If you’ve decided to invest in gold, you have a decision on your hands. You can take the traditional route and buy physical gold, or you can invest in a gold IRA.

There’s no wrong answer here, as both have benefits and drawbacks. However, in the end, you’ll need to decide which makes sense to you. This page should help you come closer to a decision.

Gold IRAs

A gold IRA is an individual retirement account, or IRA, that invests part of its fund in actual gold. It behaves in much the same way as a traditional IRA but allows and requires a bit more input and decision-making on the investor’s part.

First, any IRA is a retirement account into which you place contributions from your regular income. After age 73, the account pays out mandatory distributions to you until the end of your life.

Two types of IRA are available to you if you are regularly employed. Traditional IRAs take contributions from your paycheck before your income’s taxation. You can then deduct the value of the contributions from your tax return. Once you begin withdrawing from the account, you will be obliged to pay income and capital gains taxes on the withdrawals.

Roth IRAs don’t withdraw from your paycheck until after income tax has been collected from it. Thus, there is no way to deduct the contributions on your return. However, once distributions begin, neither the money you’ve contributed nor any capital gains you’ve incurred are subject to taxes.

Both types of employer IRAs are subject to contribution limits each year as mandated by the IRS. Investors under 50 can contribute $7,000 per annum, while those over 50 can invest $8,000 annually.

There is a third type of IRA that is available, but only to small business owners or the self-employed. A SEP IRA, short for Simplified Employee Pension, is a form of traditional IRA that takes out funds before taxation and requires tax settlement upon distribution.

However, one major advantage of a SEP IRA is that the contribution limit is much higher. You can contribute as much as 25% of your income up to a maximum amount. In 2025, you can put as much as $70,000 into your account.

Although you will receive mandatory distributions at 73, you can begin making withdrawals without incident after you reach 59 and six months, or six months before your 60th birthday. If you do decide to withdraw before then, be aware that you’ll have to pay an additional 10% tax on top of any income taxes you have to pay.

One thing to mention, however, is that a gold IRA is not the same thing as a gold ETF. A gold ETF is more like a mutual fund that invests in gold and allows investors to buy shares in the fund. Gold ETFs do not offer the same advantages as IRAs or physical gold and have several drawbacks best avoided.

There’s no denying that a gold IRA has advantages over physical gold. However, it also has some drawbacks. So, let’s discuss both.

Advantages

Here are some reasons you may consider buying a gold IRA over physical gold.

• Tax Benefits: Both types of gold IRA, traditional (including SEP) and Roth, bear significant tax benefits to investors. Traditional gold IRAs allow you to invest before taxes and deduct the contributions from your taxable income each year that you invest. Roth IRAs don’t allow you to evade taxation initially, but exempt you from any taxes – both income and capital gains – when you finally withdraw from it. Buying physical gold doesn’t have any similar benefits.
• Diversification: A gold IRA conveys the benefit common to precious metals investing by providing diversification to the IRA itself. The inverse relationship between gold and the economy – including other investments that may be part of the overall IRA – can help you hedge against the economic downturns and the negative effects of inflation. However, and paradoxically, a gold IRA allows you diversification against physical gold due to the other investment vehicles that make up your IRA.
• Retirement Planning: Putting money into any IRA, gold or otherwise, allows you to put away money for your later years. An IRA’s distributions can help you to make ends meet when your working days are waning or at their end, and there is peace of mind to be found within that level of security. Physical gold requires a bit more discipline to avoid conversion into cash prior to retirement.
• Secure Storage: One clear advantage of a gold IRA over buying physical gold is the notion of secure storage. With physical gold, you must work out the details and remain vigilant about the storage and security of your investment at all times. With an IRA, your account is administered by a custodian, and he or she is charged with storing the gold in your IRA securely. Thus, there’s a great deal of guesswork taken out of the investing.
• Estate Planning: If you happen to pass away before completing your account’s distributions, the government doesn’t just keep the remainder. Instead, you can designate a beneficiary to continue receiving the payments. The only drawback – other than the fact you aren’t enjoying all of your money – is that additional estate taxes may be placed on the distributions. Nevertheless, it can be a nice bit of inheritance for your successors.

Disadvantages

Here are some of the reasons why a gold IRA might not be so great.

• Low liquidity: Investing in a gold IRA means that you effectively lose the money you contribute for a long period. Because of the withdrawal penalties, it isn’t easy to get your investment’s cash value back if you need it. You can still get some of it, but it’s much messier than if you have physical gold.
• Contribution limits: You are also much more limited in the size of the investment you can make. The IRS contribution limits don’t permit the creation of full nest eggs, which may run counter to your investment goals. Physical gold has no such limits – you can buy as much as you like.
• Fees: Any type of IRA requires an IRS-approved custodian to serve as its administrator, and no custodian works for free. A gold IRA comes with additional fees because the custodian is charged with storing your gold securely. Physical gold has no such fees.

Physical Gold

Investing in physical gold is fairly self-explanatory. You buy tangible gold products and, hopefully, the price of gold goes up and makes your investment more valuable.

Now, there are a few decisions you need to make when you decide to invest in physical gold. First, you must decide how much gold you can afford.

The baseline value of gold is its spot price. Though there is a more technically-accurate definition, 99% of people use the spot price as the market price for a troy ounce of gold.

The rise of gold’s spot price in recent years has been nothing short of explosive. Thus, buying even an ounce of gold will cost you thousands of dollars, and you need to be aware of the cost before investing.

The second thing to understand is that you will rarely be able to buy gold at the spot price. Each dealer charges an additional fee, known as the premium, as a surcharge for facilitating the deal. So, it is important that you shop around and try to find a reputable dealer with as low a premium as possible.

