Gold IRA Vs Physical Gold Comparison

74% of Americans are concerned about the price of food and consumer goods. Meanwhile, business leaders like worry about America’s continued growing debt.

Are you looking at a Gold IRA vs physical gold for your investment strategy? Investors who want to protect their money often seek safety by buying gold. If that’s you, consider using your traditional IRA to invest in gold coins or bars.

What’s the difference between a Gold IRA and buying physical gold? They can be the same thing. An IRA is a type of retirement account, and you can actually own physical gold inside of it.

This article covers how a Gold IRA works, why people choose it, the tax benefits, and some drawbacks to consider. You’ll also learn what to look for in a gold dealer and the steps to get started setting one up.

Get a full understanding of Gold IRA options to see if they’re the right fit for your retirement plans.

What is a Gold IRA?

A Gold IRA is a type of retirement savings account that allows you to hold physical gold and other precious metals as part of your retirement savings. Traditional IRAs focus on stocks, bonds, and mutual funds, but a Gold IRA offers a tangible asset that doesn’t rely on markets, companies, or governments.

The big difference is control. With a Gold IRA, you pick the gold or precious metals investments that meet your strategy plus you get all the same tax advantages as a traditional or Roth IRA.

Gold IRAs also give you a layer of protection against inflation and market volatility. Paper assets like stocks or bonds can lose value when inflation rises or the economy faces uncertainty, but gold has a history of retaining its worth over time.

If you want diversification and stability, a Gold IRA can serve as a hedge against economic instability while still offering the tax-deferred growth you expect in a retirement account.

Things to keep in mind with Gold IRAs

Just like traditional IRAs, the IRS has specific rules for Gold IRAs which you’ll have to follow in order to keep all of the tax benefits. Here are key details:

• Types: There’s several different types of Gold IRAs and you’ll also sometimes hear people call them precious metals or silver IRAs. You can have a traditional IRA, Roth IRA, SEP IRA or Simple IRA.
• Assets: You can own gold, silver, platinum and palladium bullion in these accounts. Bullion is a term for any precious metal that has value specifically because of it’s metal content.
• Taxes: Gold IRAs give you the same tax benefits of traditional IRAs and they work exactly the same way. This means you have the same contribution limits, tax treatment and retirement age as you do with accounts that hold traditional assets.
• Custodian: Instead of a traditional broker or administrator, you’ll work with an self-directed IRA custodian to manage your money. They buy and sell precious metals under your direction.
• Fees: All investments have fees and Gold IRA fees include one-time set up, annual management and annual storage. Some custodians have other fees so you should research options.
• Gold Dealer: Your custodian doesn’t sell metals so you’ll work with a reputable gold dealer like Swiss America to buy metals that meet IRS requirements.

Why investors choose Gold IRAs

Some of the common reasons why investors choose to hold gold and other precious metals inside of their retirement accounts include:

• Diversify: Gold moves independently from stocks and bonds so it can protect your portfolio when markets drop so adding gold gives you a way to reduce risk to your savings.
• Protect savings from inflation: Investors consider gold a way to protect their wealth from the effects of inflation. We only have a certain amount of gold and other precious metals on earth and we can’t just make more. So you get a tangible asset with real value that increases over time to protect your savings.
• Hold long term: Gold IRAs reward patience. You’ll gain the most from the tax structure and benefits when you invest for years ahead, not when you chase quick returns.
• Own physical assets: You can touch and see gold as a real investment. Many people sleep better knowing they hold some retirement savings in physical form.
• Receive tax benefits: Traditional and Roth Gold IRAs cut your taxes. Depending on your account type, you’ll either delay paying them or skip them on future gains. This makes your retirement savings grow faster.
• No counterparty risk: Precious metals are physical assets that don’t require third-party involvement to impact the amount you hold. Whatever physical gold or other precious metals you own — you own them no matter what other parties do. This is different than paper assets which depend on someone else to perform or hold up their end of a commitment which adds risk to your savings.

Who is a Gold IRA right for?

To make a choice between a Gold IRA and physical gold bars or coins, consider your overall investment objectives, preferences and risk tolerance. Gold IRAs are best for investors who:

• Want to use long-term retirement savings to hold gold as a defensive asset.
• Want tax benefits that come with retirement accounts.
• Are comfortable with some volatility in pricing and are OK with holding an asset that doesn’t generate income.

