Gold IRA Meaning: Definition and Explanation of Gold IRAs

Disclaimer: We are reader supported.  We may be compensated from the links in this post, if you use products or services based on our expert recommendations. Please read our Advertising Disclosure.

Gold has been used as a store of value for thousands of years, and its value tends to hold up well during times of economic uncertainty. Precious metals can act as a hedge against inflation, as their prices may rise as the cost of living increases. 

Gold and silver are a form of "real assets" and a physical form of investment that can act as a diversifier to a portfolio heavy in paper assets such as stocks and bonds.

With financial markets in chaos and the world teetering on brink of war, investors are seeking out the safety of assets, and just about anything else that is "real".

Before we get started:

We understand how difficult it is to pick a company that you can trust with your hard earned savings.  That's why we create informative and useful information to give you as much knowledge as possible to make the right decision.

We created a list of our highest recommended investment companies, to make comparing and choosing the company best suited to your needs as easy as possible.


Get a FREE Gold Investing Packet from our #1 recommendation, by clicking the button below:

Learn How to Protect Your Wealth Today!

Gold IRA 101

gold coins protected by a lock

If you're an investor, you might have heard of a gold IRA. A gold IRA is one type of self-directed IRA account that is becoming a common option for investors. A gold IRA gives investors more range to choose alternative assets like silver, platinum, and palladium.  

Many investors are moving towards opening a gold IRA account because it creates more opportunities to expand their retirement portfolios. A gold IRA can be a traditional or Roth account.

To invest in a gold IRA, you will need a custodian, a broker to purchase gold, and an approved depository for storing gold. 

Understanding the Process of a Gold IRA

There are several steps involved with opening a gold IRA.  Here are a few vital steps that you'll need to follow if you would like to make the transition:

  • 1. Identify a Custodian

One of the first things you'll need to do is find a custodian. It's important to note that most custodians and brokers don't typically operate self-directed IRA accounts like a gold IRA.  

For this reason, you will need to find a custodian that specializes in self-directed IRA accounts. Self-directed custodians are not as popular but there are still plenty of custodians available who focus on these particular services.  

When searching for a custodian, there are other things that you'll want to be thinking about as well, such as fees, customer support provided by the custodian, and reviews.

  • 2. Funding Your Gold IRA

Once you've found a custodian, the next thing you'll do is fund your gold IRA account. There are contribution limits that you should be aware of. If you're younger than 50, your contribution limit is $6,000. If you're 50 or older, your contribution limit is $7,000.  

You can also roll your 401(k) or a traditional IRA over into your new gold IRA account. Note that gold IRA rollvers will follow the same rules that apply when you roll over into a traditional or Roth IRA account. 

  • 3. Buy Gold

The last step to open your gold IRA account is to buy IRA-approved gold. Investors must know that the IRS has specific guidelines in terms of physical gold and precious metal investments. Understanding these rules will minimize your risk of fees and penalties.  

One of those guidelines states that gold bars must have a 99.5% purity to be eligible. On the other hand, silver must have 99.9% purity. Platinum and palladium must have 99.95% purity.  

These are considered IRA-eligible, but there are other eligibility requirements that investors must meet. Here is an overview of other eligibility conditions that investors will need to follow: 

Producer Info: The producer of the product must be someone like a manufacturer or refiner. Some common organizations include NYMEX, COMEX NYSE/Life, and National Government Mint. Visit the IRS website to learn more about qualified organizations.  

Condition: Proof coins must be in optimal condition as well and have a certificate of authenticity. Additionally, proof coins must be deemed complete and in original mint packaging. 

Bullion Bars: Small bullion bars must be produced to the exact weight specs listed.  

Bullion Coins: Bullion coins must not have any damage and be uncirculated.  

There are other rules set by the IRS. It's essential to go over the IRS rules before making any purchases. 

  • 4. Depository 

Once you've funded your account, the next thing you'll want to do is use an approved depository.

If it's your first time investing in precious metals, it's essential to note that they must be stored in a particular location that will ensure the security of your investment, according to the IRS.

For this reason, the depository must be approved by the IRS to ensure the security of physical gold assets.  It's also important to note that the IRS prevents investors from storing physical gold at home.

If you choose to store it at home, the IRS will consider this a withdrawal and you will be subject to heavy tax fees if you have a traditional gold IRA and penalties if you're younger than 59 and a half years old. 

  • 5. Making Withdrawals 

There are specific rules regarding selling off gold for cash, but these rules will depend on whether your gold IRA is traditional or Roth.

Let's take a look at the rules for each type of account: 

Traditional Gold IRA RMD Guidelines 

If you have this type of gold IRA account, the required minimum distribution is set to the age of 72. If you choose to withdraw early, whether this withdrawal is required or voluntary, this will result in taxation.

Those who withdraw before the age of 59 and a half will receive a 10% penalty.  

Roth Gold IRA RMD Guidelines 

If you have this type of gold IRA account, there is no required minimum distribution. Additionally, there is no taxation on withdrawals.

However, for withdrawals before the age of 59 and a half and before the IRA is at least five years old, you will receive a 10% penalty. 

Frequently Asked Questions

Here are a few questions commonly asked about gold IRAs: 

Are gold IRAs and physical gold the same? 

