out for hidden costs.

IRS-approved custodian or trustee

Even though the money in your retirement account is technically yours, the URS still retains a certain amount of control over it, such as making sure that you use a custodian that they have approved.

The job of the custodian is very important because they will take charge of the account, the gold or silver coins within, and manage the storage arrangements.

You can use any approved custodian you want but in most cases, gold IRAs are managed by banks, credit unions, brokerage firms, and other large financial institutions. You cannot keep your gold or leave it in the hands of private gold dealers.

Tax benefits

Tax benefits

The most important reason why an investor would choose to open a gold IRA despite all the IRS rules and regulations is so that they can enjoy the tax benefits that come with the account.

Gold IRAs allow you to take certain tax deductions on your investments, just as you would do with a traditional or Roth individual retirement account.

There are two ways of doing this depending on whether you have a Traditional gold IRA or a Roth gold IRA. With a traditional gold IRA, your contributions will be tax-deferred, meaning you will only pay taxes when you make withdrawals.

In a Roth gold IRA, investors will have to pay taxes upfront, meaning your deductions and tax benefits will be applied when you fund the account. Both options have their advantages and your choice will depend on your circumstances

Alternative investments

Besides gold, which is the most common type of investment, a gold IRA can hold other precious metals, such as silver, platinum, and palladium.

The complexities involved in owning such a diversified portfolio mean that not all gold IRA companies can offer this kind of service.

However, it is not wise to focus on gold investments alone because you will be placing a lot of risk on one asset class. You should look for a reputable dealer or custodian that offers a wide range of precious metals for your gold IRA.

Self-directed IRA

When we say the account is self-directed, we mean you have a higher degree of control over it compared to, say, a 401(k) account.

While there are obvious advantages to self-directed gold IRAs, it also places a lot of responsibility on your shoulders. You will be responsible for choosing the custodian, arranging and paying for storage, and, at times, even transporting your precious metals.

Your chosen custodians are usually not allowed to give you financial advice as this would be deemed as self-serving on their part. This means you will also have to look elsewhere for a suitable financial advisor.

Physical Gold

Physical Gold

If you choose to invest in physical gold rather than open a gold IRA, you will be faced with many options from the moment you go out and try to buy gold.

The first thing you will notice is that physical gold comes in many forms, such as gold bullion, coins, nuggets, jewelry, and even gold leaf.

Choosing any type of physical gold is a worthy investment. However, some options, such as jewelry, do come with added value that stems from their design and functionality. This would mean a gold necklace could hold more value than a gold nugget even if both contain the same amount of gold.

You are also allowed to hold and keep your physical gold, which is something gold IRA investors cannot do. That means if you wish, you can purchase gold and silver simply to keep it or wear it, without worrying about breaching IRS rules.

When buying gold purely for investment purposes, though, gold bullion is certainly the best option. It is by far the easiest form of gold to grade, quantify, and sell because its value is simply based on the amount of gold it contains.

A few important things

Keep the following facts in mind when it comes to buying physical gold:

  • Research how and where to buy and sell gold safely and legally

  • Only work with a reputable dealer, like Goldco.

  • Be prepared to pay for shipping and handling costs out of your pocket

  • Keep up to date with the spot market price of gold so that you may know the best times to buy and sell

  • You are allowed to hold your physical gold, therefore the storage is also up to you

Besides these facts, you must educate yourself on taxes and IRS reporting as follows:

IRS reporting requirements

Whenever you sell or buy gold coins or bars, you need to report to the IRS or risk serious consequences.

This is because, unlike paper assets, such as mutual funds, which are easy to trace, the origins of gold bars and bullion coins are not always so clear. A close eye is always kept on gold trades for this reason.

Depending on the type of gold you have purchased, and the nature of the transaction, you are required to either report it immediately to the IRS or the next time you pay your taxes.

If any tax liabilities arise from purchasing gold, you will have to settle these along with your regular taxes.


Purchasing gold and other precious metals will incur some taxes from the IRS, which considers these assets as collectibles, which means capital gains tax will be applicable.

Typical income rates are applied to short-term gains (gold purchased and sold within a year), and capital gains tax equal to an investor’s marginal tax rate will be applied to long-term gains (gold kept for more than a year)

Gold IRA vs. Physical Gold - Pros and Cons

Whether gold IRAs are more to your liking, or you would prefer to invest in physical gold, there are advantages and disadvantages of either choice that you will have to contend with.

