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Personal Finance Gold

Precious Metals IRA: How It Works and How to Get Started

Whether you’re worried about the dollar’s eroding purchasing power or the prospect of a recession, a precious metals IRA could help address your concerns.

Gold and precious metals have long been used as a hedge against inflation, and they can help diversify investment portfolios in times of economic uncertainty. While you can buy gold and precious metals directly, using an IRA means those saving for retirement can access valuable tax benefits.

This guide is designed to answer all of your questions about precious metals IRAs—from what they are to how to open one. Plus, we’ll discuss alternatives and how to ensure you don’t fall for a scam.

What is a precious metals IRA?

A precious metals IRA is an individual retirement account that allows you to invest in physical metals. They are sometimes called gold IRAs, but silver, platinum, and palladium can also be purchased within these accounts.

There are two types of IRAs: traditional and Roth. Both have tax advantages although they are structured differently:

  • Traditional: Contributions to a traditional IRA may be tax-deductible. Money in the account grows tax-deferred, and withdrawals in retirement are taxed as regular income. With few exceptions, assets withdrawn prior to age 59½ are subject to a 10% tax penalty. At age 72, accountholders must begin taking required minimum distributions, known as RMDs.
  • Roth: There is no immediate tax deduction with Roth IRAs. They are funded with after-tax dollars, but then the money grows tax-free and can be withdrawn tax-free in retirement. There are no RMDs with Roth accounts, but there may be a 10% tax penalty on early withdrawals of gains before age 59½. Since contributions have already been taxed, they can be taken out at any time without penalty.
Traditional IRARoth IRA
EligibilityHave taxable compensationMeet income requirements
Tax deductible?Contributions may be deductibleNo immediate tax benefit
Tax impact in retirementWithdrawals are taxed as regular incomeWithdrawals aren’t taxed
Contribution limits*$7,000 ($8,000 for ages 50 and up)$7,000 ($8,000 for ages 50 and up)
RMDsRequired at age 73After death of account owner
Penalties10% for withdrawals before age 59 1/210% for withdrawals before age 59 1/2
*For tax year 2024

In 2024, workers younger than age 50 can contribute up to $7,000 to an IRA while those age 50 and older can contribute up to $8,000. The IRS also has other rules, such as income limits, that dictate who can contribute to these accounts.

Since gold and precious metals are considered alternative investments by the IRS, they can only be held in self-directed IRAs. As you’ll see below, there are also requirements for the type of precious metals you can buy within a retirement fund and where you can store them.

What precious metals are IRA-eligible?

The IRS limits the types of precious metals you can hold in an IRA. Here are the four types of metals allowed and examples of items that meet IRS regulations.

MetalEligible coinsBars and rounds?Purity
GoldAmerican Eagle
Canadian Maple Leaf
Australian Kangaroo
SilverAmerican Eagle
Australian Kookaburra
Chinese Panda
PlatinumAmerican Eagle
Australian Koala
Isle of Man Noble
PalladiumCanadian Maple Leaf99.5%

The IRS also does not allow collectible or rare coins to be held in an IRA, and some popular currencies, such as the French 20 Franc and Mexican 50 Peso, do not meet government regulations.

It is also important to note that precious metals must be purchased through an IRA. You can’t use coins or metals you already own to fund an IRA. And bars and rounds must be produced at an accredited or certified manufacturer or a national government mint.

What’s more, once you purchase precious metals in an IRA, they must be stored at an approved depository. If you keep them in your home or other personal storage, you won’t be eligible for IRA tax benefits.

How to open a precious metals IRA 

Since precious metals are an alternative investment, opening a gold or precious metals IRA is a more involved process than starting a regular IRA. Not all brokerages are equipped to handle self-directed IRAs, and you’ll want to research carefully to ensure you are using a reputable company.

To get started, follow these steps:

  1. Open a self-directed IRA: Many of the major financial players, such as Vanguard and TD Ameritrade, don’t offer self-directed IRAs. Only certain custodians allow these accounts. Oxford Gold Group, American Hartford Gold, and Lear Capital are a few of the companies specializing in gold and precious metals IRAs.
  2. Fund your account: As mentioned above, IRAs have annual contribution limits of $6,000 for younger workers and $7,000 for those age 50 and older. Some precious metal IRA custodians have higher opening minimum balance requirements, but you can meet those by rolling over money from an existing IRA.
  3. Select a precious metals dealer: Next, you need to decide where your IRA will buy precious metals. To meet IRS guidelines, the physical metal will need to be sent directly to a depository, so it’s best to work with a dealer who has experience with gold and precious metals IRAs. Companies like Goldco and Patriot Gold Group know the government’s rules and can help ensure you stick to them.
  4. Decide what to buy: Of all the steps, this is often the most enjoyable one. You can buy plain rounds or bars or select coins imprinted with different designs and from different countries. Just be sure that whatever you buy meets IRS guidelines. Some dealers, such as American Hartford Gold, have IRA-eligible products clearly marked.
  5. Choose a depository: The IRS won’t allow you to store precious metals in your home or another personal storage area. Doing so will make you ineligible for IRA tax savings. Instead, you’ll need to select from one of about a half dozen IRS-approved depositories.
  6. Complete the transaction: Once you know what you’ll be buying and where it will be stored, it’s time to put your plan into action. Your precious metals IRA provider can walk you through the process of initiating and completing the transaction.

