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Gold IRA vs. Physical Gold | Which Is Better for Your Retirement Portfolio?

The secret is out! Investing in gold bullion is one of the smartest choices you can make as an investor right now. In the face of such economic turmoil, the advantages of buying gold are there for all to see.

However, knowing what to do with this information is the tricky part. After all, there are many different ways one can invest in gold.

You could go to a gold dealer and buy a few gold coins, buy stock in a gold mine, trade gold on the commodities market, invest in gold exchange-traded funds (gold ETF), or even open gold IRA retirement accounts!

With so many options to choose from, it’s no wonder most investors are at serious risk of making the wrong choices.

Make no mistake about it though; you need to be investing in physical gold right now in one way or another.

All the investment options we have mentioned are great ideas, but you should choose one that is best suited to you. In this article, we will look at the choice between gold IRA vs. physical gold as two options to consider for gold investments.

Read on and find out which one you should choose for your 2023 investment portfolio.

OR, get a free gold IRA Guide and start investing ASAP:  —->  Free Investing Guide.

Before You Invest in Precious Metals, Read This

Gold IRA vs. Physical Gold

Owning gold is something you should have started pursuing a long time ago, especially if you were looking for secure ways to diversify your Individual Retirement Account.

However, this type of investment is not like the mutual funds or stock market options you are used to investing in.

There are certain details that you need to know before you choose between a gold IRA vs. physical gold.

In particular, you need to consider IRS regulations, costs associated with each investment, limitations, tax advantages, and the various storage options available after you buy gold.

Gold IRAs

While it is, essentially speaking, a kind of self-directed IRA, a gold IRA is not quite the same as a traditional IRA or Roth IRA.

Rather than fiat currencies, stocks, bonds, or mutual funds, gold IRAs hold precious metals, such as gold and silver coins.

As such, the way a gold IRA is managed, and the associated IRS rules, is a bit different from a Roth IRA or Traditional IRA. Consider the following important features of gold IRAs:

Gold IRA contribution limits

Let us start with one area where a traditional gold IRA shares some similarities with every other type of self-directed IRA account, and that is the limit on contributions.

The 2022 contribution limits for a gold IRA were $6,000 per year or $7,000 for individuals over the age of 50.

You Need A custodian

Rule number one on gold IRAs, according to the IRS, is that you need to have an approved custodian handling your precious metal retirement accounts. This means the first thing any investor will need to do is comb through the long list of gold IRA companies and find one that suits them best.

Your custodian will be the gatekeeper for your gold IRA, and their responsibilities will be wide-ranging, including:

  • Overseeing any gold IRA rollover

  • Setting up and managing your Individual Retirement Account

  • Helping you select your physical gold coins and other precious metals

  • Giving you financial advice

  • Finding an IRS-approved precious metals depository to store and insure your precious metals.

With such important responsibilities, you must make the right choice when selecting the best gold IRA companies to work with. Consider things like their level of experience, selection of gold coins and other precious metals, and the associated fees and costs they charge.

Custodial fees

Any self-directed IRA account will have a certain amount of fees that you will have to pay, but precious metal IRAs will come with additional costs related to the handling of physical gold bars and coins.

You will be expected to cover the costs of shipping your gold bullion, for example, unless your depository or custodian offers that as one of their perks.

Other costs include gold IRA account setup, transaction fees, annual fees, and regular custodial fees. If you are not careful when selecting your gold IRA provider, owning gold can become more expensive than it is worth.

Tax benefits

One of the main reasons an investor will choose an IRA is because of the tax advantages it comes with. Gold IRAs are the same in that regard. Any investments you make to your gold IRA will entitle you to tax deductions.

You are also allowed to defer paying taxes on any IRA-deposited income until you decide to make withdrawals, as long as these are made after you have retired. This is one of the main differences between gold IRAs and Roth IRAs, where individuals are required to pay taxes upfront.

With a gold IRA, you also do not need to worry about paying capital gains tax on the physical gold you are holding. These are just a few of the many tax advantages that make it attractive to invest in a gold IRA.

Other precious metals

Besides physical gold, your gold IRA can hold a wide range of other approved precious metals. We say “approved” because the IRS is very strict on the origins and fineness of the physical gold coins and other assets deemed eligible for gold IRAs.

There are added complexities that come with holding physical gold and precious metals, which is why many of the standard IRA providers do not offer precious metal IRAs.

However, if your custodians offer these services, be sure to consider the following IRS requirements on the gold, silver, platinum, and palladium you intend to hold:

  • Platinum, palladium, and gold bullion coins and bars must be of 99.5% purity or more

  • Silver bullion coins and bars are required to be of 99.9% purity

  • Only coins from approved mints can be held in your gold IRA, such as the Royal Canadian Mint

  • You cannot add any physical gold or precious metals that you already own to your gold IRA

Self-Directed Gold IRAs

Just like a self-directed traditional or Roth IRA, self-directed gold IRAs offer you a lot of control over how your retirement portfolio is managed. This means you decide who will be the custodian or reputable dealer that will hold gold in your name and give you financial advice.

Physical Gold

Physical gold assets are available in a wide range of forms, such as gold coins, pure nuggets, jewelry, gold leaf, or gold bars. All these forms have a value equal to the gold content they hold and, for example with jewelry, the intrinsic value that comes from their design and function.

However, for serious gold investments, gold bullion bars are usually the most preferred option. Other assets such as rare gold coins or precious metal jewelry are sometimes considered collectibles rather than pure investments, even though they still offer the same value as pure bullion.

The advantage that gold bullion has is that when it comes to finding a buyer for your gold, the process is very easy because there are no protracted negotiations over design elements and intrinsic value as is the case when selling jewelry. With bullion bars, you are only concerned with the weight of the gold and its spot price on that day.

