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Gold IRA vs Physical Gold: The Best Way to Protect Your Wealth

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Are you a savvy investor looking to expand your portfolio? Wondering what the best way is to invest in gold? You’re not alone.

Over the years, the spectacular performance of gold as an inflation-hedge has made it an increasingly attractive asset in many portfolios. With this guide, we’ll break down exactly which option makes sense for you – physical gold or a gold IRA — and why investing in gold can be such a smart move for any investor.

Before we begin, it may help to have a high level understanding of the differences between a gold IRA vs physical gold.

When considering a gold IRA vs physical gold, it’s important to note that you hold physical gold in a gold IRA — you just do so with special benefits. In brief:

A gold IRA comes with the tax-deductible or tax-deferred benefits of a standard retirement account. Gold held in a gold IRA is not subject to the capital gains tax rate as a collectible that applies to physical gold. You are required to appoint a custodian for the storage of your gold in a gold IRA, who also acts on your behalf to handle all reporting requirements and disbursements.

Now that we have an overview of the differences, let’s dive into more detail to everything you need to know about how to get started with both physical gold and retirement plans backed by precious metals!

Gold IRA vs Physical Gold

Weighing the pros and cons of owning gold is worth your time — after all, you’re deciding whether it’s in your physical possession or part of a retirement portfolio.

The contrast between physical gold versus a gold IRA might seem confusing at first glance, but just understand that when you set up a gold IRA, you are purchasing physical gold and holding it in storage. They’re two sides of the same coin, so to speak. There are just some subtle differences that you need to keep in mind when deciding which is right for you.

Before we dive into each in more detail, let’s take a look at a top-level comparison between gold IRAs and physical gold.

Gold IRA vs. Physical Gold Comparison

Gold IRAPhysical Gold
Holding StrategyLong-term holding strategyYou're not restricted in any way and have freedom to sell anytime

You can only purchase certain types of gold, though other precious metals may be included in a gold IRA.

You can purchase gold in various forms.
TaxesA gold IRA enjoys the same tax advantages as a traditional or Roth IRA, while being exempt from the higher capital gains tax rates for collectibles.Investors holding physical gold for the long-term don't receive the tax advantages offered by gold IRAs.

As gold is considered a collectible, capital gains on its sale outside an IRA must be reported and paid for in the same year.
Storage and SecurityGold held in a gold IRA is generally considered safer and more secure since it is held by a custodian who is insured.Investors are responsible for secure storage and insurance of physical gold, with the option of direct access if stored in a location with simple accessibility.

Fees associated with IRA setup and maintenance.

Investors pay lower associated fees compared to a self-directed IRA, but they need to pay for shipping and handling expenses and find trustworthy dealers and buyers.

It can be challenging to liquidate precious metals outside a regulated environment.

Gold IRA


Traditional IRAs can be a bit boring, only allowing you to invest in stocks, mutual funds, and other conventional investments. But with a self-directed IRA, you can purchase gold or other precious metals like silver, platinum, or palladium in the form of bars or coins.

A gold IRA works just like a standard IRA with the same contribution limits and distribution rules. But instead of holding boring paper assets like stocks and bonds, you can hold actual physical bullion. You’ll have the peace of mind of knowing that you have a tangible asset that will help secure your financial future.

Let’s break down everything you need to know about gold IRAs.

What You Must Know About Gold IRAs

Here are a few things to know before investing in gold IRAs:

  • They Can Hold A Variety of Assets. Along with gold, gold IRAs can hold precious metals, such as silver, platinum and palladium.
  • They Offer Tax Benefits. Gold IRAs provide tax benefits just like traditional and Roth IRAs, allowing investors to defer taxes on their income until withdrawal, and follow the same distribution rules.
  • There Are Contribution Limits. In self-directed gold IRAs, contribution limits are similar to standard IRA. For example, in 2022 it was set at $6,000 yearly for earned income, with $1,000 extra for individuals aged 50+.
  • There Are Fees for Setup. Gold IRAs come with additional fees for shipping, storage, and potential brokerage fees, in addition to typical startup and transaction fees of all IRAs.
  • You Must Go Through a Custodian. A gold IRA requires a custodian to handle funds, disbursements, and compliance. IRS guidelines mandate an approved depository as well. Your precious metals can’t be self-stored.
  • Gold Must Meet IRS Requirements. Gold IRAs have IRS-approved precious metal requirements, including gold, silver, platinum, and palladium, meeting minimum fineness. Only government mints or accredited manufacturers’ products are IRA-eligible.
  • It’s Important to Research the Price of Gold. Gold IRA ownership allows investors to choose assets and determine when to purchase, providing control over portfolio management. Therefore, it’s important to do your research on the market or find a trustworthy advisor.
  • You Need a Gold Distributor. When adding physical gold to a gold IRA, a distributor of precious metals must help your custodian acquire the gold products.
  • You Need to Consider it a Long-Term Strategy. Physical gold within a gold IRA must adhere to distribution timing rules similar to Traditional and Roth IRAs. Gold IRAs should be considered part of long-term financial strategies due to these regulations.
  • There Are Multiple Types of Gold IRAs. Gold IRAs come in different formats, including Traditional, Roth, and SEP, with different tax treatments for contributions and withdrawals. SEP Gold IRAs have IRS restrictions and allow employees to save up to 25% of their pay.

