Pros and Cons of Gold IRA Savings: An Investor’s Guide

A gold-backed IRA account is something many investors consider for their retirement savings- but are they a good idea?

This guide to gold IRA pros and cons covers the benefits of investing in a gold IRA, and the gold IRA disadvantages. It aims to provide a better idea of what these accounts are all about- and who should include them in their retirement planning.

A Quick Introduction to Gold IRA Pros and Cons

Pros and Cons of Gold IRA Savings

What is a gold IRA account? In short, a gold individual retirement account is a type of savings tool that allows people to invest in physical gold and silver coins, bars, and bullion- as well as some other precious metals products.

They work similarly to traditional IRA savings accounts- with the same tax advantages and many of the same rules and regulations. The only real difference is the possibility of converting the funds into physical precious metals- as opposed to paper assets, stocks, and bonds.

Are Silver and Gold IRAs a Good Idea?

The answer to this question really depends on the individual and their investment goals. In many cases, the gold IRA long-term value is worth it- and they add a valuable element to many people’s portfolios.

A lot of people also ask, “Are gold IRAs safe?”- and the answer is yes- they are IRS-approved savings accounts. There is always some risk involved in any investment, but gold is considered one of the safest bets there are.

To understand more about whether or not a gold IRA is a good idea for you, have a look at the pros and cons mentioned on this list.

What Are the Pros and Cons of a Gold IRA?

What exactly are the pros and cons of gold IRAs for investors? Below, you can learn six of the core reasons for choosing a gold-backed IRA, and six of the biggest drawbacks to consider before committing to an investment.

The Advantages of Gold IRA

Let’s begin with the good. There are many benefits of investing in a gold IRA- and these are six of the best.

Diversify Your Portfolio

Portfolio diversification is the key to success in the eyes of most savvy investors. Putting all your financial eggs in one basket is not advisable under any circumstances- and there are few assets more effective for diversification than physical gold.

Having a variety of stocks and bonds is great- but if a recession happens or the market crashes, they will almost all go the same way. The same does not apply to gold, which is what makes it such a smart investment for a diverse portfolio.

A financial advisor can give individuals a better idea of how much of their portfolio should be invested in gold- based on their risk appetite, total funds, and savings goals. It is important to remember that everyone is different- and the right amount for one person is not necessarily right for another.

Choosing to diversify through gold IRAs is a relatively safe and stable path to take- and with the tax advantages awarded to these types of accounts, it ticks many boxes for many people.

Diversified Option

Hedge Against Inflation

Gold prices tend to move the opposite way from the US dollar and other key asset classes. If the market is on the way down, gold is usually on the way up.

This fact makes it a perfect hedge against inflation– as was proven in the aftermath of the 2008 crash, when the average annualized growth rate of gold reached 30% compared to an 11% annual inflation rate at the time.

It is a Self-Directed IRA

You are in complete control of how and when your gold IRA funds are invested. Although you need to go through a custodian to make the actual purchase, all transactions are 100% self-directed- so there is no leaving your investments in someone else’s hands.

You Can Buy Physical Precious Metals

A gold-backed IRA is the only savings account that lets you invest in physical gold and other precious metals and retain the tax benefits that come with other individual retirement accounts. If you want to invest in gold, there is no better or safer way to do it.

You can enjoy a vast range of purchase possibilities- including many gold coins (minimum 99.5% purity- except the American Gold Eagle Coin), gold bars (also 99.5% pure or more), silver (at least 99.99% pure), and a variety of platinum and palladium products (99.95% pure or more).

Gold Is Considered a Reliable Investment

Gold-backed IRA investments are considered some of the lowest-risk investments of all. Over the last century and beyond, gold has remained an appealing and valuable commodity- people have always wanted it, and they very likely always will.

Regardless of your risk appetite, it is always advisable to have at least some capital invested in a reliable asset class that is seriously unlikely to crash completely.

Protect Your Wealth in Times of Economic Uncertainty

The stock market has crashed before- leaving many investors in a terrible position. Stock market volatility is something that every investor must be wary of- and investing in physical gold is a good way to protect yourself if the worst should happen again.

Because gold is a tangible asset, its value cannot just disappear overnight. Yes- the price of gold may fluctuate, but it will always have intrinsic value. There is also a strong possibility that if the stock market were to crash again, gold would become a vital commodity- so having some in your back pocket (figuratively speaking) is a good thing for security.

The Disadvantages of Gold IRA

Here is a quick look a some of the gold IRA disadvantages. Some are specific to a gold-backed IRA, and others apply to several types of tax-advantaged savings accounts. It is important to understand the drawbacks of this type of account before making any big investment decisions.

You Have Limited Access to Funds

If you find yourself in sudden need of access to funds and have a large sum tied up in a gold IRA, you may find yourself struggling to get to it quickly. You can’t immediately withdraw funds from gold IRAs- or any IRAs for that matter- without incurring penalties unless you are over 59.5 years old.

Annual Contributions are Limited

You can arrange a traditional IRA to gold IRA rollover– or transfer money from your 401(k) into your gold-backed IRA. When you do this, you are permitted to deposit a lump sum- but contributions thereafter are capped.

The current annual contribution limits for a gold IRA are $6500 for under 50-year-olds and $7500 for over 50-year-olds. This is the same as a Roth IRA, so it is not necessarily a gold-specific disadvantage.

Gold Cannot be Stored at Home

Despite what some gold IRA companies claim, the IRS does not approve of home-storing gold and other physical precious metals. To compliantly invest in a gold IRA, you need to store the gold in an IRS-approved depository.

This means additional fees, slower access to your assets, and an additional element of organization. That said, it is well worth it to avoid the risk of theft or an investigation from the IRS.

There are Age Limits on Penalty-Free Withdrawals

This is not unique to gold IRAs- most retirement accounts charge high fees for early withdrawals. Early withdrawal penalties on gold IRAs apply to anyone younger than 59.5 years old- and cost 10% of the total withdrawn.

The Fees Can be High Compared to Some Other Retirement Savings Accounts

Although a Roth IRA or traditional IRA will come with account setup fees and charges, there is usually more to pay with a gold IRA. Like most retirement savings accounts, there are basic admin and account fees- but you also have to consider custodian and storage fees.

To open a gold IRA, you must have an appointed and approved custodian. Custodial fees are, therefore, unavoidable. The same applies to storage- you have to pay a facility to hold physical gold on your behalf.

Other additional IRA fees when investing in gold include brokerage fees- which are sometimes applicable when buying gold.

These higher fees are off-putting for some investors, but it is worth looking into deals and offers provided by various gold IRA companies.

It Is Not a High-Return Investment

Gold is unlikely to yield the same returns as some other riskier assets might. It is a safe haven, and although the price of gold is volatile, it is not so dramatic that it often leads to significant gains.

That is not to say that profits are not possible- they most definitely are- but they are not the main reason to invest in gold.

Final Thoughts

A traditional Gold IRA has advantages and disadvantages- but they are generally a good option for retirement savers who want to diversify and protect their wealth.

It is certainly worth considering setting up a gold IRA if you are looking for a long-term, low-risk investment to provide a safety net if a crash were to happen.

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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.