Gold IRA Pros and Cons

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.

Early in your investing, you're probably most worried about saving money. Later on, you want to grow your portfolio as much as you can, and investing in growth assets is always a priority. However, as you amass wealth, you'll want some way to protect it.  

Saving for retirement takes years and decades. Recessions happen along the way, inflation can eat up your value, and the possibility of a stock market crash might make you fear for your portfolio wealth.

Diversification into certain asset classes can help you possibly protect your portfolio value. 

A gold IRA combines the asset protection of precious metals with tax advantages. Investing in one might give your portfolio a useful anchor should the market downturn close to retirement.

However, there are also possible downsides, so you need to know both the pros and cons involved.

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:

Protect Your Savings - Tax and Penalty Free!

What Are Gold IRAs?

A gold IRA might also be known as a precious metal IRA. They are tax-advantaged investment accounts where you can invest in physical metals in an IRA.

This self-directed IRA gives you the same tax advantages as traditional IRAs, but you can also benefit from investing in gold. 

Gold has a historical trend of gaining value in tumultuous economies or market downturns. Depending on your gold IRA broker, you might also be able to invest in silver, platinum, and palladium.

All these metals have similar benefits to investing in gold.

How Does This Work?

A rollover from a previous retirement account is a common method of starting up a gold IRA. Funds in an IRA or 401(k) and similar plans are already tax-advantaged. You can protect that status by moving those funds into a gold investment.  

The first thing you have to do is choose a broker to arrange the account for you. Once you do that, they do most of the logistics and paperwork involved with creating your account and moving your funds.

This can happen in a way that doesn't incur penalties or taxes. 

Once the gold IRA has been funded, you get to choose precious metals in the form of coins and bars that you would like to buy. Then, they're shipped to a depository. They're kept there safely for the duration of the account.

There Are Rules You Should be Aware of

Every IRA account has rules and regulations. Gold IRAs are no different. You can't invest in collectibles, and there are maximum annual contributions ($6,000 in 2022; $7,000 for those past age 50). 

You can't do early distributions until age 59 1/2. By age 72, you're required to start doing so. The IRS also requires each account to be managed by an approved custodian and stored with a depository.

Why Invest Gold in Your IRA?

Individual Retirement Accounts (IRA) protect your retirement as well as your family's financial security.

These special accounts allow you to set aside tax protected savings that you can use in the future.   

With these long term accounts it's important to allocate a significant portion to assets that are solid and reliable, so you have a secure and worry-free retirement. 

a couple listening to a financial advisor

You can have cash in an IRA, but that is devaluing at a rapid pace and inflation is out of control

You need an asset that's dependable, retains it's value, and even increases in value over time, and there is no better asset for this than gold. 

With the world's economy struggling through lockdowns, shortages, wars, and inflation, uncertainty has never been higher and investors are protecting themselves by placing physical gold in IRA's. 

A gold IRA investment prospers from these crisis that negatively affect most other assets. 

Risk is knowing the economic dangers and doing nothing to protect yourself and your family. 

Safety is knowing the economic dangers and taking action to protect your financial future, and this is easy to do with a gold IRA.

Pros of Owning a Gold IRA

Putting some of your investment funds into a gold IRA can yield substantial advantages to you, including the following.

  • Diversify Your Portfolio

Portfolio diversification means putting investment funds and resources into different asset classes. Stocks and bonds can be largely thought of as one big asset class, but precious metals are an entirely different asset class.

The advantage here is that precious metals often move in different cycles and directions than paper-based assets.  Diversifying in multiple asset classes should mean that part of your portfolio is always growing, even if another part might be contracting.

With regular rebalancing, you can move profits from upswing assets into those going through a downturn. That way, you're in a prime position to capitalize on any asset class when its next growth cycle comes around.

  • Benefit From Long-Term Holds

Investing in a gold IRA is a long-term play. However, that should mean you can benefit from the long-term growth precious metals historically feature.

While there are ups and downs along the way, gold has grown in value possibly more than the stock market over the last 50 years.  Other precious metals show growth potential over time, too.

Silver has had double-digit growth, faster than gold, in many recent years over the last decade.

Palladium and platinum also have a history of growing in value, and that is likely to continue as industry demands and supply chain disruptions occasionally spike their value.

  • Protection From Inflation

Inflation wasn't a real problem for two generations, but it's certainly back in the minds of many people in recent history. This happens when the spending power and value of fiat paper currency go down and prices go up.

If you started the year with $1,000 in the bank and also ended with just as much, it's not as valuable at the end.  Precious metals are incredibly valuable during periods of inflation.

As physical and tangible assets, their value doesn't have the possibility of disappearing overnight like a stock or currency might. Gold and silver have been in high demand for thousands of years, so they're not going anywhere.

  • Hedge Against Instability

Another thing that precious metals hedge against, other than inflation, is instability. Whether it's market roller coasters or political turmoil, many investors flock to gold and silver as safe investment harbors when things get rocky at a societal level.