How to set up a Gold IRA

Here are the steps to set up a physical Gold IRA:

Step 1: Choose an IRA custodian

If you don’t already have a precious metals custodian in mind, we can recommend one for you. The custodian manages your account and complies with IRS regulations. Their role includes buying and selling gold or other precious metals on your behalf, arranging for secure storage of your metals, and annual IRA reporting.

You’ll open a self-directed IRA account with the custodian and you’ll pick a precious metals dealer. Look for a reputable company like Swiss America that can help guide you through the set up process and which metals make the most sense for your needs.

Step 2: Fund your account

If you are opening an IRA from scratch, funding means providing the money to your chosen custodian so that they can buy gold and other physical precious metals at your direction.

For existing IRAs or 401(k) plans that you want to roll over to a precious metals IRA, follow these steps:

1. Contact your current administrator or your employer plan or traditional IRA and tell them how much you’d like to roll over.

2. Decide between a direct or indirect rollover. A direct rollover is usually the best option since the administrator sends the funds directly to your IRA custodian.

3. Monitor to make sure the custodian receives the funds.

Step 3: Buy and store metals

Next, you get to choose what gold, silver, or other precious metal you want to add to your retirement account. The IRS has certain rules about which metals qualify for precious metals IRAs, so you can’t buy just any bullion coins or bars without following these guidelines.

The Swiss America team has worked with thousands of investors on these IRAs and can help you understand what your options are.

Once you choose which silver or gold coins or bars you want to buy, you’ll instruct your custodian to buy them on your behalf. From there, the custodian directs precious metals dealers to ship your bullion products to an IRS-approved depository for storage.

IRA approved precious metals

The IRS’ rules around which metals you can buy with your Gold IRA include:

• Metals: Gold, silver, platinum and palladium.
• Purity: Gold must be 99.5% pure, silver 99.9% and platinum/palladium 99.95% pure.
• Manufacturers: Your metals must come from government mints or accredited manufacturers.
• Forms: Only specific coins and bars qualify. The IRS excludes collectibles, commemorative coins, or gold that doesn’t meet purity requirements.

Tax rules for Gold IRAs

Here are the key areas to know about taxes and Gold IRAs:

Tax benefits

The various benefits depend on the type of account you have:

Traditional gold IRAs: You add pre-tax funds to this individual retirement account that grow tax-deferred. You can also potentially deduct annual contributions to the account.

Roth Gold IRAs: For this retirement account type, you contribute after-tax dollars. This means you can withdraw your contributions at any time since you have already paid taxes on them. The benefit of Roth IRA is that any growth of your account is tax-free.

SEP (Simplified Employee Pension) Gold IRAs: This works just like a traditional Gold IRA and is for self-employed folks or small business owners.

Capital gains rules

One of the biggest advantages of a Gold IRA is that it shields your gold from capital gains taxes:

• If you hold physical gold outside of an IRA, you pay capital gains tax at the collectibles rate of up to 28% when you sell.
• A Gold IRA shields your investments from this tax as long as they remain in the account. This can save you the costs of taxes over time.

Reporting requirements

The IRS has reporting requirements that include:

• Your custodian handles most of the reporting on form 1099-B when you make distributions or sell assets.
• When you take distributions in retirement, you’ll need to report the taxable income from your Gold IRA distributions on your individual tax return.

Required minimum distributions

Traditional Gold IRAs require you to start taking minimum distributions by age 73. This means you may need to sell part of your gold holdings, even if you want to hold onto them. Roth Gold IRAs don’t have required distributions plus, you can also pass on your metals tax-free to your heirs as long as you’ve held the account for at least five years.

Gold IRA risks

Before you set up a self-directed IRA to invest in gold, you should also consider the risks. The main drawback to investing in gold is that it doesn’t generate income. When you own precious metals, you give up the opportunity for cash flow or dividends.

But, you gain a type of “insurance policy” for your wealth. Since gold tends to retain value during risk events, it provides stability when other assets may lose value. Consider gold a defensive strategy. This is why most financial experts recommend you hold some but keep the amount to 5%-15% of your total savings.

What is physical gold?

Physical gold is owning actual bars and coins versus paper assets like gold ETFs or stocks. With physical gold, you have a tangible asset that’s completely under your control. You decide where to keep it and when to sell it.

Since it protects you from inflation, economic uncertainty and overall crisis, it’s a smart addition to your savings plan.

