Gold IRA vs Physical Gold: Which is Best for Your Portfolio?

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Do you feel proud of yourself for making the decision to invest in gold as part of your retirement plans? I think you should. Gold is a great way to preserve your wealth and give your portfolio stability when you need it most.

Do you also feel dread when faced with the next decision? That would be looking at a gold IRA or physical gold for your investment into precious metals.

I cover this industry a lot, so I know there are pros and cons to doing either one.

Fortunately, you’re not the first one to face the gold IRA vs physical gold debate. I can’t tell you which one is better for you to do.

What I will do is help you get to know both options and their risks and benefits. From there, you can make your own informed decision, and as always consult with a certified financial advisor before making any investment decisions.

Why Invest in Gold?

a hand holds a plant that is sprouting dollar signs

Many countries and cultures around the world respect gold for the value it holds. That’s been true for thousands of years of human history. I don’t think it takes much for you to see how important gold has been and still is.

Gold first started showing up in coins at approximately 650 B.C. Around a century later, the first totally pure gold coins were recorded when King Croesus held rein over Lydia. Over time, gold has become synonymous with wealth.

Today, there are good reasons to invest in gold. I’ll cover eight of them for you. You can see for yourself why gold is still important in the modern age.

  1. Diversify Your Portfolio: The real trick to portfolio diversification is investing in asset classes that have very little correlation. Gold certainly has a negative correlation to stocks and bonds. The 1970s and the Great Recession weren’t great for stocks, but gold did well, whereas the 1980s and 1990s were very different.
  2. Geopolitical Uncertainty Abounds: Gold is sometimes called a “crisis commodity” since investors flock to it when international tensions rise. Its value tends to go up when there are crises between nations in parts of the world. It also sees a surge in demand even when political instability happens inside a major country.
  3. Gold Holds Its Value: Gold doesn’t physically corrode, but it can be melted and molded easily into coins. It also retains a unique and gorgeous color. Gold atoms are heavier with faster-moving electrons, and this wasn’t figured out until Einstein came up with his theory of relativity.
  4. Growing Demand: Emerging market economies help lift many nations to a higher quality of living, but that can also strain gold supplies based on their cultural value. China is a country where gold bars are seen as a traditional method of personal savings, while Indian families often use them in making jewelry. In fact, the traditional October wedding season in India often marks the annual high point in global demand for metal.
  5. Hedge Against Inflation: Gold historically goes up in price when the cost of living also goes up. In years of high inflation over the last five decades, gold values rise dramatically when the stock market goes the other direction. This means gold in your portfolio can counteract other asset classes that are deteriorating at the time, thus preserving your wealth.
  6. Protection From Deflation: Deflation happens when prices go down, business activity is slower, and substantial debt burdens the economy. This happened a lot during the Great Depression but also some during the 2008 financial crisis in some areas of the world. In times such as these, the purchasing power of gold rises considerably.
  7. Supply Problems: A lot of modern gold available happened because global central banks sold bullion from their vaults, but that has since greatly slowed down since the Great Recession. Meanwhile, new gold production from actual mines has been on the decline since the turn of the century. This has resulted in an overall decline in the amount of gold available, so demand and values are likely to keep rising.
  8. The American Dollar Is Weak: The United States currency is one of the most important in the world, but sometimes its value drops against other currencies. This happened from 1998 to 2008. At that same time, the value of gold tripled.

Gold IRA vs Physical Gold: The Differences

In terms of a gold IRA vs physical gold, the biggest similarities are twofold. First, you own the gold. Second, you might be able to preserve wealth and even make money off of that gold.

The primary differences are also twofold.

First, a gold IRA means your precious metals are stored in a depository vault under IRS-approved management at private facilities, whereas physically owning your gold means you have personal access to it and store it where you want.

The second difference is that a gold IRA might offer you quite a few tax advantages while owning gold physically might be susceptible to all applicable taxes.

Gold IRA

a Gold IRA investment chart

In the gold IRA vs physical gold debate, most people might lean towards a gold IRA automatically. I think that can be a good instinct.

I also think it’s good to know the specific pros and cons behind that particular instinct.


Gold IRAs have several advantages to them, and they’re pretty potent ones.

  • Rollover Tax Benefits: If you qualify for or even have to do a rollover from a 401(k) account, traditional IRA, or Roth IRA, then you can do so into a gold IRA. When done properly, you can do so free of taxes or penalties so that all your wealth is preserved. You don’t have to lose a dime.
  • More Tax Advantages: Also when done by IRS rules, your contributions and withdrawals from a gold IRA account are also tax-free. This lets you keep more of your income or investment when putting it into the account. You can also keep as much of it as possible when pulling it out.
  • Secure Storage: Gold IRA precious metals have to be stored in an IRS-approved depository. These facilities are secure sites that will maintain your precious metals for you where people can’t get to them. They’ll be tracked and protected, and you might even get webcam access to see them anytime.
  • Specialist Help: Investing in gold can be a smart move, but not all gold is created equally. When you work with a gold IRA broker, their specialists will help you invest in specific pieces of gold that match your financial objectives in the long run. They want your account to be successful over the years since you’re not just a one-off transaction.


Gold IRAs are great investment vehicles, but they’re far from perfect.

  • Fees: Gold IRAs do have fees. You may face a round of setup fees when you first open your account. You’ll also likely face annual storage and maintenance fees on your account.
  • Limited Selection: The IRS has strict lists about what kind of gold you can put into a self-directed precious metal IRA. That means you can only buy off of that list. Anything outside of it can only be done privately and is subject to taxes.
  • Withdrawals: If you need the money now, you can sell physical gold anytime you want. If you do an early withdrawal from a gold IRA, there might be withdrawal penalties on top of the taxes. Your options for pulling out money early are limited.

