What is a gold IRA and how does it work

What is a Gold IRA and How Does it Work?

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Every investor wants to manage their risk and maximize their returns. To realize these goals, many people choose to invest their money in alternative assets, which include everything from gold to real estate. These investments can be made with a self-directed IRA.

Over the past two decades, gold has become a popular retirement asset because of how it allows for better portfolio diversification. This guide goes into extensive detail about gold IRAs and the best companies to work with when creating one.

Before we get started:

Inflation and rising interest rates has destroyed many people's savings.  Many investors feel defeated and helpless, but you can fight back.

Gold and other precious metals have been used to protect against inflation for thousands of years.  And when you hold physical in a tax-protected savings account, it gets even better.

Opening a gold IRA can sound complicated, but it's really not.  

That is why we created a list of our most trustworthy investment companies, to make comparing and choosing the company best suited to your needs as easy as possible.


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Table of Contents

What Is a Gold IRA?

Unlike a traditional IRA, a gold IRA provides investors with the means of placing physical gold and other precious metals into their retirement accounts. The types of physical gold that an investor can add to their IRA include coins, bullion, and bars.

It's possible to invest in ETFs that track gold indexes, mutual funds of gold companies, and stocks of gold companies with a traditional IRA.

The other kinds of precious metals that can be placed in a gold IRA include platinum, silver, and palladium. According to the IRS, investors are only allowed to invest in one, one-tenth, one-quarter, and one-half-ounce versions of a U.S. gold coin. As for silver, the coins must be weighted at one ounce. 

Gold IRA Account Types to Consider

There are numerous types of IRA accounts that an investor can choose to open, each of which offers unique benefits. The most common type of gold IRA is a traditional gold IRA.

When an investor contributes funds to a traditional gold IRA, they can deduct the amount they invested from their income when filing taxes. When money is taken out of this account, taxes must be paid on the full amount.

Another type of gold IRA is a Roth gold IRA, which requires investors to pay taxes on the money before it's placed in the account. Once a contribution has been made, its value will increase on a tax-free basis.

When a withdrawal occurs, investors don't pay any taxes on the money. There are also no restrictions on the amount of money that can be taken out of the account.

Investors may also choose to open a SEP gold IRA. These accounts are available for small businesses and self-employed individuals. They work just like traditional gold IRAs but provide people with the ability to make contributions to themselves and their employees.

How to Start a Gold IRA

Investors who wish to start a gold IRA must do so in a five-step process that begins by getting a custodian.

  • Get a Custodian

Custodians that can open a traditional IRA may be unable to open and manage a self-directed gold IRA, which is why it's important to find a custodian that can. Three of the most popular gold IRA custodians include Augusta Precious Metals, Goldco, and American Hartford Gold.

These companies guide investors through the process of opening a gold IRA account. However, numerous factors must be taken into account before choosing a gold IRA company to partner with, which include:

  • Track record and reputation
  • Fees
  • Transparency
  • Customer support
  • Buyback option
  • Place Funds in Gold IRA

While gold and other precious metals can be placed in a gold IRA, the amount of contributions that are made to the account must adhere to IRS regulations. In 2023, the contribution limit is $6,500 for anyone younger than 50 and $7,500 for investors who are 50 or older.

It's also possible for investors to roll their traditional IRA or 401(k) into a gold IRA. Keep in mind that some guidelines apply when rolling funds into a gold IRA. If, for instance, pre-tax funds are distributed to a Roth IRA, they will be taxed before the rollover is completed.

After-tax funds won't be taxed. If pre-tax funds are placed into a standard IRA, they aren't taxed immediately but will be when they are taken out of the account.

  • Purchase Gold

Stringent rules are in place when it comes to buying physical gold for a gold IRA account. As an example, gold bars need to come with a 99.5% purity to be eligible for an IRA. The same purity is required when buying palladium and platinum. However, silver bars must have a 99.9% purity.

Any proof coins that are added to a gold IRA need to be in fantastic condition. They're also required to come in original mint packaging. When investing in bullion coins, they need to be free of damage and in excellent condition.

Even though the IRS allows Canadian Maple Leaf coins and American Gold Eagle coins, they don't allow British Sovereign coins or South African Krugerrand. Investors are also forbidden from placing gold collectibles in a gold IRA.

If an investor receives approval for their purchase, they're able to complete the transaction with the help of a broker.

  • Use the Right Depository

The fourth step in this process involves the investor selecting the right depository to store their gold or other precious metals in. The IRS will need to approve a depository for this purpose. For gold to be placed in an IRA, it can't be shipped to the investor's home.

The IRS approves depositories like HSBC, the Delaware Depository Service Company, and JPMorgan Chase.

  • Eventually Withdraw Funds

The rules regarding fund withdrawals are also strict. If an investor doesn't follow these rules, they may need to pay withdrawal penalties. Keep in mind that a withdrawal involves selling gold for cash.

The purpose of an IRA is to save for retirement, which is why withdrawals are penalized if they are made before an investor reaches 59.5 years old. When investing in a traditional IRA, withdrawals that are made before retirement age come with a 10% penalty. After reaching retirement age, every withdrawal is taxed as income.

A traditional gold IRA also has rules for required minimum distributions that apply to anyone older than 70.5. The minimum amount that must be withdrawn each year depends on how much savings are available. If money isn't taken out of the account every year, penalties could be assessed.

For people who use a Roth IRA account, assets that are placed in the IRA can be withdrawn at any time without incurring a penalty. If the assets grow in value over time, these earnings can only be withdrawn without penalties once the investor turns 59.5 years old.