Things to keep in mind with physical gold

If you buy physical gold outside of an IRA, just consider:

• Options: You’ll have more options and can buy collectible coins or jewelry. The benefit is you have flexibility but the drawback here is that you’ll need to do your own research to make sure you’re buying quality metals.
• Ownership: You get to decide where you want to store your metals but you’ll also need to plan for insurance and other safety measures to protect your investment. When you’re ready to sell, you’ll need to research options or work with your gold dealer to liquidate your metals.
• Costs: If you buy metals outside of an IRA, you won’t custodian costs but you’ll still have taxes, shipping and potentially storage costs if you use a bank vault or depository.
• Taxes: Owning physical gold with non-retirement savings doesn’t give you any tax benefits. You’ll pay capital gains on any gains when you go to sell.

Why investors own physical gold

Owning gold outside of an IRA is great for investors who want to:

• Diversify: Add gold to reduce the risks of the stock market but have the option to add whatever metals you want.
• Protect savings: Protect your money from inflation or other economic risk with more control over your asset since you can store it wherever you want.
• Flexibility: Sell and trade your gold whenever you want without having to worry about IRS rules for retirement savings.

How to buy physical gold

Buying physical gold is very simple and straightforward:

• Gold dealer: Find a reputable gold dealer like Swiss America who has been around for decades and has great reviews.
• Buy metals: Open and account and buy your metals. You’ll pay a premium above spot price which covers the distribution and shipping costs for your gold. You might also have sales taxes depending on where you live.
• Store your metals: Decide on where you want to store your metals like a home safe, bank safety deposit box or depository. Check into insurance as well.
• Monitor: Gold is a great investment because you don’t need to worry every day about what is happening with metal but you can also check that status online.

Risks with physical gold

The main risks of physical gold include storage and no passive income. Owning gold goes beyond its purchase price. Whether you keep it at home or in a secure vault you’ll need to account for storage costs and potential added risks like theft.

Gold doesn’t produce income like dividends or interest. It’s value comes from its ability to hold steady in volatile times, not from generating cash flow. That’s why gold is primarily a tool for stability and diversification. It’s not designed to outperform high-growth investments like stocks or real estate. Relying too heavily on gold could mean missing out on bigger returns in other areas.

Common mistakes with physical gold

Since physical gold doesn’t have to fall under IRS rules, you can buy whatever you want. This is great for flexibility but it also makes it especially important that you verify the authenticity of the gold and that you’re not buying counterfeit coins or bars. A few tips to avoid common mistakes:

• Use a reputable dealer that’s been around for decades. Don’t buy from online marketplaces like eBay which might have counterfeit products.
• Don’t rush into buying and take the time to research your options. Stick with bullion coins and bars versus collectibles.
• Consider gold a longer term investment.
• Don’t neglect storage and insurance to protect you investment.
• Compare prices with the current spot price of gold to make sure you aren’t overpaying for premiums.

Other ways to invest in gold

There are other ways to invest besides owning physical assets in your IRA. You might invest in gold with:

• Mutual funds or ETFs: Either of these approaches gives you a share of a professionally-management investment in gold. It’s an option where you don’t have to store gold but you don’t actually own the asset since it’s only a paper investment.
• Gold stocks: You can also buy stocks in individual gold mining companies. This approach might help you benefit from increasing gold prices but you’re also relying on the company to perform. If they don’t, it doesn’t matter how strong gold prices are, you’ll lose money.
• Gold futures: This is one of the most riskiest ways to invest in gold. You’re essentially guessing what a future price might be and buying a contract based on that. If you are wrong, you could also lose money.

Choosing a Gold IRA company

When you look at Gold IRA companies check to see how long they’ve been in business. Swiss America’s 40+ year history means you can count on our ability to navigate market ups and downs.

The best Gold IRA companies provide education and resources to help investors make the best decisions about their retirement accounts. Swiss America’s weekday news articles, regular podcast episodes, and free resource guides can provide the information you need to make your decision.

Gold IRA investors should check out a potential company’s customer reviews. Look for high ratings on their website, in Google and through other sites like the Better Business Bureau.

IRA gold account final thoughts

Now that you know how a Gold IRA works, you can decide if this approach is the right fit for your situation. Consider your retirement goals, risk tolerance, and current portfolio mix.

If you want to learn more about how to diversify with precious metals, contact Swiss America today!

Gold IRA vs physical gold: FAQs

Is a Gold IRA physical gold?

Yes, a Gold IRA means that you hold physical gold inside of your retirement account.

Can I cash out my IRA and buy gold?

You can, but you don’t have to. You can buy gold inside your IRA by working with a precious metals custodian and a gold dealer.

Is gold a good retirement plan?

Adding some gold to your retirement account gives you a tangible asset that many see as a hedge against inflation, economic uncertainty, and stock market volatility.

Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.