Gold IRA Pro’s and Con’s

By Tim Schmidt - UPDATED: February 8, 2025

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As the economy continues shifting, people are looking for smarter solutions for their retirement accounts more than ever. A gold IRA is an excellent choice for those looking to diversify, hedge against inflation, and protect their long-term savings.

Investing in gold is certainly not a new notion, but it is becoming a more prominent option in mainstream retirement planning. It may not be for everyone, and there are elements to consider before investing, but gold IRAs are undoubtedly beneficial in a lot of ways.

Understanding what a gold IRA is, what it offers, and how it works helps retirement savers make the most informed and empowered decisions regarding their funds. Here is an overview of gold IRA pro's and con's to paint a better picture of what you may stand to gain by branching into physical gold as part of your retirement portfolio strategy.

What Is a Gold IRA?

A gold IRA is a type of individual retirement account that allows people to use their savings to purchase physical gold and other precious metals- specifically silver, platinum, and palladium. Other names for this account include gold-backed IRA or precious metals IRA.

Gold IRA

It is a self-directed IRA, meaning the account holder has complete control over how and when their funds are used. That said, there are strict regulations as to what gold coins, bars, and other precious metals products can be held.

Gold IRAs are not meant to replace traditional retirement savings accounts but offer an alternative choice for those looking to diversify their retirement funds. They have all the same tax advantages as mainstream individual retirement accounts- plus the bonuses of greater autonomy with investments and the opportunity to own tangible assets.

Choosing Between Traditional and Gold IRAs

You can have both a traditional IRA and a gold IRA. If you are comparing the two, there are a few important differences (and some major similarities) to consider.

Traditional IRAs are popular for a reason. They offer versatile investments with tax advantages and generous yearly contribution limits. Depending on whether you pick a traditional or Roth IRA, you can either avoid paying tax on earnings now or look forward to tax-free savings withdrawals later.

The same applies to a traditional gold IRA or Roth gold IRA- but this time, we are talking only about physical gold investments. In short, the big difference is what your money is invested in.

Gold is beneficial in many ways- but does not make a diverse portfolio if it is on its own. Consider your risk tolerance, current portfolio strategy, and long-term goals before making a decision.

What Are the Pros and Cons of Gold IRA?

Understanding the pros and cons of a precious metal IRA is crucial to giving people the full picture of what these accounts offer and entail.

Pros and Cons of Gold IRA

Here is an overview of gold IRA pros and cons to explain the primary advantages and drawbacks before we go into more detail.

Pros:

  • Inflation hedge
  • Diversify
  • Ease of sale
  • Rollover flexibility
  • Tax advantages
  • Individual control
  • Physical metals

>> I go over additional gold IRA benefits on this page.

Gold IRA Cons:

  • Lack of options
  • Potential penalties
  • Storage fees
  • No interest or earnings
  • Unfamiliar

Advantages of a Gold IRA Account

Enjoy Tax Benefits

Tax advantages are always good to look out for when planning your retirement investments. Gold accounts have the same tax benefits as traditional and Roth IRAs- including the possibility to contribute up to $7000 of pre-taxed earnings annually ($8000 for over 50s).

Traditional gold IRAs let you contribute money without paying taxes there and then. You only pay when you withdraw. Roth IRAs work the other way around- contributing taxed dollars and then enjoying tax-free withdrawals later.

Tangible Assets

A gold IRA allows you to hold physical gold- a tangible asset that physically exists. Most other assets only exist on paper, but you can't put your hands on them. The stability and reliability that having a physical asset provides offers peace of mind for retirement savers.

Of course, owning physical precious metals comes with additional considerations. You can't just keep it all under your bed, after all. Luckily, you don't need to worry too much about this, as gold IRA custodial companies generally arrange for deposits in approved storage facilities as part of their service.

Hedge Against Inflation

Inflation is a real danger for retirement savings, as your fund can lose value over time depending on what happens in the economy. Gold is an ideal inflation hedge for the US dollar. The dollar has lost 99% of its value in comparison to gold over the last century, which is one of the main reasons more people are looking at precious metals as a way to protect their wealth from corrosive inflation.

