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Personal Finance Gold

How Does a Gold IRA Work?

Investing in gold can diversify your portfolio and hedge against inflation. By holding gold in an individual retirement account (IRA), you can also gain valuable tax benefits.

These accounts, known as gold IRAs, offer tax advantages but require strict adherence to IRS rules. You’ll need to buy specific types of gold and keep it in a self-directed IRA. Keep reading to learn how a gold IRA works.

What is a gold IRA?

A gold IRA is a retirement account that allows individuals to invest in physical gold. Depending on how they are set up, these accounts can offer tax deductions for contributions or tax-free income in retirement.

Physical gold is considered an alternative investment not allowed in regular IRAs, but gold IRAs, as self-directed IRAs, can hold such investments as long as they adhere to IRS rules. Regulations outline the types of gold that can be held and where they must be stored. Gold IRA companies help ensure compliance with these rules, making it easier to incorporate precious metals into your retirement savings.

Types of gold IRAs

The three main types of IRAs—traditional, Roth, and SEP—each offer various benefits to investors. Depending on your financial situation, you may prefer one to another.

Here’s a brief overview of which features are available for each gold IRA type.

FeatureGold IRA type
Available to all individualsTraditional, Roth
Available to self-employed workers & business ownersSEP
Pre-tax (deductible) contributionsTraditional, SEP*
After-tax (not deductible) contributionsRoth, SEP*
Retirement distributions are taxedTraditional, SEP**
Retirement distributions are tax-freeRoth, SEP**
Min. age for penalty-free withdrawals is 59½ Traditional, Roth, SEP
*Contributions can be either pre- or after-tax; **Distributions can be taxable or tax-free

SEP IRAs can be created as either traditional or Roth accounts, determining their tax benefits. While all IRAs are subject to a 10% tax penalty for early withdrawals, that penalty only applies to the earnings of Roth accounts, allowing penalty-free withdrawal of contributions.

How can you choose among gold IRA types?

Catherine Valega


Because gold is not traded as easily as securities, ask each custodian about the process for getting funds out. This is especially important when it comes time to take your required minimum distributions. 

What type of gold or metal can be held in a gold IRA?

Gold IRAs can hold various precious metals, including gold, silver, platinum, and palladium. The IRS limits the types of coins and bullion that can be held to ensure they are high-quality metals with long-term value.

For instance, gold in a gold IRA must be 99.5% pure, except for the 91.67% pure American Eagle coins. Silver must be 99.9% pure, while platinum and palladium must be 99.95% pure.

Where is the gold stored?

Gold and other precious metals in a gold IRA must be stored in an IRS-approved depository. This prevents individuals from keeping the metals at home or in a safe-deposit box.

Depositories offer two storage methods: segregated storage, where your metals are stored separate from others, and commingled storage, where your metals are stored together with those of other customers.

Factors to consider when choosing a depository

When can I withdraw from my gold IRA?

Gold IRAs are intended for retirement savings, offering tax benefits but imposing restrictions on withdrawals. Below are the rules for traditional and Roth gold IRAs.

Min. age for regular distributions: 59½ Min. age for regular distributions: 59½ 
Early withdrawal penalty: 10% on all withdrawalsEarly withdrawal penalty: 10% on account earnings
Required minimum distributions starting at age 73 or 75, depending on birth yearNo required minimum distributions
Distributions are taxableDistributions are not taxable

Exceptions to these rules include penalty-free early withdrawals for first-time home purchases, qualified medical and educational expenses, and substantially equal periodic payment plans for early retirees.

How can I fund a gold IRA?

Funding a gold IRA can be done in several ways, typically taking a week to 10 days. Here are the methods:

CashIRA transferRollover
Easiest & fastestFor those with an IRAFor those with 401(k) or other retirement plan
Can be used upon depositPaperwork required to transfer assetsPaperwork required to transfer assets
Subject to annual IRS limitsAssets may need to be liquidated firstRequires working with HR or 401(k) administrator

Direct funding with gold bullion or coins you own is not allowed. The government restricts the types of coins and bars that can be purchased, and you cannot take possession of the metals in your gold IRA until retirement. Metals must be stored at an approved depository.

Where can I open a gold IRA?

While fewer companies provide gold IRAs than other types of IRAs, several options are available. It’s essential to compare companies to find the best one for your situation. For a starting point, consider our picks for the best gold IRA companies.