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Personal Finance Gold

How to Hold Physical Gold in an IRA

A self-directed gold individual retirement account (IRA) is an option if you want to own or invest in physical gold. You can also include other precious metals and assets to diversify your portfolio.

The companies below can help you purchase metals and facilitate storage with a trusted depository. For more information on how storage of physical gold in an IRA works, click here.

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How does holding physical gold in an IRA work?

You can’t invest in physical gold in a regular IRA. Instead, you’ll need a special account known as a self-directed IRA. These accounts allow workers to invest in what the IRS considers “alternative assets.” These assets include gold, precious metals, real estate, and cryptocurrency.  

To set up a self-directed IRA, you’ll need a custodian. The custodian can be a bank, credit union, trust company, or other entity licensed by the IRS. It is this firm’s responsibility to hold and administer the assets in the self-directed IRA, but it isn’t an advisor and won’t provide investment advice. 

If you aren’t sure where to start, many gold IRA companies can help guide you through the process of finding a custodian and opening a self-directed IRA. Once you have the IRA in place, you’re ready to begin buying gold.  

Are there rules to holding physical gold in an IRA?

To use an IRA to invest in gold, you’ll need to follow two IRS guidelines.

First, you can only invest in IRS-approved gold. You can find gold that meets IRS standards online and at local gold dealers. However, not all dealers are familiar with government rules. To avoid buying a prohibited item, consider purchasing from a company that specializes in gold IRAs. They often label qualified precious metals as “IRA-eligible.”

The list of approved options changes, but the IRS says it must be “highly refined bullion.”

Here’s what that generally looks like:

  • 99.5% pure gold
  • Produced by a company that’s nationally accredited
  • In complete, original packaging
  • Includes the certificate of authenticity
  • Coins are uncirculated and damage-free
  • Bars are manufactured to the exact weight

Second, you can’t hold the gold in your possession. You are its owner, but the gold must be stored off-site in an IRS-approved depository. Your gold IRA custodian can help recommend a suitable depository for your investments.

Pros and cons of owning physical gold in an IRA

Purchasing gold can be a smart way to safeguard your wealth and, in some cases, grow it. Consider the following pros and cons before you open an account.

Pros

  • Diversification

    Putting all your investments in one basket can be risky. Investing some of your funds into gold is a terrific way to diversify and reduce your portfolio’s overall risk.

  • Protection from economic downturns

    Having your funds in gold also helps reduce losses if the economy—especially the stock market—takes a turn.

  • A hedge against inflation

    As the value of the dollar declines, so does your purchasing power. Gold can protect against this loss. As of February 2024, the value of gold outpaces that of the U.S. dollar.

  • Wealth growth

    If you believe gold will grow in value, it could increase your long-term wealth. As of February 2024, gold prices have climbed since hitting a low in 2016.

Cons

  • Complexity

    Opening and maintaining a self-directed IRA isn’t as simple as opening a traditional retirement account. You’ll need to find a custodian, determine which gold and precious metals meet IRS rules, and ship them to a depository for safekeeping.

  • Added costs

    A gold IRA comes with costs beyond what you’ll find with a traditional IRA. You should expect to pay annual fees for your custodian’s services and gold storage.

  • Illiquid asset

    Gold is a physical asset. Many people see that as a benefit, but it has a downside. If you want to make a withdrawal for cash, you’ll need to sell some of your gold, and that process could mean a delay in when you receive your money.

If you’re not sure owning physical gold is the best use of your funds, consider speaking to a financial professional or accountant. They can advise you on your specific goals and finances.

How to start a gold IRA account 

To start a physical gold IRA, follow these steps:

  1. Select a custodian: These are companies that manage gold IRA accounts and report on them to the IRS. Many gold IRA companies can connect you to custodians that have experience with precious metals.
  2. Select a depository: The IRS requires that gold be stored in an approved depository. Your custodian may have a specific depository it works with, or you may be able to select your own.
  3. Buy your gold: This is the fun part. Select which gold and precious metals you would like to keep in your self-directed IRA, being careful only to choose items that meet IRS requirements. 

Once you’ve established your account, you can fund it in any of these three ways:

  • Cash: Invest cash into your IRA by sending a check or wire payment to your custodian.
  • Rollover: Withdraw funds from a retirement account, and deposit them into your new IRA. You must do this within 60 days of withdrawing the funds to avoid penalties. To learn how to do this, check out our guide to initiating a gold IRA rollover.
  • Transfer: Have the administrator on your current retirement account transfer all or a portion of your funds to your new IRA custodian. For more about how to do this, check out our guide to initiating a gold IRA transfer.
Tip

For 2024, you can deposit up to $7,000 per year in a self-directed gold IRA if you’re under age 50 and up to $8,000 if you’re 50 or older.

Gold IRA companies vary in experience, service, and costs, so make sure you shop around and compare your options before moving forward with opening an account. Check out our guide to the best gold IRAs to get started.

Our expert’s take

Catherine Valega

CFP®

As a Certified Financial Planner, I think there are better ways to invest in gold. The major downfall of holding gold in an IRA is when it comes time to take your required minimum distribution (RMD). The process of meeting your RMD can be complex. It involves getting the physical gold withdrawn from the custodian to avoid RMD penalties. Personally, if you’re determined to invest in gold, I would consider doing this outside an IRA: Invest, rather, in the actual commodity and hold it yourself instead of via a custodian. The other option to consider is a commodities fund, but that’s one step removed from holding the actual commodity. By the way, investing in real estate in a self-directed IRA has similar illiquid limitations.

Can I convert my current IRA to physical gold?

If you already have an IRA, you can convert it to a physical gold IRA by using a rollover or a transfer. These funding options involve moving money from your old IRA to a new self-directed gold IRA. 

You’ll need to set up your gold IRA first. Then, contact your current plan administrator to request the paperwork needed to move your money. A gold IRA company may also be able to help with this process.

Will the gold in my IRA ever be in my physical possession?

Gold IRAs come with valuable tax benefits, but to get them, you’ll need to keep your money in an IRS-approved depository. Storing physical gold at your home would be considered a distribution from your IRA and may make the gold subject to tax. If you are younger than 59 and a half, you’ll also pay a 10% penalty in addition to income tax.

Once you reach age 59 and a half, you can take penalty-free withdrawals from your IRA. Those withdrawals could involve liquidating your gold for cash or taking possession of the physical gold yourself. Either way, you’ll likely pay income tax on the value of the withdrawal.