A gold IRA and physical gold are not the same. However, gold IRAs are what's needed to invest in physical gold as an asset when you don't want to be in direct possession of physical gold.  

What is the difference between IRA-eligible gold and gold that isn't? 

Gold that is deemed IRA-eligible is gold that has been allowed by the IRS to be held as an asset within a self-directed IRA. For more details about IRA eligible goldcheck directly with the IRS website. 

Why should I invest in a gold IRA? 

One of the things that distinguish gold IRAs from other investments is the hedge against inflation it provides when the market is volatile. Gold typically holds better value than currencies and stocks.

Additionally, the value of gold can never reach zero, making it a great alternative investment for investors.  

What isn't allowed in a gold IRA? 

Certain collectible coins are not allowed in a gold IRA. According to the IRS, certain popular coins cannot be held in a gold IRA like the South African Krugerrand and the United Kingdom Sovereign coins.

Additionally, investors cannot invest in gold collectibles.  

What happens if I don't have an IRA-eligible coin in my gold IRA account? 

If you accidentally make an improper transaction, like including the wrong coin, the IRS will not accept it. Even more, they will count this transaction as a withdrawal. As a result, you will owe income tax on the value of that item.

If you are younger than 59 and a half, you will receive an additional 10% early withdrawal penalty.  

What are the fees associated with a gold IRA? 

There are several fees associated with a gold IRA account. These fees will depend on your custodian.

But in general, you can expect to have an account setup fee, custodian annual maintenance fee, setup fee, storage fee, insurance fee, wire transfer fee, and cash-out fee. 

Advantages and Disadvantages of a Gold IRA

Gold as an alternative investment has several advantages and disadvantages. Let's take a look at some of the advantages and disadvantages to consider:

  • Advantage: Historical Hedge Against Inflation

One of the first advantages you'll quickly recognize when researching physical gold as an investment is that it is a great hedge against inflation.

When the economy is occasionally affected by inflation, protecting assets becomes a top priority for many investors.  By investing in physical gold, you are providing your portfolio with optimal protection.

Gold performs considerably better compared to paper assets during periods of inflation. For this reason, it's a good idea to mix up your portfolio with gold investments to create a sense of stability.

  • Advantage: Reliable Long-Term Value

When the recession hit in 2008, it showed that companies can underperform to a point where their stock price can reach zero. However, the value of gold won't reach zero, which is reason enough for investors to include gold in their portfolios. 

Another reason gold maintains its value is that it is more difficult to replicate. The central bank can increase the supply of currencies, which reduces their value. However, it is not easy to create new gold, making it more valuable overall.

  • Advantage: Diversification

One of the most important things for investors to do is diversify their portfolios. Diversification can improve your potential returns and stabilize your results. 

Investing in a gold IRA is one of the best ways to diversify your retirement portfolio. Gold almost does not correlate with stocks and bonds. With that said, having a healthy portfolio of gold, stocks, and bonds can lower the risk of your portfolio.

  • Disadvantages: Fees

One thing to keep in mind before opening a gold IRA account is the potential fees. In general, a self-directed IRA account is higher compared to opening a traditional IRA account. 

Fees associated with a self directed IRA can add up quickly. Some common fees that are associated with these types of accounts are account set-up fees (usually a one-time fee), annual maintenance fees, seller fees, storage, and more.  

Investors should do thorough research regarding fees before committing to a particular company. You do not want to choose a company with high fees that will end up costing more than it's worth.

  • Disadvantage: Lack of Liquidity

Investors need to keep in mind that selling off physically gold, silver, platinum, or palladium can be a challenge.

Looking for buyers can be a lengthy process and investors may end up selling their precious metals for a lesser price than the market value. 

For traditional gold IRAs, RMDs begin at the age of 72. Failure to make RMDs will lead to a penalty.

When thinking about the difficulty to sell off physical precious metals, investors should keep this in mind and start thinking early about how they will sell their physical gold when the time comes.

This is why it's important to choose a high-quality precious metals company to work with.  A reputable gold IRA company will have buy-back programs in place to provide liquidity to their clients.

Also, in general, gold IRAs are not good for very active investors that like to do a lot of trading.  It's better to think of gold IRAs like buying a house or a piece of real estate. They are ideal for long term investors.

  • Risk of Loss

Although rare, something to think about is the possibility that your physical assets can be stolen or lost due to unforeseen circumstances. Establishing insurance is vital for this very reason, but the idea of losing an asset can be unsettling for investors.

Again, this is why it's important to work with a reputable dealer, because they will point you to the safest and best storage and insurance options for your investment.

Gold IRA: A Great Option for Investors

Whether you're a new or seasoned investor, diversifying your portfolio with a gold IRA is an excellent way to lower your portfolio risks and bring stability to your assets.

Gold is an excellent hedge against inflation and creates a great opportunity to add more value to your portfolio. One of the most important parts of successfully investing in a gold IRA is choosing the right custodian.

Be sure to thoroughly research custodians, take advantage of reviews, ask questions, and compare fees for the best results.

You can get a Free Gold Investors Guide from our top gold and precious metals company recommendation by clicking the link above or you can read our article of the top companies we reviewed this year:

>> CLICK HERE to read our list of the Top Gold IRA Companies. <<