You May Also Like: How to Start a Gold IRA

Physical Gold

three gold bars in a pile

Now that you’ve read about precious metal IRAs, you might think the gold IRA vs physical gold debate is settled, but not so fast.

You shouldn’t make a decision until you know the pros and golds of owning physical gold yourself.


If you ever get into a gold IRA vs physical gold debate with friends or family, consider that owning gold yourself has a few benefits.

  1. Physical Comfort: When your precious metals are in your personal possession, you can know that they’re where you can see them. Unlike stocks and bonds, their value won’t disappear because they are physical assets and not pieces of paper. Gold can be melted, but not destroyed.
  2. Physically Pleasant: Gold is beautiful to look at. It’s also very pleasing to touch and hold. PIeces with ornate illustrations are even pieces of art that you can enjoy and display.
  3. Get What You Want: There are serious IRS restrictions about the gold and silver that can go into a gold IRA. When you buy your own pieces, you can get whatever you want. There are many more options to purchase.
  4. Freedom of Storage: When you own your own physical gold, you can put it wherever you want. While depositories are secure facilities, you never actually get access to your own metals. Owning them yourself directly lets you choose where to put them.


There are four potential downsides to physically owning gold that you should be aware of.

  1. Overpriced Pieces: This is less likely to happen with billion, but if you aim for ornate pieces, rarities, and things with collectible value, then you might pay a premium. Part of the price of such pieces will be more collectible markup than the actual gold value. You’ll always have the gold value, but if aesthetic preferences in the collectible market change, then you might take some loss.
  2. Taxes: If you buy gold and keep it for more than a year before selling it, then your capital gains rate is likely to only be 28%. You’d probably only pay 20% for doing the same with stocks. Also, this is after paying sales taxes when you first bought the gold.
  3. Storage: Gold is obviously desirable to criminal elements, and this has been the case for centuries. Storing it at home might take you to feel better, but it’s also a considerable risk. Your homeowner’s or renter’s insurance might not automatically cover precious metals as personal possessions without significant notice and documentation.
  4. Liquidation: If you want to make money from your gold assets, then you need to liquidate them. Depending on what kind of gold you hold, you might not always be able to find a buyer. This can impact how fast you can turn gold into cash, and it might even impact how much you get.

When It Might Not Matter

While a gold IRA vs physical gold might be a decision you have to make when investing in precious metals, there are actually some situations where you won’t have to deal with the choice.

I always surprise some people when I tell them that physical gold or a gold IRA might not even be possible for them.

That’s usually because of where they’re at in life, as there are three situations where neither is an option.

  1. You’re Too Young: For most investors, you should put 5% to 15% of your total portfolio into gold and silver. Younger investors might not be able to meet the minimum investment levels without going way past this. Even though I believe strongly in precious metals, I also think that younger investors should still be concentrating on growth, and stocks are a better place to do that.
  2. You’re Too Old: The IRS will require you to start making required minimum distributions after you are 70 years, 6 months of age. Whether or not you can still make contributions to an IRA after this age gets tricky. There’s technically no age limit, but you do need a certain level of earned income in most cases; if you’re fully retired, that might be impossible.
  3. You Don’t Have Enough to Invest: Many gold brokers won’t just have minimum investment levels for their precious metal IRA accounts. They may also have minimum transaction levels for anyone looking to buy gold in physical bulk for their own private ownership. If you don’t have enough money, you won’t be able to exercise either option.


If you’re unable to invest in a gold IRA or enough physical gold to make it worth it, then there are other ways to invest in the gold sector until you can.

Likewise, you might want to look into these options if you just want to have gold exposure in your portfolio until you decide which way to go.

  1. ETFs/Mutual Funds: While a gold IRA or physical gold is a great way to diversify away from the stock market, you can enjoy exposure to the gold sector in the stock market. There are mutual funds and exchange-traded funds that focus exclusively on the gold sector. Investing in those can help you enjoy growth and profits in this industry, even if it’s somewhat vicariously through other businesses.
  2. Gold Mining Stocks: If you want to get very directly involved in the gold sector, then owning the stocks of gold mining companies is another way to take advantage of the growth in the sector. Just know that while these stocks tend to rise in value with the sector, they won’t necessarily go along with gold prices themselves. Still, you can use these to profit from the gold sector before you’re able to deal in physical gold or a precious metal IRA.

Key Takeaways

It’s too easy to see the gold IRA vs physical gold conundrum as being a binary debate where one answer is right and the other is wrong.

However, I think it’s a lot more situational than that. I’d advise you to keep several things in mind.

  • A gold IRA is a great rollover option that helps you preserve wealth from other retirement accounts in a format with considerable tax benefits.
  • Owning physical gold might mean paying more in taxes, but you get a lot more control over your investment.
  • The main thing you want to do is save as much money as you can for retirement. That might mean getting to a point where you have enough saved up that you can actually dabble in both at the same time if you want.
  • Always keep your portfolio properly balanced. If you start a gold IRA and buy physical gold at the same time, remember the overlap so you don’t saturate your portfolio past the percentage allocation you want in gold total.

Ultimately, the decision between a precious metal IRA or buying physical gold is up to you. Base it on your goals, risk tolerance, and financial flexibility.

I hope this information makes the decisions easy and even obvious.

Mitt Wilson

About the author

Mitt Wilson has a background in journalism and has been writing about investing for more than two decades. In his free time he enjoys spending time with his wife, touring the United States, and golfing.

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