Who Should Invest in a Gold IRA?

Before jumping into a gold IRA, it’s important to consider your goals and risk tolerance.

Are you looking to diversify your portfolio, protect against inflation, or minimize taxes?

Keep in mind that gold can be a volatile investment, so it may not be suitable for those seeking stable returns. Gold IRAs can be a great option for investors with an already diversified retirement portfolio looking to add a layer of security.

Investing in a gold IRA might be a suitable option for you if you:

  • Wish to diversify your portfolio with precious metals
  • Are a gold investor who plans to hold your gold for an extended period and are willing to pay fees for the added security and tax benefits that an IRA structure gives you
  • Want to leverage the tax benefits that an IRA provides while protecting against inflation

Pros and Cons of Gold IRAs

Gold IRAs enjoy the same special tax treatment as standard IRAs, with tax-deductible contributions for traditional self-directed IRAs and tax-free qualified withdrawals for Roth accounts.Gold bullion in an IRA doesn't generate income, meaning it can't take advantage of the tax-free growth benefit of IRA investing.
Physical gold is ideal for a long-term buy-and-hold investment strategy, making it well-suited for an IRA.You can’t store your own gold, instead, you must pay a custodian to buy, transport, insure and store your precious metals.
Gold IRAs are self-directed, allowing for direct management and investment decisions and greater control overall.Restrictions apply: Can't transfer already-owned metals or personally buy metals for your Gold IRA. Early withdrawals may incur high fees.
Gold IRAs offer further diversification options including a variety of alternative assets such as real estate and cryptocurrency.Custodian storage and other related costs for a gold IRA can be more expensive than storing gold in a bank or home safe.
Gold IRAs offer the same tax benefits as conventional IRAs, but with the added advantage of not being taxed at the higher collectibles capital gains rate like physical gold.Due to custodians and IRA regulations, investors cannot access their investments immediately, which may cause issues if you need liquidity fast.
Custodians are responsible for all documentation and disbursements, which makes record-keeping hassle-free.
Gold IRA custodians are insured, so you can have peace of mind knowing your investments are likely to be safer versus self-storage.
Diversification opportunities for retirement savings to create a more well-rounded portfolio.

Tax Benefits and Reporting Requirements for Gold IRAs

Tax Deferral 

When it comes to gold IRAs, you get a tax break when you contribute. But, when you withdraw the money, you’ll have to pay income taxes. So, your money can grow tax-free until you retire and begin taking withdrawals.

No Capital Gains Tax

With a gold IRA, you won’t pay capital gains tax on your investments’ growth. Plus, once you turn 59, you can sell your assets without paying any taxes. But if you sell them earlier, you’ll owe taxes on any gains since you bought them.

Reporting Requirements

Make sure to follow IRS regulations for your gold IRA account. You’ll need to file Form 1099-B when filing your taxes, and any taxable income or losses should be reported on Form 8606. If your account’s value surpasses $1,000, you’ll also need to disclose it on Schedule B of your 1040. Speak to your tax accountant for advice.

Risks Involved in Gold IRAs

Gold held in an IRA doesn’t pay dividends, has no revenue, and must be stored in a specific institution. It should be thought of as a diversification play.

Despite its ups and downs, gold does well in times of financial instability. But if we look at history, a portfolio that just bought into the US stock market would have done better than one with gold between 1980 and 2022.

The biggest risk is that you won’t get the same gains as elsewhere. But at the same time, you’re protecting yourself against inflation and downside potential in the worst case scenario. It’s up to you to weight the pros and cons.