There are a few exceptions to these rules, one of which is that penalty-free withdrawals can be taken early for:

  • Qualified educational expenses
  • Qualified medical expenses
  • First-time home purchase

Advantages and Disadvantages of Gold IRA

Before opening a gold IRA, it's important to understand the pros and cons of this retirement account. The main benefit of a gold IRA is that it can be used as a hedge against current or future inflation. The value of gold can increase even when the economy is doing poorly.

It's also impossible for the value of gold to drop to zero, which isn't true with company stocks. While central banks can increase the supply of a currency to lower its value, making new gold is much more challenging.

Another benefit of opening a gold IRA is that gold isn't correlated with stocks and bonds. If the stock market performs poorly in a given month, the value of gold can increase during the same time.

Since these assets aren't correlated, adding gold investments with stocks and bonds means that the level of risk in an investment portfolio should drop.

Keep in mind, however, that there are a few drawbacks to opening a gold IRA. For one, the fees can be high when compared to a traditional IRA. Along with an initial account setup fee that's paid to a custodian, investors must also pay:

  • Annual account maintenance fees
  • Brokerage fees
  • Seller's fee
  • Storage fees to the depository
  • Insurance fees
  • Cash-out expenses

A gold IRA is also illiquid in comparison to other types of investments. Selling physical silver or gold can be challenging unless the custodian company has a buyback program. Investors may need to sell at a price that's lower than the current market price.

Gold is somewhat volatile as well. If the value of gold or other precious metals drops significantly for a specific time, investors may experience substantial losses. Since gold is a physical asset, it can also be lost or stolen.

While it's possible to insure against these losses, an insurance policy costs money.

Top 3 Companies to Open a Gold IRA With

Even though there aren't a large number of companies that offer gold IRAs, there are several fantastic options that every investor should consider. The top three companies to consider opening a gold IRA with include Augusta Precious Metals, Goldco, and American Hartford Gold.

  • 1. Goldco

Goldco is currently the most popular gold IRA company and has been in business since 2006. They specialize in gold and silver IRAs and aim to provide customers with knowledgeable support at all times. Once an IRA has been opened, it must be funded to finalize a purchase with Goldco. They accommodate 401(k) rollovers.

When a customer has an issue with their purchase or needs to ask a question, they can reach a customer representative by clicking the online chat option that's found on the Goldco website.

Their live chat is available seven days per week. Informative videos and articles are available to investors who want to be certain that they're making a sound financial decision. The benefits of using Goldco include:


  • Pricing is clear and easy to see
  • Low fees and account protection charges
  • A vast catalog of silver and gold products

The drawbacks to investing with Goldco include:


  • They don't offer palladium or platinum
  • New investors must make a minimum investment of $25,000
  • 2. Augusta Precious Metals

Augusta Precious Metals is an esteemed gold IRA company that has been in business since 2012. They offer reasonable pricing and a comprehensive catalog of silver, gold, and other precious metals that are available for purchase.

Augusta Precious Metals has gained an A+ rating with the Better Business Bureau as well as an AAA rating with the Business Consumer Alliance, which shows how strong its reputation is.

When an investor wants to open a gold IRA, they'll guide them through the process and provide them with extensive educational resources. Customers also receive a lifetime service guarantee.

Augusta Precious Metals provides consistently great customer service. Whenever a customer has a question, they can call them on the phone, submit a question through their website, or select the live chat option to speak with a representative.

They continue helping customers even after the transaction has been completed. The main benefits of opening a gold IRA with Augusta Precious Metals include:


  • It's easy to use their 401(k) rollover feature
  • There are no hidden costs
  • They offer a wide selection of precious metals
  • Their return policy is exceptional
  • Bullion, coins, and bars are available to buy and add to an investment portfolio
  • All customers receive lifetime support and service
  • Every silver and gold product is insured

A few issues that should be kept in mind include:


  • A minimum investment of $50,000 is required
  • Palladium and platinum metals aren't available for purchase
  • Their products can't be purchased online but must be bought at one of their physical branches
Augusta precious metals homepage
  • 3. American Hartford Gold

American Hartford Gold is another well-known gold dealer that was founded in 2012 and is headquartered out of Los Angeles, CA. Investors who want to open a gold IRA have the option of buying gold and placing it in the IRA or performing a 401(k) rollover.

They provide customers with storage at third-party vaults from Delaware Depository Service and similar depositories.

Over the years, American Hartford Gold has built customer trust by giving them the latest information on precious metals like gold and silver. They also offer 24/7 customer service that can be accessed by existing customers and potential customers alike.

One of the more notable features they offer is a buyback program that allows people to sell their precious metals back to American Hartford Gold. These purchases are made at current market prices. The primary advantages of opening a gold IRA with American Hartford Gold include:


  • Best for bullion investors
  • Relatively low minimum investment of just $1,500
  • Free shipping and insurance
  • Online customer help
  • Ability to purchase products online

A few issues to be on the lookout for include:


  • High maintenance fees
  • Lack of pricing information on their website
  • Shipping is only available in the U.S.

All three of these gold companies have received high ratings and great customer feedback. Before choosing a company to open a gold IRA with, consider the pros and cons of each.

Remember to read our list of the Best Gold Investment Companies to work with, before investing your hard-earned savings!

>> CLICK HERE to read our list of the Top Gold IRA Companies. <<

Charles Turner

Hi, I'm Charles Turner, founder of Turner Investments.  I created Turner Investments to provide education and guidance to individuals interested in personal finance.

My goal is to make Turner Investments a valuable resource for anyone looking to learn more about personal finance and make smarter investment decisions.

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