Gold IRA vs Physical Gold: Which is Best for Your Portfolio?

Written By Colin Kuehn  |  Gold 

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Are you tired of fighting a losing battle against inflation? It often seems that no matter how much we save or invest it’s not enough to account for risk, losses, and inflation.

But there are a few smart techniques that financial experts use to bolster themselves against these losses.

We believe that gold is one of your best investment options for managing risk; whether you’re investing in physical gold or directing a gold IRA.

Key Differences Between a Gold IRA and Physical Gold

an illustration of an old main standing on a stack of gold coins next to a jar

Both of these options present plenty of value and can be used strategically to hedge against inflation and other losses. If your portfolio is static, then incorporating gold is one of the best methods to diversify.

There are a lot of different ways you can invest in gold, including mining stock, gold ETFs, physical gold, and gold IRAs.

Investing in physical gold is very easy to understand. You are simply purchasing a physical commodity whose value reacts to the value of the USD.

Of course, there are several factors and additional expenses you need to consider when investing in physical gold. You will need somewhere secure to store the gold and insurance to cover the gold.

A gold IRA is slightly more complicated. It is not a traditional investment avenue like stocks, bonds, or options. Instead, it is an Individual Retirement Account that will accrue physical gold over the years.

As with any retirement account, the objective is to earn and save as much money as possible before reaching an old enough age to retire.

  • Can I Add Gold to a Normal IRA?


Gold is one of the very few commodities that can be added to an IRA but it cannot be stored in a standard account. This is because there are a lot of additional steps involved with securing and storing a physical asset like gold.

The gold must be stored at an appropriate financial building like a bank or a facility approved by the IRS.

Instead of a traditional IRA, you will need a self-directed IRA(SDIRA) sometimes referred to as a precious metals IRA or a gold IRA. Your SDIRA is provided through an IRS-approved custodian. Finding the right custodian will take some time and research. Each custodian varies in terms of value, flexibility, and reliability.

We make sure to keep up with the best custodians on the market and what they have to offer.

Not every custodian will offer you the same investment options. There are even custodians that provide SDIRAs without the option to invest in gold. You will need to make sure you find a custodian that allows for gold investments as well as any other investment options that might interest you.

An SDIRA is a smart choice for anyone who wants to take control of their retirement account and their financial future. They often provide many additional investment options that are not available with a traditional IRA.

In addition to gold, they may allow other precious metals, real estate, intellectual property, and cryptocurrencies.

With more options comes more work, more required research, and more risk involved. But starting an SDIRA doesn’t mean you are forced to invest in all of these different options.

Many people use them purely for standard investments like stocks alongside precious metals like gold. By sticking with these two options you minimize risk and maximize your financial protection.

Traditional vs Roth IRA

a form for selecting IRA type with "Roth" circled in red pencil

As with a standard IRA, you also have the option between a traditional SDIRA and a Roth IRA. There are important distinctions between the two that you should understand before making a decision. Most of these distinctions are exactly the same as a standard IRA.

The major differences between the two relate to their tax advantages. For example, contributions to a traditional IRA are tax-deductible within a certain limit. If you do not have a retirement plan sponsored by your employer, then you are able to deduct full contributions.

Even with an employer program, you can still make deductions according to your salary.

A Roth IRA is a popular alternative that is only available to people below a certain income limit. A single non-married individual who makes less than $129,000 can qualify. Married couples filing jointly who make less than $204,000 together may qualify as well.

A Roth IRA allows for tax-free withdrawals and can defer taxes on savings. Many experts agree that a Roth account is the best option if you can qualify.

Another big difference between the two is the availability of withdrawals. Sooner or later, you will want to start your retirement and begin utilizing the assets you have saved. A Roth IRA allows withdrawals for anyone who is over the age of 59 years and 6 months or who is disabled.

You can also begin taking withdrawals 5 years from the date of your initial deposit. There are no taxes on withdrawals from a Roth IRA.

You can begin withdrawing from a traditional IRA at the same age but the withdrawals will be taxed according to your income. If you withdraw money before the age limit, then you will face a 10 percent fine. You can continue to contribute to your traditional gold IRA at any age.

Overall, the Roth IRA offers strong financial advantages that aren’t available to traditional IRA holders. The problem is that not everyone will qualify.

Your qualification status will depend entirely on your family’s income. If you fall within the limits, then we believe a Roth IRA is your best option.

How to Start a Gold IRA

Starting a self-directed gold IRA is similar to starting a standard IRA with a few extra steps. The first and most important step is finding a custodian for your SDIRA.

We mentioned previously that not all custodians are created equal. Some of them limit their client’s investment options heavily and add as many additional fees as possible.

Luckily, we can help you find the best custodian for your specific needs – see a ranking of our top 5 gold IRA companies to learn more.

The next important step is choosing between the traditional IRA and Roth IRA. We’ve covered the differences between these two options and believe the Roth IRA is a better choice for those who qualify. Even so, you should still review all of the specific differences and make the decision that best suits your future goals.

Next, you will need to find a dealer of precious metals to purchase the gold. As with custodians, no two dealers are exactly the same. There are plenty of educational resources available you can use to find the best dealers for specific precious metals.

To purchase gold you will need to fund the SDIRA. Many people roll over their existing IRAs into their new SDIRAs to begin making purchases. If you do not have an existing IRA, then you can simply start making your contributions or transfers as normal. Keep in mind that every account has specific contribution limits.

What Are the Benefits of a Gold IRA?

an illustration of a man with a cane standing next to a large sack of money

Your IRA is obviously a big part of your future. Where and how you choose to invest your money will have a significant impact on how your retirement years unfold. It makes sense to wonder if a gold IRA is a smart option or entirely unnecessary. We believe that everyone can benefit from the right gold IRA. Here are some of the biggest benefits.

1. A Reliable Inflation Hedge

Inflation is the unseen enemy that wrecks profits and ruins investments. That’s why investors and other financial experts work so hard to find different ways to protect themselves against inflation. Any investment with the purpose of protecting against declining purchasing power is known as an inflation hedge.

Gold is one of the most popular and reliable inflation hedges in the market. It maintains its value exceptionally well and fluctuates with predictability. Oftentimes, when the value of the USD drops the value of gold increases. This makes gold a particularly powerful inflation hedge during times when the economy is struggling.

2. Consistent Profits

Making regular contributions to a gold IRA is an easy way to produce consistent profits in your account. Gold has continued to climb in value over decades and will likely continue to do so for centuries. It’s not an investment that will make you rich overnight but it will produce consistent profits that you can rely on.

3. Diversification

Diversification has always been a popular strategy for protecting your financial future. If all of your investments are in a single type of asset or market, then you can easily lose everything in a short period of time.

By spreading your investments across various asset types you are ensuring that one failed market doesn’t ruin your future.

In Conclusion

Physical gold and gold IRAs are both great ways to diversify your portfolio and hedge against inflation. Both can provide consistent profits as well.

There’s no reason not to utilize both of these options to improve your future. However, we believe that pursuing a gold IRA should be a top priority.

The sooner you can begin contributing to a gold IRA the greater your future benefits will be.


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Last Updated: November 8, 2022