Pros and Cons of Gold IRAs

The following are some of the pros and cons of gold IRAs:


  • Your gold IRAs may hold other approved precious metals, such as silver, platinum, and palladium

  • Opening a gold IRA is the best method for portfolio diversification

  • Gold IRAs enjoy the tax benefits of a Roth IRA or traditional IRA

  • You will not pay capital gains tax

  • You have the advantage of having gild IRA custodians do all the leg-work for you

  • Transporting and storing gold is something you will not have to worry about

  • Gold has good growth and is a great long-term investment strategy


  • You cannot hold the gold in precious metals IRAs

  • Be prepared to pay shipping, custodial, and storage fees

  • You can only work with an IRS-approved custodian

  • In times of emergency, it may be difficult to have immediate access to your gold

  • Any early withdrawals will cost you added fees and IRS penalties

Pros and Cons of Physical Gold

If you think you would rather buy physical gold, consider the following pros and cons:


  • Holding physical gold is allowed meaning you can keep your gold

  • You have quick access to your assets if you need to sell the physical metal for emergency purposes

  • There are many forms of gold to choose from when buying physical gold

  • No need to pay custodians to handle your physical gold for you


  • Finding the best place to store your gold is your responsibility

  • You will pay capital gains taxes, without any tax benefits to rely on

  • Gold is a high-value asset, which means you will be at risk of being robbed or scammed.

Gold IRA vs. Physical Gold - Who Should Invest

Any form of gold holdings, be it gold IRAs or physical gold will benefit you in the long run. The only issue is choosing the right one for your needs and your plans. Let us help you to make this decision by targeting the main things you need to consider.

Invest in gold IRAs if:

  • You have done your research and are sure that you can find the best custodians to work with

  • Your gold investment plan includes holding precious metals in an individual retirement account for long-term purposes

  • The extra custodial and storage fees do not bother you

  • Your main objective is to diversify your portfolio to spread out the risk

  • You have looked at the tax benefits and decided that you will benefit from making this move

Invest in physical gold if:

  • You want a chance to hold and keep your gold coins, bars, and jewelry

  • The various options and types of gold available are attractive to you

  • You want complete control over your gold investments as well as freedom from the IS regulations

How Long Does It Take To Open a Gold IRA?

The procedure for opening a gold IRA is usually very quick, with about 10 to 15 minutes to sign the forms. You can also do the process online, from the comfort of your home.

Funding your gold IRA account will take longer than that. About 10 working days for a rollover to be approved and the money deposited into your custodian’s account.

If you choose other means to fund your account, other than doing a rollover, you should expect the process to take a lot longer, depending on which payment option you choose and the time it takes for the funds to clear.

What Are the Storage Options for Physical Gold?

A lot of people buy gold and decide to keep it at home or their place of business, but this is not a safe option. Regardless f how sophisticated a security system you have, the risk of theft is too high.

A good option is to keep your gold with a bank or trustee that has the necessary infrastructure and security measures to safeguard your gold. Not only will your gold be safe but it will also be insured against theft and destruction.

However, the cost of storage will vary from one bank to another which is something that will require you to do some research. There is also the issue that a bank may not allow you to keep your gold in the bank’s safe deposit box.

Open a Gold IRA in Four Easy Steps

Opening a gold IRA is very easy as long as you follow these simple steps:

  • Find a reputable custodian or trustee, such as Augusta Precious Metals, Birch Gold Group, Goldco, Noble Gold, and many more

  • Fund your gold IRA account using various means such as a rollover or a direct transfer

  • Buy IRS-approved precious metals only, such as American Gold Eagle coins and Canadian Maple Leaf coins

  • Find an IRS-approved depository, such as the Delaware Depository

Of course, I invite you to check out gold IRA alternatives as well in case you have your doubts.  But for me, this is the safe investment at the time.

Final Verdict

Any form of precious metal investment you choose to make will likely prove to be beneficial in the long run as long as you make prudent choices.

Looking at the facts outlined in this article, it is clear that either of these options, opening a gold IRA or buying physical gold, are great choices.

Look carefully at your particular circumstances and choose one that will best meet your needs as a 2023 gold investor.

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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.