How Do Gold IRA Plans Work?

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.

When choosing investments for your portfolio, you likely have many questions, especially if you're a new investor. You want your assets to make you money without any substantial losses.

The most successful investors focus on making their portfolios safe, not necessarily those that make the most from their investments. One of the most secure ways to protect your investment portfolio is to invest in gold.

People have bought and sold gold for centuries. Ancient civilizations associated gold with the gods, wealth, and power. Gold is one of the best precious metals to work with since it's in a pure state, doesn't have to be extracted from ore, and doesn't tarnish.

With economies and governments around the world descending into near complete chaos, more and more smart investors are looking for financial safety and to protect their assets with gold.

The best way to protect your savings with gold is through a tax efficient gold IRA plan. In this article we will tell you everything you need to know about these unique accounts to make a good decision for you and your family.

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:

Learn How to Protect Your Wealth - Tax and Penalty Free!

Gold is a Solid Investment

Buying gold is an intelligent way to diversify your portfolio and provides a safety net when inflation is out of control. When the economy is stable, making safe investments for your portfolio is still a good idea.

You can diversify precious metal purchases further when you open a gold IRA. A gold IRA is a self-directed account that allows you to purchase gold bullion. A gold 401K retirement plan has advantages similar to a traditional IRA plan.

However, a gold IRA is a more stable way to diversify your investment portfolio. Buying gold and silver is an excellent way to protect your savings for retirement.

There are advantages to gold IRA retirement accounts if you want to leave your investments to your heirs or a charity.

How a Gold IRA Plan Works

With a gold IRA, you can invest in precious metals like gold and silver with the tax advantages of a traditional IRA.

A gold IRA works like a conventional IRA, which allows investors to use their money before they pay taxes to invest in gold or other precious metals.

A Roth IRA enables the purchase of precious metals like gold after taxes are paid. However, there are significant differences to be aware of. 

With a traditional IRA, it's possible to invest in gold exchange-traded funds or ETFs or purchase stocks in gold mining companies. A self directed IRA allows you to buy physical gold.

The Employment Retirement Income Security Act, or ERISA of 1974, allowed individuals to establish IRAs for retirement. After the act became law, individuals could open an IRA.

Self-Directed IRAs allow non-traditional investments like bonds, real estate, precious metals, and private companies. Gold offers stability when there are economic downturns or high inflation rates.

The tax code allows investments in gold with the same benefits as traditional IRAs. The IRS has specific record-keeping and tax requirements for gold IRAs since the assets are more complex.

The IRS doesn't allow you to keep gold bullion in your possession with a gold IRA. According to law, your gold must be stored with a custodian that may include:

  • Safe deposit box in your bank
  • National gold depository
  • A third-party trustee that has IRS approval

When you set up a gold backed IRA, your custodian will advise you of IRS-approved facilities to store your gold. The custodian will also handle transferring your gold to the facility when your gold IRA is set up.

Advantages of a Gold IRA

Whether you're new to your career or getting close to retirement, there are numerous advantages to a gold IRA. The primary reasons to open a gold account are:

- Gold and precious metals are an excellent way to diversify your investment portfolio for the short or long term.

- Gold and precious metals can assist with risk adjustment. The longer you plan for your retirement, the less risk you want to be involved with your portfolio. 

You can decrease risks with your portfolio by investing in fewer stocks and bonds and buying gold, even if it's in smaller amounts.

- The financial crisis in 2008 was disastrous for many investors. However, those that invested in gold and precious metals managed better than those who invested in stocks and bonds. Investors with gold in their portfolios continued to thrive long after the crisis.

Diversifying is More than Stocks and Bonds

Most people are under the impression that diversification means different stocks and bonds in the investment portfolio. Smart investing is more involved.

When you focus on investments from one country, industry, or currency, you're more likely to lose money when inflation is high, or the stock market isn't performing well. 

Most retirement accounts offer money market funds, stocks, and bonds. Wall Street influences the rates. If the stock market crashes, assets go down in value. Stocks and bonds can't be quickly sold for cash due to low market trading.

Investing in gold aids in the shift from financial assets like stocks and bonds to physical gold. Precious metals protect your investment portfolio when Wall Street is on a downward turn.

When the stock market performs poorly, gold maintains its value and can protect your portfolio when there's a threat of a recession.

Protection from Fluctuations in the Market

When you only invest in stocks, bonds, or mutual funds, there's a risk that your assets could be worthless if the companies you invest in should fail.

Gold and other precious metals will always retain value. When the economy doesn't perform well, gold will always be valuable.

Controlling Your Self Directed Gold IRA Investments

Choosing to invest in a gold IRA offers more control over your investment portfolio. When you invest in a traditional IRA, the options are limited.

Opening a gold IRA offers more control since you choose which types of gold, silver, or other precious metals to invest in.

One of the best advantages of a gold IRA is you can transfer your assets without paying tax penalties since a self-directed gold IRA is a qualified retirement savings option. The process is simple if you want to roll over a portion of your conventional IRA. 

Another option is to sell some of the precious metals in your retirement portfolio for stocks or bonds.

Options, when you have control over investments, include:

  • Having peace of mind
  • Diversifying your portfolio
  • Knowing your retirement will be secure

Potential for Growth

Most financial advisors recommend buying stocks and bonds for your portfolio. Many mainstream financial advisors focus on the 1982 - 2000 surge in the stock market. The average annual growth in the stock market was approximately 17 percent.

