Gold IRA vs. Physical Gold – What You Need to Know


More and more people today are showing interest in buying gold. They’re worried about the future, fearful that we may be facing another 2008-style financial crisis, and they want to protect their assets.

The desire to want to protect your wealth isn’t new, nor is it unique. Millions of people around the country want to safeguard their savings, and they’re looking to find the best means of doing that.

Many are now turning to an old standby to protect their wealth – gold. The yellow metal has traditionally served as a safe haven and a store of value that has protected wealth through financial turmoil and economic crisis for decades. And with increasing headwinds facing the economy, buying gold has seen renewed interest.

Benefits of Investing in Gold

There are numerous benefits to investing in gold, but there are four in particular that stand out.

Portfolio Diversification

One of the primary reasons that many people buy gold is to diversify their investment portfolios. Even the most anti-gold investors will often admit that devoting a percentage of your assets to gold can help provide you with much-needed diversification.

All too often people think that buying an index fund or investing in a smattering of stock and bonds is enough diversification. But real diversification means investing across asset classes, or in different industries or regions of the world.

If your wealth is concentrated in financial assets that rely on the strength and health of Wall Street for their performance, a severe financial crisis could lead to significant losses in the event of a systemic financial crisis. Because gold very often performs well when financial markets aren’t, its role as a countercyclical asset comes in handy for investors who want to diversify their portfolios to make it through tough times.

Risk Mitigation

Gold can also help lower the risk profile of your portfolio. Gold doesn’t have the same price volatility as some financial assets, so it can help in certain instances to lower the overall volatility of some portfolios. For people who are exposed to risky assets with significant price volatility, buying gold can be part of a risk mitigation strategy.

Inflation Defense

Gold has traditionally been treated as an inflation hedge, an asset that can help maintain the value of an investment portfolio during times of high inflation. We’ve been blessed in this country with having relatively little experience with high inflation, but that’s beginning to change.

Inflation is now the highest it has been in over 40 years, and it continues to rise. And gold could help see you through continued inflation.

During the stagflation of the 1970s, inflation peaked at 11%, while the economy was largely stagnant. But gold’s annualized growth rate over that decade was over 30%. That meant that its real inflation-adjusted growth rate was over 20% annualized.

That’s a phenomenal growth rate by any measure, but especially during a time of high inflation and economic turmoil. And that kind of performance in the face of high inflation is why so many people are turning to gold once again during today’s bout of high inflation.

Asset Growth

Just because gold is traditionally treated as a safe haven or an inflation hedge during times of economic difficulty doesn’t mean that it can’t also be a useful asset when times are better. Since 2001, gold’s annualized growth rate is 9.45%, versus 4.82% for the S&P 500 and 4.94% for the Dow Jones Industrial Average. So gold can play a useful role in your portfolio even during times of low inflation and a strong economy.

What Is a Gold IRA?

Many people today are buying gold through a gold IRA. You may have heard of a gold IRA, but do you know what it is and what it does?

A gold IRA is a special type of individual retirement account (IRA) that owns physical gold coins or bars. A gold IRA offers the same types of tax advantages as any other IRA account, but allows you to own physical gold coins or bars and benefit from the advantages of gold ownership.

Advantages of a Gold IRA

While owning gold, and especially physical gold, has many benefits, a gold IRA has benefits that go above and beyond just normal gold ownership.

Protection of Retirement Assets

One of the foremost benefits of a gold IRA is that it maintains the same tax treatment of your assets that your existing retirement accounts do. So if you have a 401(k), 403(b), TSP, IRA, or similar retirement account, your gold IRA can maintain the same tax advantages, just like any other IRA account.

Most people who start a gold IRA end up doing some sort of 401(k) rollover, in which they roll over assets from an existing 401(k) account into a gold IRA. The same process works for rolling over or transferring assets from a 403(b), TSP, IRA, or similar account into a gold IRA.

In most cases these 401(k) to gold IRA rollovers are done tax-free, allowing you to keep your existing retirement assets protected against current taxation. As with most retirement accounts that use pre-tax dollars, your gold IRA will continue to accrue any gains tax-free and you only owe taxes when you decide to take a distribution or are required to take required minimum distributions (RMDs).

When you decide to take a distribution, you can choose to take the distribution either in cash or in the physical gold coins or bars you chose to buy.

Tax-Free Asset Growth

A gold IRA can either be a Traditional IRA or a Roth IRA. And just like conventional Traditional and Roth IRAs that invest in financial assets, a gold IRA allows you to grow your assets tax-free.