Diversification

Portfolio diversification is crucial for a balanced and protected investment strategy. Diversifying means spreading your investments across a range of well-balanced asset classes, including stocks, bonds, and mutual funds. By doing this, you have better protection from market volatility and can manage risk levels effectively.

Gold is an excellent way to diversify- and opens doors to other potential investments. It is one of the lowest-risk investments, so it brings a level of stability to a portfolio that you don't get on the stock market. Luckily, the IRS doesn't cap how many IRAs you can have- so you can hold a range of assets across various accounts for maximum protection against volatility.

Flexibility for Rollovers and Selling

It is very easy to roll over existing retirement accounts to a gold or gold Roth IRA. You can move funds from a traditional IRA or 401(k) without losing the tax advantages or owing the IRS a hefty tax sum.

When it comes to selling your assets, you also have the benefit of liquidity and flexibility. It is generally very easy to sell physical gold since most gold companies offer buybacks- and gold is always in high demand.

If you want to arrange a rollover or sell your IRA-held physical gold, you can do so through your IRA custodian and the company through which you opened the account. Both activities are regulated by the IRS and have a few rules, but they are still very straightforward.

More Control

A self-directed gold IRA gives you greater control over your wealth and long-term savings. Although there is a select list of approved gold products, it is up to you which ones you buy and how much you invest in each.

The IRS provides a list of gold coins, bars, and bullion you can buy with IRA funds, and is very clear about the required pureness. Within these boundaries, you can buy what you want- and the custodian can only act when directed by you as the account holder.

Disadvantages of a Gold IRA Account

No Interest or Yields

Unlike most other investments, physical gold does not pay interest- nor does it pay dividends or generate yields. Although the reliability and low-risk nature of gold investments is a major appeal, they remove the possibility of generating extra wealth within the account.

The only way you make money on your physical gold is if the value increases by the time you withdraw.

Risk of Penalties

There are strict rules regarding gold IRAs- including maximum contributions, withdrawal restrictions, and terms for the rollover process. Failure to follow all the rules can lead to hefty tax penalties and investigation from the IRS.

Crucially, you must open and fund the account following the process approved by the IRS, and you are bound by the same withdrawal and contribution rules that apply to traditional IRAs.

Minimum Investment Requirements

One of the gold backed IRA cons is the minimum investment required. Depending on the company you choose to open a gold IRA with, it can be quite high. Most companies require a large sum of money, starting at around $5,000 and ranging up to $50,000. Some companies may accept smaller amounts, but not many.

Limited Investment Choices

Gold IRAs are only eligible for investments in physical gold and other approved precious metals. You don't have any other investment options within this type of account, and even the precious metals products you can buy are restricted.

Less Familiarity

One of the main drawbacks for people considering a gold IRA is the lack of familiarity. They are not as well-known as traditional IRA options, and people are often unsure where to begin. While this is not an issue for everyone, it can be daunting for a potential first-time gold investor.

Could a Gold IRA be Right for You?

Gold IRA right for you

Are gold and silver IRAs a good idea? In short, yes- but you should always consider your individual situation. Investing in gold is an attractive prospect for a lot of investors- and a gold IRA is the best way to do it. It is worth speaking to a financial advisor to discuss how gold investing would fit into your portfolio.

A gold IRA could be a great choice if you:

  • Hold most of your savings in a retirement account
  • Don't want to risk all of your retirement savings on stock market investments
  • Want to protect your wealth against inflation
  • Are interested in owning gold and want to buy it using IRA savings without paying taxes

Speak to a gold IRA expert today to learn more about your options- and always remember to invest wisely.

Tim Schmidt

About 

Tim Schmidt is an Entrepreneur and Serial Investor. Since 2012 he's been an advocate of alternative investments using a Self Directed IRA. His work has been featured in Yahoo! Finance, USA Today, Business Insider, and Tech Times, among others. Get his portfolio breakdown here.

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