However, the stock market hasn't experienced similar growth since that period.  A financial advisor's income comes from the fees associated with asset management and stock trades.

When people invest in precious metals like gold, silver, or platinum, they invest long-term. Stockbrokers and financial advisors charge a percentage for each transaction and make annual management fees for each asset. 

Owning precious metals long-term means your assets are secure and safe, and you don't have a lot of out-of-pocket expenses.

It's essential to consider all your options. Annuities promise a guaranteed income. The problem is that your assets are tied up for several years. Some investors have to pay substantial penalties to get their money back.

You don't have to consider paying penalties for precious metals. If your money is invested in an annuity, you could miss out on substantial gains when the market is performing well.

Gold is more stable than paper assets. If you want access to your funds, you can sell some of your gold or transfer it to different investments.

Tax Advantages Similar to Traditional IRAs

A conventional IRA offers tax advantages that are available with a gold-backed IRA, including:

  • Investing in gold before or after paying taxes with a Roth IRA
  • Rolling over existing assets without tax penalties
  • Deferring paying taxes until you take out your assets

Another benefit is that the yearly contributions to a gold IRA can be tax deductible. The same rules that apply to a conventional IRA apply to a gold IRA. If you take money out of your IRA early, you may have to pay income taxes and a 10 percent penalty.

After you reach the age of 72, a minimum distribution must be taken from your account each year. With a gold IRA, you can contribute $6,000 each year. The amount increases to $7,000 after you're over 50.

You may request cash or gold when you withdraw any of your assets. 

Many people who invest in gold or silver prefer working with a traditional broker rather than a mint since they get a better return on their investment. You also have the option of deferring tax payments. Use your money before deferring payments.

How to Get Started with a Gold IRA Plan

You can open the account without making a deposit when you transfer your assets to a gold IRA. It's best to choose a custodian that specializes in precious metal investments. Be sure that the partner you work with is reputable by checking with consumer rating agencies.

When you find a reputable precious metals specialist, here's how to proceed. 

Complete all the necessary documents. Transfer or roll over money from your current IRA or retirement account. You have the option of making annual contributions which opens a new account.

Submit the completed documents to your financial adviser. Open a new gold IRA.  Select the precious metals to invest in. Purchase your gold or precious metals.

Precious Metal IRA Standards

Before you choose gold or any precious metals for your portfolio, you should be certain it meets the guidelines and standards for eligibility for gold IRAs. 

If you buy gold or any other precious metal that doesn't meet eligibility requirements to invest in a gold IRA, you could have to pay taxes and penalties on the purchase.

Level of Purity to Meet Gold IRA Guidelines:

  • Gold - .995
  • Silver - .999
  • Platinum - .9995
  • Palladium - .9995

The types of gold coins you may purchase with a gold-backed IRA include:

  • American Buffalo
  • American Eagle
  • Australian Gold
  • Canadian Maple Leaf

Meeting gold IRA guidelines may depend on where the coins are issued. Some coins that don't meet the standards for purity for a gold IRA may still be eligible for investment in a gold-backed account.

Your precious metals are held in an account until you retire. When you reach the age of 59 1/2, you may start taking gold out of your account or selling your precious metals. Certain types of gold coins aren't allowed in a gold-backed IRA.

Sovereign coins from the United Kingdom and gold coins from South Africa aren't accepted in gold IRAs. You must discuss the various options available with the custodian of your gold IRA before you make any purchases.

For example, you can't invest in gold collectible coins. If you complete a transaction that the IRS doesn't allow, it's considered a withdrawal. You would be liable to pay the income tax on the gold item.

If you're younger than 59 1/2, you would have to pay an additional penalty of 10 percent.

What You Need to Know About Gold Investing

It's a good idea to learn as much as possible about gold IRAs and price fluctuations in the gold market before you invest in precious metals. Purchasing gold is the best way to protect the assets in your investment portfolio.

Costs Associated With a Gold IRA

Although you have charges with a gold IRA, your assets are secure and maintain their value. Although you have costs with a gold IRA, your assets are protected and hold their value. The custodian fees that you don't pay on a traditional IRA include the following:

Opening the Account 

The custodian of your gold IRA may charge fees upfront to open the account. The amount the custodian charges could be between $50 to several hundred dollars.

However, if you're making a substantial deposit to the account, you likely won't have upfront costs. 

Annual Fee for Maintenance 

The custodian of your gold IRA may charge fees upfront to open the account. The amount the custodian charges could be between $50 to several hundred dollars.

However, if you're making a substantial deposit to the account, you likely won't have upfront costs.  The custodian usually charges an annual amount to cover the cost of paperwork and maintenance of your account.

Maintenance is usually a flat rate and can vary depending on the amount you have in your account. 

Seller Costs 

The seller may charge a markup fee, depending on the market prices. You could also be charged commissions and standard handling fees of $40 for each transaction. 

Storage Costs 

The gold in your account must be stored in a secure location. The fee may be a percentage of the amount in your gold account or a flat rate. 


Storage costs and insurance on a gold IRA generally run between $100 and $300 each year. 

Wire Transfers 

When you send or receive money via wire transfer, you can expect to pay a standard handling cost of $25. 

Cash Out Fees 

When you close your gold IRA the custodian will charge a final amount of approximately $250.

gold ira investing information

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. <<