A Traditional gold IRA uses pre-tax dollars to buy gold coins or bars. Gains accrue tax-free until you pay taxes at distribution.

A Roth gold IRA uses post-tax dollars to buy gold coins or bars. Gains accrue tax-free, and then no taxes are owed at distribution.

Diversification of Retirement Savings

Many people who hold assets in retirement plans may feel limited by the investment choices they’re offered. Some workplace 401(k) and IRA plans may offer fewer choices than others, and between fees and lackluster asset growth, you may not feel that you’re able to get the most bang for your buck.

That’s why many people take advantage of 401(k) rollovers and IRA transfers to try to access a wider variety of potential investment options. And a gold IRA can be one of those.

By rolling over or transferring a portion of your existing retirement savings into a gold IRA, you can take advantage of a physical gold ownership opportunity that most retirement plans don’t offer. That can help diversify your retirement savings and give you new tools to control your finances.

Secure Storage

Like any other IRA asset, the assets owned by a gold IRA are managed by a custodian. And because of the nature of gold, your assets are also stored in a secure bullion depository.

Goldco partners with well-established precious metals depositories who have a long track record of storing and securing precious metals. You can rest easy knowing that the gold you purchase is kept safe and secure, ready when you need it.

Advantages of Physical Gold

Not everyone has significant retirement account assets that they want to protect. And not everyone who has retirement assets necessarily wants to roll over those assets into a gold IRA.

That’s perfectly fine, because there are a number of advantages to buying and holding physical gold too, including having gold shipped directly to your home.

Immediate Access

You’re probably familiar with phrases like: “A bird in the hand is worth two in the bush,” or “Possession is nine-tenths of the law.” When it comes to gold, many people think that if you can’t hold it in your hand, you don’t really own it.

That’s why the immediate access of owning physical gold is so appealing. Being able to open your sock drawer or open your safe and put your hands on the physical gold coins you own brings reassurance to many gold owners. And that’s why so many people choose to buy physical gold that they store at home.

Distribution of Physical Metal

As much control as a gold IRA can offer you, owning physical gold that you take possession of can offer you even more control. You can stick it under your mattress, hide it in a wall, store it in a safe, or put it in a bank safe deposit box.

At the end of the day, you have complete control over your gold and where it is stored. And no one but you has to know where you keep it.


That ability to choose where your physical gold is stored also means that taking physical possession of your gold gives you maximum portability. If you think there’s ever a potential situation in which you may have to leave your house at short notice, having personal possession of your physical gold means that you can take it with you if you need to.

For some people, that ability to carry their physical gold assets with them gives them maximum peace of mind. And because gold is so portable, you can carry over $100,000 in gold in a jacket or purse and no one will be the wiser.


Some people may choose to own gold both with a gold IRA and by taking physical possession of gold at home. Taking physical possession of gold is just one more tool in the toolbox, one more way to diversify their investments. Sometimes that flexibility and diversity of investments can be an important factor.

Disadvantages of a Gold IRA

Now that we’ve seen the advantages of both a gold IRA versus physical gold, let’s look at some of the disadvantages of a gold IRA.

Lack of Physical Access

The major drawback to a gold IRA is the fact that your gold is stored in a secure depository. On the one hand, this is beneficial, as you can rest assured that your gold is in safe hands. But on the other hand, the only way you can get your hands on that gold is to take a distribution of your gold IRA assets.

For those who prefer the peace of mind of having gold in the house, or in a safe nearby, having gold in a secure bullion depository, no matter how safe and secure, just isn’t something they want to do. Even if they could liquidate their holdings and receive their gold in a matter of days, they would rather have the knowledge that their gold is only an arm’s length away.

That’s part of the beauty of owning gold, the numerous types of storage options available. For many, perhaps even most gold owners, storing gold in a secure bullion depository such as those used by gold IRA owners gives them the greatest peace of mind. For others, having gold readily available at home at a moment’s notice gives them the most security. And for still others, having a mixture of gold holdings in a depository and at home makes them feel like their assets are most secure.

Fees and Paperwork

Like any other asset, buying gold costs money. And a gold IRA, like many other IRAs, is no exception.

Just like the mutual funds, index funds, or exchange-traded funds you invest in charge management or expense feeds, gold IRAs incur some costs too. The most prominent fee you’ll likely face is a fee to store your gold. And this is where it helps to do your homework.