The next decision is what form you’d like your gold to take. Gold is typically available in coins, bars, or rounds. Bars and rounds are the same thing – formed lumps of gold that derive their value entirely from their metal content. Collectively, these products are known as “gold bullion.”

Coins, on the other hand, are the products of sovereign mints, and their condition and provenance add an extra bit of value to them. However, be prepared to pay additional amounts of premium for coins due to their certified authenticity and extra value opportunity.

Obviously, you’ll have to get the gold shipped to you unless you choose to buy it from a local coin shop. There is nothing wrong with most retail shops, but be aware that they may be more expensive than online.

Once you have the gold in hand, you’ll need to store it in a secure location. A house safe is better than nothing, but you should probably spring for a safe deposit box at a bank at a minimum. The best choice is a secure storage vault that specializes in storing precious metals, but unsurprisingly, this option is also the most expensive.

Advantages

Here are some of the reasons that investing in physical gold is superior to a gold IRA.

• Direct control: There is actual gold involved with investing in a gold IRA, but you don’t actually have direct control and access to your gold due to the presence of the custodian. It’s not that the custodian will refute your orders, but it still means that there is a middleman separating you from your investment.
• Tangibility: One obvious advantage to owning physical gold is that you can literally hold it in your hand. No other type of investment allows you to possess the actual investment itself – the rest of them are essentially promises of value.
• Value stability: No matter the ebbs and flows of the world economy or the value of fiat currency, physical gold retains its value through time. Civilizations have universally recognized gold as a store of value for thousands of years, and the value of your investment would likely survive even a complete collapse of the economy and/or society.
• Liquidity: There is no early withdrawal penalty or even a delay to process a withdrawal if you deal with physical gold. You can sell your physical gold for cash quite easily. A coin shop or local dealer can put the dollars in your hand almost immediately, and you can maximize the sale price if you deal online – you just have to wait a few days to complete the online process.
• No contribution limits: Though gold is expensive, there’s literally no limit to how much you can buy. IRS contribution limits for IRAs are either $7,000 or $8,000, depending on your age, and you can overwhelm that limit if you buy more than 2 ounces of gold. On the flip side, as long as you have the cash, you can buy physical gold until your heart’s content.
• No fees: If you buy physical gold, you’ll never be subject to any ongoing fee outside of your storage costs. There is no percentage that you’ll owe a custodian for its upkeep, and gold’s only fee at purchase is the dealer’s premium.

Disadvantages

Buying physical gold has some drawbacks with respect to a gold IRA.

• No tax benefits: While gold IRAs give you some flexibility with regard to your tax liability, buying physical gold bears no such benefit. You will only be able to buy gold with post-tax income, of course, and there is no deduction you can claim. Furthermore, you’ll have to pay capital gains tax on any profits you realize when you sell your gold for cash.
• Storage costs: Even if you just buy a home safe, there is still a cost associated with storing your gold. You should never just keep it in the sock drawer. If you decide on a more secure option, like a safe deposit box or private vault, you’ll have to pay even more to store the gold you buy. With a gold IRA, the storage cost is folded into the fees you pay the custodian.
• Security concerns: Another element you don’t have with gold IRAs are the security concerns – the custodian handles those issues. You have to be especially cautious about how you store your gold. You must protect it against both theft and natural disasters, and doing so will likely take both money and some changes to your pattern of life.
• No diversification: The entire value of your physical gold is tied to the market price for gold. There are no other pieces of the investment that might move in different directions and act as a hedge when gold might depreciate in value. Gold is trading quite expensively right now, and its overall value has steadily increased – but there have definitely been times when the price has swooned.

Compare Gold IRA vs. Physical Gold

Factors to Consider When Choosing

We cannot decide which direction you want to go. Both options have their upsides and downsides, but ultimately, investing in gold is usually a good idea. Here are some things to consider when you are coming to a decision point:

• Purpose – Why do you want to invest? Would this investment be your only retirement savings? Is this investment part of a larger strategy or goal?
• Timeframe – Are you going to need the money you invest sometime soon? Can you afford to put your money and investment in a place such that you cannot access it easily or without penalty?
• Storage and security – Do you have the money to pay for proper storage if you buy it yourself? Do you have the time to assure that the gold is safe and stored away?
• Tax benefits – Is it important to you that your investment has tax benefits, one way or the other? Do you need a way to defer your taxes, or are you unconcerned with the IRS implications?
• Trust and secrecy – Do you feel comfortable entrusting your holdings to an independent third party? Do you prefer to keep everything closer to the hilt? Are you alright with creating a paper trail for your purchases, or do you want to stay off the books (with cash)?

Related articles: 

• What are the fees for a precious metal IRA?
• IRA contribution limits
• How to fund precious metal IRA

Final Thoughts

Although it is possible that you might consider buying gold in both of these formats, the reality is that you’re probably going to choose one over the other.

For instance, a person who sees gold as an essential portion of their overall net worth might need the flexibility that physical gold allows. There are no contribution limits or fees you have to pay to an administrator. Nothing is more empowering than holding a portion of your net worth in your hand.

At the same time, you may be more interested in putting money away for your later years, and you don’t figure to need the value of the money you put in a gold IRA anytime soon. Additionally, you may want to have an extra $7,000 or $8,000 in deductions for your income tax. Finally, you may find the idea of an appreciating asset that bears no further taxation when you withdraw it to be appealing.

Whatever your decision, we’re here to answer your questions or help you get started with your investment. Call us at 1-800-276-6508 Monday through Friday, between 8 AM and 6 PM Central.

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