How to Purchase Physical Gold for an IRA

Here are the steps to purchase physical gold for an IRA:

  1. Open a self-directed IRA with a custodian that allows for precious metal investments.
  2. Select a precious metals dealer to make the actual gold purchases for your IRA.
  3. Fund the account with a contribution, transfer, or rollover from a qualified plan.
  4. Select investments for the account and have your custodian and metals dealer complete the transactions.
  5. Make sure the physical metals meet IRS “fineness” standards and are stored in an insured IRS-approved depository.

Note that when it comes to coins, you are limited to bullion coins issued by certain government mints.

Remember to check with your custodian to see if physical gold is one of their offerings before opening an account. You can set up the self-directed IRA as either a traditional IRA or a Roth IRA.

Physical Gold


Buying physical gold can be a great way to diversify your investment portfolio. Unlike stocks and bonds, gold is a tangible asset that can be held in your hand.

However, it’s important to do your research and buy from a reputable dealer. You’ll also need to consider storage and insurance costs. While gold prices can fluctuate, it can provide a hedge against inflation and economic instability. Just remember that buying physical gold is not a guaranteed path to profits, and you’ll need to have a long-term perspective when investing in this precious metal.

Let’s break down everything you need to know about buying physical gold.

What You Must Know About Physical Gold

Here are a few things to know before investing in physical gold:

  • You Must Take Full Control and Responsibility. Want to invest in gold? Take full control and responsibility. Buy, hold, and store the gold securely, and insure it. You’re also in charge of selling it when the time comes.
  • You Have to Do Your Research. Make sure you research and choose a reputable dealer when buying gold. Learn where and how to sell your gold when you’re ready, and be aware of taxes and IRS rules. Remember that the purity of the gold affects its market price, so pay attention to the gold fineness.
  • You Must Become an Astute Trader. Learn about gold prices and understand that selling gold doesn’t always guarantee profit. Know where and how to sell it at the right time to maximize returns.
  • There Are Fees for Shipping and Handling. You’ll need to pay fees when buying and selling gold so be sure to factor this in. Educate yourself on the spread price of gold as well.

Who Should Invest in Physical Gold?

On the other hand, owning gold is still a pretty solid option. It is considered a safe haven that many investors include in their portfolios to make them more extensive. It has been a pretty stable asset even during periods of economic turbulence. Nonetheless, investing in this precious metal might not be ideal if you’re seeking to have a safety fund for your retirement, as its price can greatly change over time. Instead, you should consider it if you’re looking for a safe strategy to generate income without many risks.

Investing in physical gold might be a suitable option for you if you:

  • Prefer having a say in the specific types of gold you invest in
  • Want complete control over your gold, including the option to store it at home or in a bank’s safe deposit box
  • Don’t want to be bound by the rules of an IRA
  • Wish to avoid paying custodian fees
  • Don’t necessarily want to hold your gold for the long term, or want the option to sell at will

Pros and Cons of Physical Gold

If stored at home or in easily accessible locations, physical gold offers investors quick access to their assets.Physical gold requires secure storage and insurance by investors.
Physical gold investors pay fewer associated costs than self-directed IRA investors.Selling physical gold requires finding reputable buyers and paying for shipping and handling fees.
Investors can purchase various types of gold, allowing for more diverse pricing options.Gold outside of an IRA is viewed as a collectible, so earnings are subject to capital gains taxes, and sales must be reported and paid for in that year's taxes.
Investors can sell at any time and are not constrained by the timing of gold IRA distributions or early withdrawal costs.If an investor has a long-term holding strategy, physical gold won't provide the tax benefits associated with an IRA.
Physical gold investors have the flexibility to sell their holdings at any time without being bound by distribution schedules or incurring early withdrawal penalties.

Tax Implications and Reporting Requirements for Physical Gold

Subject to Capital Gains Tax

Gold is considered a collectible and is subject to capital gains tax by the IRS:

  • If sold within a year of purchase, short-term gains are taxed at typical income rates.
  • Long-term gains are taxed up to 28% depending on your tax bracket.
  • To own gold, you must pay taxes on both gains and losses. You must report the fair market value of your gold on your tax return. If you wait for at least one year to sell it for a higher value than its original price, your gain is taxed as a long-term capital gain.