This phenomenon is known to happen around the world in many countries.  When it does, it means that the demand for gold goes up dramatically.

Investors would rather hold it and retain their portfolio value until things calm down rather than hold currencies reserves, stocks, or bonds that might lose tremendous value overnight in some kind of market crash.

The Great Recession was definitive proof of this concept.

  • Total Investment Control

When you invest in a mutual fund, a fund manager makes the investment decisions for you. Investing in an index fund just means automatically mirroring some particular index, and investing through employer-sponsored plans might leave you limited choices.

precious metals IRA leaves you in total control.  You choose how much you want to invest, and you get to decide how to allocate your investment among gold, silver, platinum, and palladium.

You also get to decide how much to put into particular coins or bullion. There are even choices you can make regarding custodians and storage vaults in many cases.

  • Tax Advantages

Gold IRAs are basically just regular IRAs with one important distinction, they are allowed to hold physical gold. Nearly all gold IRA brokers will let you create a gold IRA that doesn't tax any capital gains or asset growth inside the account.

Many will also let you do a Roth IRA where you use post-tax income but don't pay taxes at all when the funds come out so long as they stay in place for five years or more. You can fund a precious metal IRA with pre-tax income.

Alternatively, you can create the account using a rollover from a previous retirement tax shelter. This includes IRAs, Roths, SEP and SIMPLE IRA, 401(k) and 403(b) plans, and even TSP accounts.

Cons of Owning a Gold IRA 

As you can see, precious metal IRAs have plenty of potential advantages, but they are not perfect for every investor. Consider these possible downsides.

  • Restricted Fund Access

Personal savings are things you can tap into anytime. Stocks and bonds you own outside of a tax shelter can be liquidated for cash.

Many 401(k) plans let you borrow against them for things like college tuition, down payments on a home, or just emergency medical bills.  

Once you put funds into a gold IRA, they're stuck there. Making an early withdrawal, usually, before age 59 1/2, can incur taxes and penalties on top of it. This isn't a great investment for "rainy day" funds or emergency living expenses.

  • Liquidation Process May be Slow

When the time comes to make a withdrawal or required distribution, you might not get a check in the mail or direct deposit in your bank account.

That's because you're investing in precious metals, and that's what you might wind up getting when you pull anything out. The gold IRA broker, custodian, and storage facility will ship you your actual metals.  

Some investors prefer that, but it does mean you become personally responsible for the safety of precious metals. If you store them at home, they're hard to insure and difficult to document at full value.

Many brokers offer buyback options at the end of an account, but options and values might not be what you want.

  • No Home Storage

While you might choose to store your precious metals at home once you make a withdrawal, you can't do it while the gold IRA is active.

If you're already used to doing this with precious metals you've bought outside an IRA tax shelter, then this might be disappointing to you. However, the IRS simply doesn't allow it.  

A gold IRA is only possible through a precious metal IRA broker. Part of the arrangement is having your bars, coins, and other billion stored in an IRS-approved storage facility arranged by a qualified custodian.

While these are secure facilities, accidents, mistakes, and losses are known to happen, although insurance can mitigate your risk.

  • Not a Forever Plan

A gold IRA is designed to be a retirement investment vehicle, just like a 401(k) or traditional IRA. You can invest in one of these plans for a while, but there might be contribution caps.

As you get old enough, you'll have to make the required minimum distributions.  These are also known as RMDs, and they have to happen by your early 70s. They're mandatory whether you want to do them or not.

You can always keep your precious metals on your own, but the safety of a depository and the tax shelter of the IRA structure are both gone.

  • Not For Every Investor

Any investment is going to carry risk.  Gold looks like a safe investment given how much its value has risen since the early 1970s, but it's also terribly inconsistent. During strong economic times, precious metals can be downright tepid.  

The volatility involved in the short term can be nerve-wracking, to say the least. Remembering the long-term picture can be hard to do. When precious metals do best, the rest of your portfolio might be tremendously turbulent.

  • Paying to Play

Many gold IRA brokers have minimum investment levels you have to meet before they'll create an account for you. For a few, it's only a few thousand dollars, but many want $10,000, $25,000, or even $50,000.

This makes gold IRAs often an option for only high-net-worth individuals.  

There are also fees and expenses to pay. Some can be waived, but you are likely to pay setup fees at the start plus annual account maintenance and storage fees.

This all happens with an investment class that is incapable of producing dividend income along the way.  But investors do not buy gold for dividends, they buy gold to hedge against government spending, inflation, and market chaos.

Should You Invest in a Gold IRA?

That's as personal a decision as any. There are strong arguments for investing in a precious metal IRA for retirement, but there are considerable downsides and risks that might not make it worth your while.

Doing a rollover from 401(k) gains might preserve their value closer to retirement, but timing and actual numbers can be tricky.  

Consulting a financial advisor or retirement planner is always a good idea if you don't do that already. They can help you decide if a gold IRA is a good move and even how much to possibly invest in one.

Still, the final decision is truly yours.

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. <<