Some gold and precious metals IRA providers work with only a limited number of custodians and depositories. While it might be easier to let them make these decisions for you, it’s always good to conduct your own research as well.

How to make withdrawals from a precious metals IRA

IRAs are intended for retirement savings, so assets held in these accounts are meant to be invested for the long term. If you decide to sell precious metals but keep the money inside the IRA, you won’t have to worry about taxes. However, once you make a withdrawal, it becomes subject to income tax if you have a traditional account.

There are two ways to make a withdrawal from a precious metals IRA:

  • Cash: With a cash withdrawal, the depository typically buys the metals from the owner and provides payment via a check, wire transfer, or bank transfer.
  • In-kind: You can also request an in-kind withdrawal in which the depository will send you the physical gold or precious metals. In-kind transactions are still subject to taxes if your account is a traditional IRA. If you choose this type of distribution, be sure you have a plan for where you will store the metals and whether additional insurance must be purchased for them.

Either way, remember that withdrawals made before age 59½ may be subject to a 10% tax penalty. Before taking an early withdrawal, look for other options to meet your cash flow needs.

Is a precious metals IRA a good idea?

Gold and precious metals IRAs may be a good choice for investors as long as they understand the steps and costs involved, says Daniel Milan, managing partner with Cornerstone Financial Services, LLC in Southfield, Michigan. 

“There’s a significant custodial and depository cost,” Milan says. Beyond that, there may be expenses associated with precious metals transactions, and those can mean that owners take home less than the going spot price when they sell. “Let’s say the price of gold is $1,” he says. “You’re not going to get a dollar.”

Fees for self-directed IRAs may be higher than those for regular IRAs, and account holders need to pay monthly or annual fees to keep their metals in a depository. To reduce or avoid these fees, consider investing in exchange-traded funds (ETFs) or strategic asset funds.

Exchange-traded funds (ETFs)

ETFs are groups of assets, often categorized by industry. When you invest in an ETF, you invest in all of that ETF’s assets at once. 

Gold ETFs, for example, could comprise both physical gold and stock in mining companies. They give you the benefits of purchasing gold or other metals with a far lower upfront cost and far less overhead.

Strategic asset funds

Similar to ETFs, strategic asset funds (also known as mutual funds) let you invest in a variety of assets in one fell swoop. Where ETFs often group investments by industry, strategic asset funds usually target investments based on an objective.

For metals-focused strategic asset funds, that objective might be to allocate a percentage of its resources to gold or other precious metals. When you invest in that fund, you’re also investing in physical gold without having to actually purchase any.

Which precious metals investing strategy is best for you?

Precious metals IRAs, ETFs, and strategic asset funds all let you reap the benefits of precious metals investing. These investment strategies aren’t created equal, however. Here are some of the most notable advantages and disadvantages:

Precious metals IRAsDirect control over what metals you invest inHigh initial investment, ongoing maintenance fees
ETFsTypically require little active managementPortfolio diversity limited by market segment
Strategic asset fundsManaged by professional investment teamMay need to meet asset or income requirements

Keep in mind, too, that you can use a traditional or Roth IRA to invest in ETFs and strategic asset funds. It’s not an either-or situation.

Regardless of how you buy precious metals, be sure to balance them with other investments. Diversity is a hallmark of a successful investment strategy, and it is never wise to hold too much of your portfolio in a single asset, especially one as illiquid as gold and precious metals.

For those who decide to open a gold or precious metals IRA, Milan urges people to do their research. “Don’t go in blind,” he says. “It’s education first.”

Look out for scams

Thanks to rising inflation, interest in gold and precious metals has been running high. Unfortunately, that also means scammers are looking to take advantage of unsuspecting investors.

The Commodity Futures Trading Commission says the following tactics can be red flags that you are talking to a fraudster:

  • Unsolicited calls or online, TV or radio ads promising big returns on precious metals.
  • High-pressured pitches that name drop someone of importance or create the impression that other savvy investors have committed their money already.
  • Financing agreements that allow you to pay only a percentage of the stated value of an investment.
  • Agreements that are missing information such as the name of a financial institution or where the physical metal is located.

A salesperson should be able to provide you with their licensing information, and you can confirm it on the National Futures Association website or by calling the CFTC at 1-866-366-2382. 

Above all, a company or representative should be able to explain the investment in terms you can understand. If they can’t, take that as a sure sign to walk away.