Reporting Requirements

To sell gold legally, you must adhere to the IRS’s reporting rules. If you invest in physical gold, you’re responsible for following these regulations. You should learn about them and know which types of gold require immediate reporting and which ones require tax filing. All tax liabilities from gold sales must be paid at the time you file your taxes for that year.

Risks of Investing in Physical Gold

As with any investment, there are a number of risks associated with investing in physical gold. These include:

  • Storage and Cost. Gold can be pricey and storing it comes with extra fees. Keeping it at home or in a bank could add on to the expenses, plus you have to pay for shipping and insurance. And let’s not forget about the risk of theft!
  • Purity. When buying gold, it’s important to be aware of the purity of the gold. This can be a concern, especially when dealing with older gold pieces. To avoid any issues, it’s best to buy from a reputable provider that guarantees high-quality gold products.
  • Lack of Interest. Gold doesn’t generate interest or any return while in your possession, unlike many other financial products . While not really a risk, it’s more of a caution.
  • Missing Out on Returns. Investing in gold coins may not always yield substantial profits when compared to other investment avenues. It should be considered a diversification play.

How to Invest in Gold

Gold is a popular choice for protecting money from inflation. You can purchase it in various ways:

  • Gold Bullion. Buy genuine gold from reputable dealers including coins, bars or ingots. This is the only way to truly own the asset and it’s highly recommended versus the other options.
  • Gold Futures. Futures are ideal for predicting rising gold prices, and provide a low-cost investment vehicle. You run the risk of losing money if prices don’t move as predicted, and you don’t own any physical gold assets.
  • ETFs. Buy gold through ETFs on the stock market. These investments track gold value changes, and eliminate storage issues such as insurance and fees. However, like gold futures, you are buying paper gold and not a physical asset.

Frequently Asked Questions About Gold IRAs and Physical Gold

Are gold IRAs worth it?

Gold IRAs can be a good option for investors looking to diversify their retirement portfolio and protect against inflation. Physical gold held in an IRA provides some protection against stock market volatility and is seen as a hedge against inflation. However, it’s important to note that gold does not pay any dividends or interest, and it has limited liquidity since it cannot be sold quickly for cash like stocks or other investments. Additionally, gold IRAs come with higher fees than traditional or Roth IRAs which invest solely in stocks, bonds, and mutual funds. Therefore, while gold IRAs can offer some degree of protection from inflation and stock market volatility, they may not be the best option for everyone depending on their individual financial circumstances.

Can physical gold be held in an IRA?

Yes, physical gold can be held in an IRA. An individual retirement account (IRA) is a type of self-directed investment account that allows individuals to save for retirement with special tax benefits. A gold IRA is a type of self-directed IRA that specifically allows people to invest in gold bullion. By investing in physical gold within an IRA, individuals can benefit from its long term value while also taking advantage of the tax benefits offered by IRAs.

What are the advantages of a gold IRA?

A gold IRA offers a number of advantages. For example, it allows individuals to diversify their portfolios and gain exposure to the precious metals market. Additionally, many gold IRAs offer greater control than traditional IRAs, as investors have the option to choose which specific types of investments they’d like to make with their contributions. Finally, there are some tax benefits associated with gold IRAs; for example, contributions made to a traditional self-directed IRA are tax-deductible. Gold IRAs also offer potential protection from inflation, as gold prices tend to rise in times of economic uncertainty.

Who holds the gold in a gold IRA?

In a gold IRA, the gold is held in custody by an IRS-approved custodian. This custodian is responsible for overseeing the account, ensuring all transactions are legitimate and within IRS regulations, and safekeeping the gold that is held in the account. The custodian must also provide reports to both the IRA owner and IRS regarding annual ownership of assets kept in the gold IRA.

Parting Words

Gold IRAs and physical gold are great investments for those looking to diversify their portfolio or hedge against the volatility of financial markets. While a precious metals IRA is typically set up by a custodian and held at a secure storage facility, physical gold requires an investor to understand how to store it securely until it’s time to sell. Both gold IRAs and physical gold have risks and rewards that investors should thoroughly research before deciding which option is right for them.

Regardless if you’re interested in investing in a gold IRA or physical gold, the decision should be made with care and research in order to fully understand the risks associated with each option.

We hope this guide has been helpful in understanding the differences between gold IRAs versus physical gold investments. If you have any other questions regarding this topic please feel free to leave us a comment!

P.S. Like this article? You may also enjoy these other articles in the series:

Article by:

Diversify Guy

Helping you ensure a golden future in your retirement through diversification for more than 10 years.

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