You may find that fees for gold storage are fixed fees, regardless of how much gold you own or store. That means that if you’re storing $50,000 of gold, $500,000 of gold, or $5 million of gold, you’re still going to get charged the same amount of money for storage.

Naturally those types of fixed fees benefit those who have more gold to store. And that’s why you’ll sometimes find that buying and storing less than about $25,000 of gold sometimes might not seem worth it when it comes to the fees you might face.

Like any other asset you purchase, fees can take a bite out of any potential gains you make. And that’s why you’ll want to research how much fees will cost you so that your potential gains aren’t eaten away by fees.

A gold IRA also requires a custodian to manage your IRA assets, which means the same type of paperwork as with any other IRA account. That also means that you have to deal with required minimum distributions (RMDs) and calculating how much of your gold IRA you might need to liquidate once you reach the age of 72 and are required to take RMDs. Compared with that, the ownership of physical gold coins that you store yourself can seem much more straightforward and less complicated.

Disadvantages of Physical Gold

Of course, investing in physical gold outside of a gold IRA has its complications too. Here are two of the biggest ones.

Questions of Authenticity

By far the biggest question when buying gold coins is, are they authentic? No one wants to spend thousands of dollars buying counterfeit coins, which is one possible reason that many people may decide not to buy gold.

If you’re not familiar with gold coins, how they’re measured, how to weigh them, etc., you may be worried about being taken to the cleaners by unscrupulous sellers. And that’s particularly a risk if you try to buy gold coins from online marketplaces where you deal with unknown entities with obscure usernames.

Even someone like me, with years of experience buying precious metals, can end up unknowingly buying a counterfeit gold coin. In my case I lucked out and got my money back, but it’s not an experience I wish to repeat, nor would I wish anyone else to suffer something similar.

That’s why it’s important to find trusted partners to work with and buy from, who you know can source authentic coins.

With over a decade of experience in the gold industry, Goldco has established relationships with mints around the world, and can guarantee that all of its coins are 100% authentic gold, just as they came off the mint’s presses. You can rest easy buying from Goldco, knowing that the money you spend to buy gold will be buying coins that are genuine.

Risk of Theft or Damage

The other major disadvantage to owning physical gold at home is the risk of theft or damage. You may live in a nice neighborhood with a low crime rate. You may live in an area with mild weather. But at some point you may find that your gold coins end up missing or damaged.

It could be the result of having someone work in your home, someone who happens to spot something they want to come back and steal. It could be a random crime of opportunity, someone who breaks into your house and just happens to find your roll of coins.

Or it could be a freak occurrence like a house fire that burns everything and melts your coins into a huge glob of unrecognizable metal. Or maybe a tornado, hurricane, or flood destroys your home and your precious gold coins go missing.

These are all risks that could befall you and your gold coins, which is why it’s important for you to figure these into your risk assessment before you decide how you want to buy gold. The last thing you want to do is sink a sizable portion of your savings into gold and not take the right steps to protect it, leaving you nothing to show for your decades of hard work and investment.

Which Is Right for You?

So do you know now whether you would prefer a gold IRA versus physical gold? If you don’t, you’re probably not alone. And many people decide to do both. The choice is up to you, and it’s ultimately going to come down to a combination of your financial goals and your risk appetite.

As with any other financial decision, you’re going to want to talk to your financial advisor and tax advisor first to make sure you’re not inadvertently exposing yourself to potential tax liabilities. Whether you decide to start a gold IRA or just purchase a few gold coins to sock away for a rainy day, gold can help benefit you, but it’s not a decision you want to make lightly.

There’s no denying that the economy is on shaky ground right now, and warning signs are flashing. Whether we’re seeing a repeat of 2008, a repeat of the stagflation of the 1970s, or a combination of both, you want to make sure that your hard-earned savings remain safe and secure.

Suffering investment losses is never fun, and the more you lose or the less time you have to make up those losses in the future, the more painful those losses can be. That’s why so many thousands of people have already made the decision to protect their wealth with gold.

We’ve seen this scenario replay itself over and over throughout history, and even within recent memory. And by being prepared before the worst part of a crisis occurs, you can set yourself to potentially end up better off on the other side of the crisis.

So don’t wait until it’s too late to protect your savings. Call the experts at Goldco today to learn more about how you can benefit from the many advantages of owning gold.

The post Gold IRA vs. Physical Gold – What You Need to Know appeared first on Goldco.

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About the Author: Paul-Martin Foss