How Do Gold IRAs Work?

  • A gold IRA is a type of retirement account that invests in physical gold.
  • These accounts have many of the same rules as traditional and Roth IRAs, and you may have the choice of either opening a self-directed account or investing in an already established one.
  • A gold IRA offers investors, particularly those who have concerns about the long-term sustainability of paper currencies, the ability to invest in an asset whose value has traditionally maintained a relatively stable relationship with the U.S. dollar.

A gold IRA is a type of retirement account that invests in physical gold. These accounts have many of the same rules as traditional and Roth IRAs, and you may have the choice of either opening a self-directed account or investing in an already established one.

Gold IRAs vs. Other Retirement Accounts

Gold IRAs offer two primary advantages over traditional retirement accounts:
Gold IRAs allow you to own physical gold bullion.

Gold IRAs require fewer regulatory disclosures.

For example, the IRS requires you to disclose the total value of your retirement assets in Schedule B of Form 1040. A Gold IRA, however, does not require that you disclose the value of your gold bullion in Schedule B.

Gold IRAs vs. Paper IRAs

The rules for investing in precious metals through IRAs are similar for both types of accounts, but there are some differences.
Paper IRAs can be opened with stock mutual funds, bond funds, and exchange-traded funds (ETFs), but not with physical metals.
Gold IRAs can be opened with both physical metals and paper assets.

Gold IRAs, like paper IRAs, can have a number of different structures. For someone looking to avoid the hassle of shipping and storing precious metals, a gold IRA company holds these assets in a depository.
For investors with a little more experience, they can purchase precious metals through a self-directed IRA, which allows them to purchase precious metals directly.

how do gold iras work

Gold IRAs vs. Traditional IRAs

An investor with a gold-backed IRA owns physical gold bullion, typically in the form of coins or bars. The gold is stored and managed by the custodian, which will also manage the regular transactions of the account. For tax purposes, the IRS treats gold as in kind, meaning that all transactions and gains and losses are tracked as the price of gold changes.
Investors can either purchase gold bullion from a gold IRA custodian directly or through a gold exchange traded fund (ETF). The gold IRA custodian will buy the metal on behalf of the investor and hold it on behalf of the entire IRA.
The value of gold in an IRA is different that the value of gold as bullion or jewelry. The gold IRA custodian will assess the value of the gold in an IRA based on several factors, including:
The current price of gold.

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The current market price of gold.

The gold's rarity, which affects its value.

The gold's purity.

The gold's weight.

The gold's condition.

Gold IRAs typically charge a management fee of 1% to 2% annually.

Gold IRAs vs. Roth IRAs

Gold IRA investors should look into the pros and cons of gold-backed Roth IRAs and Traditional IRAs.
Gold IRAs are relatively new, and gold-backed IRAs have only been available since 2009.
Gold IRAs are generally more flexible than Roth IRAs.
Roth IRAs, on the other hand, have a contribution limit of $6,000 a year.
Gold-backed IRAs cost about $100 per year to store, whereas Roth IRAs cost about $30 per year to store.
Gold IRAs also come with tax benefits.

Gold IRAs vs. Rollover IRAs

A Gold IRA is very similar to a "traditional" IRA. Both are tax-advantaged retirement accounts and both allow people to invest in a variety of assets, including stocks, mutual funds, and exchange-traded funds (ETFs).
The biggest difference between a Gold IRA and a Rollover IRA is that the latter allows you to roll over your 401(k) or 403(b) account into an IRA. This move can be a smart decision, but it comes with some drawbacks. Rollover IRAs have lower contribution limits, which means you might not be able to roll over as much as you had in your 401(k).
With a Gold IRA, you invest all of your assets in gold and other precious metals.
Gold IRAs vs. Traditional IRAs
Traditional IRAs and Gold IRAs have a few similarities, including the fact that both have contribution limits.
However, there are some key differences between Gold IRAs and Traditional IRAs when it comes to how you fund your account.
With a Traditional IRA, you fund the account through regular, pre-tax payroll deductions. You contribute to a Traditional IRA with after-tax dollars, but your account can grow on a tax-deferred basis.
Gold IRAs, on the other hand, are funded with post-tax dollars. This means you contribute after-tax dollars to an account whose value grows on a tax-deferred basis.

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Gold IRAs vs. Traditional 401(k)s

A traditional 401(k) provides employees with a tax-advantaged account to save for retirement. This account can be invested in a variety of assets, such as stocks, bonds, and mutual funds.

A gold IRA, on the other hand, allows investors to store assets in gold and other precious metals. This allows investors to potentially make higher returns on their investments, although these returns are not guaranteed.

Gold IRAs vs. Other Tax-Efficient Retirement Accounts
Gold IRAs are considered to be a type of retirement account, but technically, they are a type of self-directed account. These types of accounts allow investors to invest their money in assets that aren't typically offered by banks or brokerage houses, such as real estate, precious metals, and private companies.

Other types of tax-advantaged retirement accounts include traditional IRAs and Roth IRAs. These accounts are set up in much the same way as traditional 401(k)s, but they offer tax-deferred and tax-free benefits, respectively.

Still, gold IRAs are unique because they offer investors a way to invest in precious metals, a market that has historically outperformed most other assets.


To open a self-directed IRA, you must choose the type of account you want to open. The most common are IRAs - either a traditional IRA or a Roth (or Roth 401(k)). In a Roth, you pay taxes on the contributions you make to the account, but withdrawals are tax-free.
If you are self-employed, you can also open a SIMPLE IRA, which consists of a salary deferral and a profit-sharing plan. A SIMPLE IRA is also subject to annual contribution limits.
Gold IRAs vs. SEP IRAs
Meanwhile, with a SEP IRA, you can only make contributions to an employee's IRA if they are eligible to participate in an employer's 401(k) plan. The employee and the employer each make contributions to the IRA. If the employee's income is more than $110,000, they cannot participate in the SEP IRA.

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Gold IRAs vs. SEP 401(k)s

As noted earlier, a gold IRA has two primary advantages over other types of IRAs:
The gold within the account is not taxed when it is purchased and when it is withdrawn.

The account holder does not need to pay the annual contribution limit.

The gold must be in physical form.

A self-directed IRA must be established through an IRA custodian. The custodian is responsible for holding gold assets on behalf of an IRA owner, ensuring that all IRS requirements are met.

The account holder must also have a qualified trustee. Trustees are individuals or entities that hold assets in trust on behalf of someone else. These individuals are tasked with handling all aspects of overseeing the account, including selecting investment options and paying any taxes or penalties.

The account holder must also have a custodian-trustee combination. These entities manage the account on behalf of the account holder.

The account holder will have the option to choose a gold bullion IRA custodian, a mutual fund company custodian, or a gold exchange-traded fund (ETF) custodian.

Gold IRAs vs. SIMPLE 401(k)s

As its name suggests, a gold backed IRA is an IRA (Individual Retirement Account) that invests in precious metals. A way to think of gold is as insurance against inflation and market crashes.
The gold in your IRA is not actually stored physically, but in your account, you merely own the rights to it. The gold is held by a trustee on behalf of the account holder, and can easily be moved to another custodian later.
The gold is insured by the Federal Deposit Insurance Corporation (FDIC), just like money in a bank account. There is typically no limit on the amount of money that can be held in a gold-backed IRA or 401(k) plan.