Quick Summary

Before we look at the IRS reporting requirements and associated taxes, let us make a quick summary of some of the things you need to know/do before you purchase gold:

  • Do your research about the gold buying industry, in particular, the spot price of gold

  • Make sure you only buy gold from a reputable dealer

  • Be ready to cover the shipping and handling costs, which may be high because this is a precious metal

  • Know the best places to buy or sell gold

  • Learn how to identify real gold as opposed to some of the fake metal that is sold by scammers

  • Understand the basics of how to make profits from a gold investment

  • Be ready to find a secure depository that offers insurance for your gold

IRS reporting requirements

The selling and purchasing of gold is an area that receives a lot of scrutiny from the IRS. This is because of the tendency of many criminal elements to use gold as a way to store and launder their ill-gotten money.

As a result, there are certain IRS rules regarding the reporting of any gold transactions. As a gold investor, it is your responsibility to make sure you comply with these rules and regulations.

Depending on the nature of the gold transaction, you may be required to report the sale/purchase immediately or, in other cases, you may hold off and only report when you file your taxes.

This means any tax liabilities that emanate from the gold transactions will need to be covered by you; otherwise, you risk being charged with tax evasion.

This aspect of gold buying would normally be covered by your gold IRA provider if you had chosen to invest in a gold IRA, but in this case, the responsibility is yours and you will have to familiarize yourself with all the minor details.


All forms of gold, from pure nuggets and bullion bars to gold coins, are regarded by the IRS, to pay taxes, as a precious metal, which falls under collectibles.

This means any gold you buy will be subject to capital gains tax. If the gold is bought and then sold within 12 months, it is considered a short-term gains tax, which is taxed at the normal rate of your taxable income.

However, if holding gold for more than a year after purchasing, it will mean it now qualifies as long-term gains. In this case, you will have to pay capital gains tax equal to the investor’s marginal tax rate but not exceeding 28%, even if you are in a higher tax bracket.

Such tax implications are what make owning physical gold a bit difficult for those just starting in the gold investment business. However, many reputable financial advisors are on hand to assist investors who wish to hold actual gold in their safety deposit box.

Pros and Cons of Gold IRAs

Whether you choose to open a gold IRA or purchase physical gold, there are certain advantages and disadvantages of each decision that you will have to contend with. Let us first look at the pros and cons of investing in a gold IRA:


  • Great for diversifying your portfolio because a gold IRA can include other types of investment options, including precious metals, real estate, cryptocurrency, and a lot more

  • With a gold IRA, you get a lot of tax benefits, such as tax deductibles and tax-deferred withdrawals which are normally found on standard IRA accounts, such as Roth IRAs. You will also be able to avoid paying capital gains tax which is normally the case when you buy physical gold

  • All the related paperwork, IRS regulations, and tax implications are handled for you by the custodians, meaning you will have experienced personnel on your side working to ensure that you make the right choices and reap the full tax benefits

  • Your investment is made a lot more secure and insured when it is held by custodians rather than when you attempt to find your own storage facilities

  • This type of investment is ideal if you want to make a long-term investment because the gains will keep on increasing as time goes on. The longer you keep your gold in your IRA, the more profit you will stand to make


  • Any type of gold that is considered to be a collectible cannot be held in a gold IRA, otherwise, you would have to pay capital gains tax on it. This also means any gold or precious metals you already own are excluded from your IRA

  • When you open an IRA, because you are using a custodian and an IRS-approved depository, you will end up paying a lot more fees than you would if you were to buy physical gold

  • When it comes to accessing your funds, you have to deal with both the IRS rules and your custodian’s rules which might prevent you from having quick access to your money. This makes it difficult when you need emergency funds and all your cash is tied up in a gold IRA because the only way to get it out will likely involve high custodian fees and a stiff IRS penalty

  • Many custodians take advantage of the fact that you cannot keep your physical gold and they charge very high transportation and storage fees or they insist that you only use a particular depository that they approve

  • As a long-term investment portfolio, your gold IRA is usually accompanied by very high fees for early withdrawals you may want to make, which means any gold or silver you invest in will only benefit you in a meaningful way if you leave it in place until retirement

Pros and Cons of Physical Gold

Buying physical gold is a worthy option to consider. However, it does come with its pros and cons, such as:


  • Since you are keeping your physical gold in a place of your choosing which has no restrictions, you will have immediate access to it at any time should you need to get your hands on some funds at short notice

  • Managing and storing your gold will incur a lot fewer fees than if you were going through a gold IRA custodian

  • Without the issue of IRS regulations, you are free to buy gold in any form or quality which gives you more options when dealing with gold sellers

  • Rules on early withdrawals or disbursements do not apply to you because you control your gold


  • The responsibility for the safety and security of your gold falls squarely on your shoulders

  • You will cover the full cost of shipping and storage

  • Selling gold to independent buyers comes with a lot of risks and is not easily done

  • Your gold will be classified as collectible by the IRS, meaning you will have to pay taxes on it

  • You are bound to report any purchases or sales of gold to the IRS

Ideal Gold IRA Investor

A gold IRA comes with a lot of benefits but is not ideal for everyone. Only choose this option if:

  • You can find a reliable custodian

  • It is a long-term investment

  • You intend to diversify your retirement portfolio

  • You are interested in the tax benefits

Ideal Physical Gold Investor

On the other hand, buying physical gold is great if:

  • Complete control over your gold investment is what you are after

  • You want independence from the IRA rules and regulations

  • The thought of having more options regarding the choice of gold to buy is attractive to you

Final Thought

The debate regarding the choice between gold IRA vs. physical gold is best settled after taking a long hard look at your requirements, your age, and the amount of money you wish to invest in your retirement funds.

In the end, both are very good options that are well worth considering for any investor who wants to make the right choice for their financial future.