Gold IRA Pros and Cons

Gold IRA Pros and Cons

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A retirement portfolio consists of every account that generates income during the retirement years. This might also include assets like stocks, bonds and gold. Individual retirement accounts, or IRAs, present a method for workers to save for the years of retirement beyond whatever’s available in a pension or Social Security retirement account.

There is a tax advantage to be gained from using a retirement account instead of simply keeping cash in a physical location at home, for example. Retirement annuities and accounts with a custodian enable the retiree to benefit from these tax perks while building a robust plan for funding the retirement years. In addition, the money inside of these accounts can build additional value through their use in long-term investments.

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Overview of Gold IRA, Value of Gold

Gold IRA Pros and Cons

The Gold IRA is a particular kind of account; it’s called a precious metals account.
Gold tends to become most attractive as a retirement investment during a stock market crash. Economic downturns can be catastrophic for people who keep their investments in only certain kinds of assets.

In some cases, people can lose their entire retirement savings when the crash wipes out the value of stocks and bonds, for example. Building a robust retirement portfolio is called diversification. This enables the retirement funds to withstand the ups and downs of the market, and gold is an asset that’s demonstrated robust performance under all market conditions.

History of Gold's Value

Gold IRA Pros and Cons

There is a long history of gold being used as a means of storing value. This precious metal has been used as a currency medium to promote trade during times when other options were unavailable. Over more than 5,000 years, it has performed in a steady manner that resists inflation and various currency crises.

Gold has proven to maintain its value during various market conditions; this increases its attraction as an investment. Retirement planners often promote stocks and bonds as two reliable assets that can fund the retirement years of life. However, stocks and bonds are very similar to each other; gold offers diversity, which builds a more robust retirement portfolio.

Tracking the history of gold’s value is difficult, but it can be helpful to review specific moments to assess what’s happened to the value of gold over time. For example, during a 100-year period of time, the value of a piece of gold appraised at $20 rose to around $1,100. This represents an appreciation of value that is only passed in significance by its relative stability in terms of purchasing power.

Stocks and Bonds, Gold IRA Comparison

Compared to stocks and bonds, the performance of gold is much more stable and reliable. Historical records demonstrate that stocks and bonds can lose as much as 60 percent of their value during a major crash or economic downturn. The value of gold is maintained during these periods on account of the tangible nature of this commodity.

Basically, if the stock market crashes, gold tends to maintain its value. People who look to gold to provide the necessary value for funding retirement years must also understand how to invest in a Gold IRA account. There are specific rules about how individuals are allowed to buy gold for the purpose of building a retirement account.

IRS Regulation of Gold IRAs

Gold IRA Pros and Cons

The option for enrolling in a Gold IRA account began when Congress authorized this as a financial option around 1998. At that time, the cost for enrollment was higher than the standard IRA account. The stabilization and increase in use of the precious metal IRA reduced the cost of participation over time; however, some associated costs still apply.

There are companies that can help you to understand and navigate the specific rules that the IRS has for precious metals and IRA accounts. The most important issues involve the purity of the metals and the storage of these items in a physical location. To get the tax benefits, you will need to ensure that compliance is maintained while directing purchases with your custodian or setting up a legal LLC.

Pros and Cons of Gold IRA


  • Gold IRA performance: There is a record of Gold IRAs performing over time, since this option became available. Experts in financial planning advise a five to 10 percent level of investment in gold to properly diversify. If the value of the dollar falls, or if stocks and bonds diminish in value, this part of your retirement fund will maintain its value.
  • Market stability: Since the beginning of this form of retirement account, there has been a track record of stability. The value of gold maintained its market position through the crisis of 2008, for example. The price of gold rose during the years called the Great Recession.
  • Custodianship: Since a custodian is required to conduct the transactions, you can benefit from the reduction in paperwork. The account must be handled by a custodian approved by the IRS; this is usually a financial institution like a bank. This entity keeps track of all transactions, records and reporting to the IRS.
  • Self-directed IRA: Gold is a precious metal, so it falls under the purview of the self-directed IRA. This applies to certain precious metals and gold bullion approved by the IRS. However, other assets can also be deposited in this type of account; you might include real estate assets, for example.
  • Legal control option: There are ways to set up a legal LLC and control all purchases for your IRA directly; however, this won’t enable you to store the gold at home. The physical location is also tightly regulated, and it will have to comply even while being stored under the name of your LLC. The depository is a location that complies with IRS rules regarding the storage of gold.
  • Tax benefits: The Gold IRA is subject to preferred tax treatment, and this is a great way to reduce taxable income while building a nest egg for retirement. For example, the Gold IRA account will allow you to contribute to the account with a tax deferment. If you make a withdraw while meeting certain criteria, this amount will also meet an exemption from taxation.
  • There are many different rules that apply to people who file as individuals or as a married couple. These rules can also be changed when the laws are adjusted. Maintain contact with a qualified tax professional who can advise you on the benefits of various decisions available for your Gold IRA investments.


