August 4


Gold IRA vs Physical Gold

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For many people, the idea of holding onto gold as a hedge against the future is just a given. What's a little harder to figure out, though, is how to hold on to that gold in a way that will protect your retirement. That's why it's necessary to start thinking about holding your metals in an IRA.

Most people who invest seriously understand the need to diversify their investment holdings. After all, putting your eggs in one basket is a great way to lose them all. Choosing something like gold for a portion of your investment savings makes sense from a safety point of view.

Once you understand why you should invest in gold, you can start thinking about how you will invest in gold.

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Why Invest in Gold?

Gold has been a store of value for human society for about as long as human civilization has existed. It's relatively easy to convince anyone from any country that gold has some inherent value, something you can't always say about currency.

Of course, just knowing that gold has value isn't the only reason to invest in gold. It's always a good idea to stop and think about why so many others have chosen to do the same thing.

As we discussed before, the biggest reason many people invest in gold is that it offers a way to diversify their investment portfolios. Given that gold doesn't tend to move in the same ways as the stock market, investors don't have to worry about movements in one sector negatively impacting movements in the other.

Another good reason to invest in gold is that gold tends to hold value in a crisis. It tends to be the investment of choice when things look uncertain on the international stage, making it a great backup if you feel like the direction of the world is at risk. In uncertain times, it seems, gold only tends to grow in value.

Gold is also a worthwhile investment because it doesn't degrade. You can melt and shape it, but it remains the same metal that it was at the beginning. Gold continues to hold its value no matter what happens to it, giving investors a very safe long-term investment.

One reason you might not necessarily think of when it comes to investing in gold is the fact that the demand for gold is constantly rising. Not only are others looking at gold as investments, but gold does have some uses in the technology sector. As the demand for gold continuously grows, so too will its value. Remember, there is also a finite amount of gold, so the substance's scarcity will also cause its price to jump.

Sometimes the significant reasons to invest in gold have to do with simple economics. When inflation hits as it is today, the value of gold tends to continue rising. The great thing about this is that even if the price of everything else rises, the rising price of gold can work as a hedge against inflation for those who invested in the metal.

At the same time, gold can go a long way to protect you from deflation. If the economy starts to slow down, the value of gold will begin to rise. Rather than just being a hedge against something like inflation, gold can become a significant benefit to those who hold it during times of deflation.

It's safe to say that gold tends to be stronger than the dollar itself. While the dollar can fluctuate in value compared to other currencies, gold itself tends to hold onto its value. This makes it especially valuable to those looking at the bigger economic picture.

Differences Between Gold IRAs and Physical Gold

As you begin to look at gold, you will have to start thinking about how you will hold onto your investments. Whether you invest in physical gold or put it in an IRA, you still own gold. You'll even be able to provide an excellent hedge against economic issues with both types of investments.

The differences between the two, though, are the most important to know.

The major difference between owning gold and getting an IRA is that all precious metals you hold in an IRA are stored in an IRS-approved depository. You don't get to keep the gold you buy physically; instead, it's kept safe under lock and key.

The other big difference is that gold you put into an IRA gets some significant tax advantages. The gold you hold at home is taxed immediately; the gold you put in an IRA brings the same benefits as any IRA investment.

Now that you know the fundamental difference between owning gold and putting gold in an IRA, it's a good idea to start looking at the pros and cons of each type of purchase. Most people tend to lean towards IRAs for retirement investments, so starting with this form of investment is a reasonably good idea.

Gold IRA Advantages

One of the significant benefits of investing in a Gold IRA is that you can roll over many existing accounts into this type of account. If you already have money in a Roth IRA or traditional IRA, you can transfer your money without incurring any tax penalties.

The tax advantages, though, are where most people find the absolute advantage in these accounts. As long as you follow all the relevant IRS rules, you'll be able to contribute to your IRA and withdraw your purchases with no tax burden. That means less of your retirement money goes to the government and more is in your pocket.

Aside from the tax advantages, there are other strong selling points for this type of account. One is that all the gold you hold in an IRA must be kept in a secure account. Unless you're a billionaire with access to the world's finest security technologies, you can't keep your gold any safer than these institutions.

Finally, investing through an IRA usually gets you help from specialists. If you work with an IRA custodian, you'll almost certainly get access to that company's team of investment professionals. They will help you select eligible pieces for your account and give you any guidance you might need to keep your account running successfully.

Gold IRA Disadvantages

While investing in a gold IRA can be a great idea, that doesn't mean that there are no problems for which investors should be on the lookout.

The big problem that most point to is the fees. If you choose an IRA, there's a good chance you will pay several fees ranging from initial set-up costs to annual maintenance fees on your account.

In addition to fees, you'll also face the fact that you can't invest in just any type of gold. The IRS has stringent limits on what can and cannot be put in an investment account, so you might not be able to get everything that you want.

