Are you trying to decide which is better to invest in: a gold IRA vs physical gold?
With gold prices up over 91% in the last five years, more investors are turning to precious metals.
But which option is right for you? This guide covers the pros, cons, and key differences you should know.
What is a Gold IRA?
A gold IRA is a self-directed individual retirement account that allows you to hold physical gold and other precious metals as part of your retirement portfolio.
Unlike traditional IRAs, which are typically limited to securities like stocks and bonds, a gold IRA gives you the ability to diversify with physical assets that hold value during economic downturns.
You can’t open up a gold IRA at your local bank. Instead, you’ll need to work with:
- A custodian to manage the account and ensure IRS compliance
- A precious metals dealer to purchase the gold
- A depository to store your metals securely
There are management and storage fees to hold gold in a gold IRA. These fees can range from a couple hundred dollars a year to several thousand dollars depending on the amount of gold you have in your account.
The IRS has strict rules for what is eligible to be stored in a gold IRA and how to maintain an account.
Gold must be at least 99.5% pure and coins or bars must be produced by an approved manufacturer.
Some common examples include the American Gold Eagle coin and the Canadian Gold Maple Leaf coin.
Gold IRAs can be funded through rollovers from existing retirement accounts like a 401(k) or traditional IRA or through new contributions.
You can’t store your gold at home so investments are held in IRS-approved depositories that provide insurance and security.
Physical Gold Basics
Physical gold is a tangible asset that you can buy, hold, and store on your own. It offers complete control over your investments.
While you can work with a custodian or a depository to hold physical gold, you don’t need to.
You can purchase physical gold as a government-issued coin, bar, or privately minted round. Some popular coins include:
- Gold American Eagle coins
- Gold Canadian Maple leaf coins
- Gold South African Krugerrand coins
- Gold Austrian Philharmonic coins
- Gold Chinese Panda coins
You can purchase coins directly from a precious metals dealer to store at home. You can purchase a safe to store in your home or you can rent a safe deposit box at a local bank to safeguard your gold.
Physical gold that you purchase on your own doesn’t adhere to the same IRS requirements, but you should make sure you buy high quality gold.
If you don’t you may find it difficult to find a buyer when you want to liquidate it.
Unlike stocks or bonds, gold isn’t a highly liquid asset and demand can vary based on market conditions.
You’ll need to first find a buyer who wants to buy your gold and then agree on a price based on the market.
Some buyers charge commissions and fees which can reduce the value of your gold when you sell it.
Physical gold provides direct asset ownership and can be a reliable store of value, but it requires secure storage and personal management.
You’ll want to get an insurance policy that covers your gold and have the right storage solutions to reduce the risk of damage or theft.
Gold IRA vs. Physical Gold: Key differences
A gold IRA and physical gold are both ways you can diversify your portfolio through physical assets. That being said, there are pros and cons to each.
Here’s a few things you’ll want to consider before investing in gold.
| Criteria | Gold IRA | Physical Gold |
|---|---|---|
| Ownership | Held by a custodian on your behalf and requires custodian approval to process transactions | You directly owned and hold your own gold and can sell at any time |
| Storage | Must be stored in an IRS-approved depository | Can be stored at home, in a safe deposit box, or in private vaults |
| IRS Compliance | Must follow strict IRS rules for contributions, withdrawals, and storage and investments must meet purity standards | No IRS oversight unless sold at a capital gain or part of an IRA |
| Tax Advantages | Option for tax-deferred or tax-free growth | No tax advantages |
| Costs & Fees | Custodian, setup, annual, and storage fees | One-time purchase price and optional storage or insurance fees |
| Buyback Options | Facilitated by the custodian or dealer you originally purchased from | You must coordinate resale on your own |
| Liquidity | May take several days to process a sale | Immediate if selling directly to a dealer or individual |
| Ideal For | Long-term, tax-advantaged retirement savings | Investors who want control and immediate access to an alternative store of wealth |
Which one is right for you?
Deciding whether to open a gold IRA and or buy physical gold depends on your financial goals, risk tolerance, and how you want to manage your investments.
If you want to preserve wealth and hedge against inflation, a gold IRA may be the right option. It’s a long-term retirement account that will give you some of the same tax advantages that come with traditional retirement accounts.
Working with a custodian will help you stay compliant with IRS rules.
If you want immediate access to your wealth and full control over your investments, owning physical gold outright may be the better option.
You’ll be able to access it whenever you want, won’t have to pay account management fees, and can easily liquidate it during periods of economic instability.
Both options offer protection against inflation and market volatility. The best choice depends on how hands-on you want to be and whether you’re looking for short-term flexibility or long-term tax-deferred growth.
The good news is you’re not limited to one option or another. You can hold physical gold at home for liquidity during emergencies while also setting aside savings in a gold IRA to take advantage of tax-deferred growth.
Is buying physical gold or a gold IRA better?
Congrats on taking the initiative to learn more about a gold IRA vs. physical gold. Many investors passively sit on the sidelines without thinking about ways to protect their wealth.
Now that you understand the difference between a gold IRA and physical gold and what they offer, you can decide which one aligns with your financial goals.
Whether you prioritize tax advantages, long-term growth, or full control of your assets, the right choice will depend on your personal needs.
There’s no one-size-fits-all answer. A gold IRA might be right if you’re focused on retirement while physical gold may be the better option if you want access to liquidity during economic downturns.
You can always take a hybrid approach, diversifying your portfolio even more.