  • Federal law requires that the custodian conduct all transactions in precious metals. This includes purchasing the gold and transferring it into your Gold IRA account. The buyer must quickly learn how to accept this information, if it’s new.
  • Associated fees: Depending on the custodian for your gold, there may be annual custodian fees for maintaining regulatory compliance. There could also be other fees related to storage and enrollment in the program.
  • Insurance: The cost of maintaining a precious metal account is linked to the insurance of these physical commodities. Insurance on precious metals is necessary to mitigate any attempts at fraud or theft, which are common wherever gold and precious metals are physically located. Custodianship is required by law; however, these assets must still be insured against theft.
  • Penalties for non-compliance: You can get into trouble with the IRS if you try to keep gold in your home. The gold must be purchased and transferred by the custodian to a depository that is IRS-approved for storing precious metals. Risk of incurring a prohibited transaction could apply if you fail to follow the IRS’s rules.
  • Industry Council for Tangible Assets: According to one industry expert from the ICTA, investors can “face taxes penalties and fees on your entire IRA” if the IRS determines that the self-storage regulations on precious metals have been violated. This power to pursue investors is a serious deterrent to anyone storing gold at home if it’s deemed to be a distribution.
  • Distribution penalties: There is some confusion about what type of home storage activity qualifies as a distribution from the IRA, which would be subjected to the relevant penalties. If there is any doubt about what type of activity is allowable under the IRS rules, it’s best to consult with a qualified professional who demonstrates a deep and accurate understanding of tax laws.
  • Early withdrawal penalties: In most cases, these assets must be kept inside of the IRA account until you reach the specified age, which is usually just shy of 60 years. If you make an early withdrawal, the IRS normally imposes a 10 percent tax penalty on the amount. However, if you’re withdrawing due to a specific hardship, you might qualify for an exemption.
  • There are many rules that only apply under certain conditions, so always consult with a qualified professional if you have any questions or doubts about your Gold IRA investment plan.

Options and Exceptions

Gold IRA Pros and Cons

Storing gold at home is technically allowed as long as the gold isn’t part of an IRA account, which is regulated by specific taxation laws. This includes gold coins, bullion, bars and other physical items made of gold. These items are all classified as collectibles by the IRS, and the IRA statutes are designed to make them ineligible for holding in the IRA account.

Avoid claiming gold as part of an IRA account in order to avoid the associated penalties. If you elect to use any form of storing gold at home or elsewhere, just be aware that you won’t be able to enjoy any tax benefits legally for choosing this method. Some exceptions to these rules do exist, but this is a tricky legal area, and you might want to check with your custodian to see if they apply.

Consultation for Gold IRAs

Gold IRA Pros and Cons

Banks or trustees will generally hold specific types of bullion in their physical location. The insurance costs for the Gold IRA is an offset cost to the risks faced by those who invest in physical precious metals. If there is any confusion about these rules, the best course of action is to locate a trusted and reputable advisor.

You should explore all of the options available to you including the Gold IRA. For example, you might be interested to learn more about the option of investing in gold funds or stocks as an alternative. This information is available in order to enable you to make informed decisions.

When it comes to your retirement plans, it’s worth taking the time necessary to learn directly from experts on gold accounts, retirement planning and portfolio diversification. Only certain assets are eligible for holding in the standard or traditional IRA. Trading is another viable option for building a robust retirement account using gold.

This option is more likely to apply if the drawbacks of the Gold IRA outweigh the benefits, for example. Having a backup plan is a good idea when researching the pros and cons of the Gold IRA itself. This will allow you to see the big picture while gaining insight into the various benefits and potential risks of opening a Gold IRA account.

Navigating Regulatory Changes

Consultants are also valuable when the rules for gold get changed, and this does happen periodically. For example, when Congress first modified the rules for investing in gold to include bullion based on the weight instead of the value as a collectible, a purity test of 99.5 percent was imposed. This measurement is important when determining if the gold qualifies to be included in the IRA.

Currently, the body of law that determines the rules for gold can be found under IRC Section 401(a). If you read this section and still have questions about your situation, this might be the right time to begin searching for a reputable consultant. Reliable information has its own value when making critical decisions about how to fund your retirement account and diversify your portfolio.

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