Diversifying your retirement portfolio is essential to navigating economic fluctuations, and one effective way to do so is by investing in gold. Gold has historically performed well during market downturns, often rising in value when stocks decline, making it a popular choice for those looking to safeguard their retirement savings.
While gold investments don’t guarantee profits, they offer a potential hedge against market volatility. In this guide, we’ll explore the various ways you can invest in gold for retirement, along with the benefits and drawbacks of each option, helping you decide whether gold is the right addition to your retirement strategy.
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How to invest in gold through an IRA
Investing in gold through an IRA lets you diversify your retirement portfolio and enjoy the tax advantages of traditional or Roth IRAs. Traditional IRAs typically include stocks, bonds, and ETFs, but a self-directed IRA allows you to invest in alternative assets like gold. To qualify for an IRA, the gold must be at least 99.5% pure, with some exceptions for certain coins like American Eagles. However, rare or collectible coins and some foreign currencies are excluded.
For a comprehensive guide to eligible investments, check out our resource on gold IRA investments to store in your account.
If you’re thinking of moving your retirement savings into a gold IRA, it’s possible to roll over your 401(k) or 403(b) without penalties. Our detailed guides on how to roll over your 401(k) to a gold IRA and how to roll over a 403(b) into a gold IRA can help you navigate this process.
Understanding the differences between a gold IRA vs. a 401(k) or gold IRA vs. a Roth IRA can also help you decide the best route for your retirement planning.
Some gold IRAs offer sign-up bonuses, which can be an incentive when opening your account. See how to convert an IRA to a gold IRA without penalty to ensure you choose a low-cost gold IRA.
Pros and cons of investing in gold through an IRA
Pros
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Tax-advantaged retirement account
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Ease of purchasing and storing gold
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Opportunity to receive physical gold after the age of 59 1/2
Cons
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Subject to IRS rules and regulations
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10% tax penalty for distributions before age 59 1/2
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More fees than the other options
How to invest in physical gold
If you want to avoid IRS restrictions—or prefer to keep gold in your possession—you could invest in gold outside of an IRA, which involves buying gold and holding it until you need to liquidate it for cash.
When you invest in gold this way, you’re not limited to a certain purity and can purchase rare and collectible gold coins or bars that may not qualify for an IRA. Weighing the benefits of a gold IRA against holding physical gold can help you determine which strategy aligns better with your retirement goals.
Pros and cons of investing in physical gold
Pros
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Personal possession of physical gold
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No limitations on the type or purity of gold purchased
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Purchases are private and not subject to government or financial institution monitoring
Cons
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No tax advantages
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Liquidation requires finding a buyer
How to invest in gold stocks
If you want to invest in gold without dealing with physical storage, consider gold stocks. These include shares in gold mining companies, such as Barrick Gold (GOLD) or Franco-Nevada (FNV), as well as mutual funds and exchange-traded funds (ETFs) that hold multiple mining stocks, such as the VanEck Vectors Gold Miners ETF (GDX).
Gold-focused funds SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) closely track the price of gold itself. Investing in gold stocks is often the most cost-effective and straightforward way to gain exposure to gold, especially through online brokerages offering fee-free trading—Robinhood, for example.
When choosing an account, pay attention to fees, available funds, and research tools. You can hold gold stocks in traditional and Roth IRAs, offering tax benefits and easy liquidity when it’s time to cash out.
Pros and cons of investing in gold stocks
Pros
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Easy and affordable through online brokerages
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Some funds pay a dividend
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Tax advantages if purchased within an IRA
Cons
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Gains depend on how well funds or companies are managed
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May not reflect the true value of gold
How to know which option is right for you
Which option you choose to invest in gold for retirement depends on your preferences and financial goals. No single option is best for everyone.
For example, if you’re looking for tax advantages, a gold IRA or gold stocks purchased within a traditional or Roth IRA will be your best bet. If you are wary of financial institutions, you may find peace of mind by storing physical gold securely at your house.
Expert’s take
For most investors looking to invest in gold as a portion of their retirement, the best option is to own the physical gold or purchase it through a gold IRA. The main reason for this is that people looking for this type of exposure view it with a specific purpose (e.g., inflation hedge or physical currency), whereas buying a gold stock is more of a temporary play on a market dislocation. Also, gold mining stocks can perform in a different fashion from the physical metal for many reasons.
Is gold a good investment for retirement?
Opinions are mixed about choosing gold as a retirement investment. Some argue that it’s an excellent hedge against inflation, and others worry about its volatility.
However, we know:
- Gold has historically maintained its value
- Gold’s value tends to rise when the cost of living increases, providing inflation protection
- Interest in gold remains high—both as an investment and a commodity
Therefore, it makes sense to consider gold for your retirement planning if you’re looking to diversify your portfolio. Young adults may want to buy physical gold, while seniors worried about volatility may find that gold mutual funds reduce risk by spreading investments across numerous companies.
Of course, it’s always wise to consult with a financial professional. Gold investments can be part of your larger retirement planning strategy, and a finance expert can help ensure you are taking a diversified approach.
Unsure of how much to invest into gold? See our guide on solutions for small investment amounts here.
FAQ
How much of my retirement funds should be invested in gold?
Financial advisors generally recommend keeping 5% to 15% of your portfolio in gold to balance risk and reward. While some, including Mad Money host Jim Cramer, suggest a 10% upper limit, others find that up to 20% may offer a favorable risk-to-reward ratio. However, it’s crucial to diversify across multiple investments to protect your portfolio from significant losses if one asset underperforms.
Are some gold coins or bars better than others?
When buying physical gold, you can choose between bars and coins, each with its benefits. Bars offer a straightforward way to store large amounts of wealth, while coins may have additional collectible value. Reputable sources for gold bars include Credit Suisse and Perth Mint, while popular coins for investors include the American Gold Eagle and Canadian Gold Maple Leaf. Ensure that any gold purchased for a gold IRA meets IRS purity standards, typically 99.5%.
What causes the price of gold to fluctuate?
Factors including supply and demand, economic conditions, and central bank activities influence the price of gold. Inflation and political changes can also affect gold’s value, causing daily or even hourly fluctuations. As with other commodities, it’s important to focus on long-term trends rather than short-term price movements when investing in gold for retirement.
About our contributors
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Written by Maryalene LaPonsieMaryalene LaPonsie has been writing professionally for more than 20 years, including 15 years specializing in education, healthcare, and personal finance topics. She graduated from Western Michigan University, where she studied political science and international business. She resides in West Michigan.
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Reviewed by Rand Millwood, CFP®Rand Millwood, CFP®, CIMA®, AIF®, is a partner at Guardian Wealth Partners in Raleigh, North Carolina. His firm assists clients of all ages and areas of life (with a strong background in the medical and legal fields) in planning, investing, and preparing for retirement and other financial goals.