Finally, there are the withdrawal rules. If you have an IRA, you're expected to keep your money in that account until retirement. You will have to pay withdrawal fees if you withdraw any of your metals early. These are the most common drawbacks to know about but an expert in handling gold ira accounts can help guide you through the process by providing more thorough information. Learn who the top gold IRA firms are right here.

Physical Gold Advantages

For many, the most significant advantage of investing in physical gold is that they can see and touch their possessions. There's never a fear that someone else has taken the gold when you can walk down to your safe and peer inside. This kind of physical security is something that's hard to match.

Other people like to invest in physical gold because gold is a substance that is nice to look at. There are plenty of people who just like having gold around their homes because they like the way that it looks.

Those with more investment experience might look into physical gold because private investors don't have limits on what they can buy. If you are buying for personal use, you don't have to stick to the small list of potential investments that the IRS approves.

Finally, some want to be able to do whatever they like with their gold. Whether it's the freedom to proudly display gold bricks at home or the ability to use any storage facility they want, these people prefer physical gold because of the lack of limitations that investing in physical gold represents.

Physical Gold Advantages

Physical gold might have some advantages over investing through an IRA, but it's just as important to know where physical gold falls short.

The first place to start is with pricing. While gold bullion that qualifies for IRAs tends to be pretty static in pricing, it can be straightforward to pay too much for pieces that are advertised as rare or collectible. When paying for these pieces, it's easy for an inexperienced investor to pay more than the piece is worth and thus lose some of their hard-earned retirement money.

Taxation is also a big issue when it comes to physical gold. If you buy gold with the intention of selling it yourself, later on, you'll end up paying a higher capital gains tax than you would with something like a simple stock. Once you add capital gains taxes and the sales taxes you paid when buying, you'll notice a fair chunk of your profits fading away.

Others balk at the challenges that come with storing gold. While you can't destroy gold, that does not mean that others cannot steal it. Some people feel perfectly safe keeping gold in a safe at home, but keeping massive amounts of gold on your person is almost an invitation to having the precious metals stolen.

Finally, there's the problems that come with converting gold into cash. If you own the gold yourself, you'll have to find a buyer, agree on a price, and hope you can get away with not having to pay for shipping and insurance. This is yet another issue that can cause the profits that come from investing in gold to become greatly reduced over time.

When It Might Not Matter

Surprisingly, there are times when the difference between these two types of account don't matter all that match. Simply put, you may not have to make a natural choice between the two.

Some investors, for example, don't need to look at precious metals. Investors generally recommend putting between five and fifteen percent of their retirement money into precious metals. Younger investors who are just getting started may not be able to hit the investment minimums without spending too much on gold, thus putting them in a position in which investing in this market just doesn't make sense.

Likewise, those closer to retirement may not want to invest in gold. Remember, the IRS requires those over the age of seven and six months old to start taking disbursements from their IRAs. If you're already close to this mark, you might not be able to make any new contributions to your IRA. Again, the benefits of investing in metals might not be there for you at this point.

Finally, some just can't afford to invest in precious metals yet. These people don't have the money to meet the minimums for investing in precious metals IRAs. These individuals may also not be able to afford enough gold to hold on to it physically to make sense. It's never a good idea to invest money you don't have.


If you can't afford to invest in physical gold and aren't in a position to consider investing in an IRA, you still have choices that can keep you involved in the gold market.

One of the best ways to keep involved with gold without actually investing directly in either physical gold or a Gold IRA is to invest in ETFs or mutual funds. That will help to keep you away from volatile stocks and still give you an idea of how gold works. Plenty of different ETFs and mutual funds focus only on the gold market, which can be a great place for a new investor to start.

To get more specific, you can invest directly in gold mining stocks. These are shares in companies that physically mine gold and thus tend to have a closer relationship with the actual value of gold and issues with supply and demand. This is a good way to see how you can profit from gold without directly buying any of the metal yourself.

Final Thoughts

One thing to keep in mind is that there's no good or bad decision regarding investing in gold. You have to make the decision that best aligns with your own goals for retirement.

It is, however, good to keep in mind some of the significant benefits of investing in a Gold IRA. If you want to move money from an existing IRA, the Gold IRA will be your best bet to keep those great tax benefits.

Physical gold, on the other hand, might make you feel better if you want to feel control over what you hold and buy. If you need to feel like you're not beholden to a vast set of rules, physical gold might make more sense.

It may seem like a bit of a dodge, but the best way to proceed is to get to a point where you can both have a Gold IRA and invest in the physical gold market simultaneously. This gives you the best of both worlds.

If you choose to do this, remember that all this money is still going into precious metals. Don't over-invest in any part of the market, and try to keep your numbers in a place that helps you keep a diverse portfolio.

Hopefully this article was helpful to you. Whichever route you take, you want to ensure that you are doing business with a reputable company. Learn about the top gold dealers by reading this article here.