Why Putting Gold Into an IRA Is a Dumb Idea

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I believe in owning gold. I believe in owning an IRA. But I do not believe in owning gold inside an IRA. In fact, I think it’s the dumbest thing you can do.

It’s a common mistake to think of physical gold and silver as “investments.” They are not!

Gold and silver are forms of currency, and owning them is a hedge. Gold and silver don’t produce income or pay dividends or increase in value the way a stock does.

They increase in value for two reasons:

  1. Long-term inflation
  2. Uncertainty risk (solvency of foreign nations, going to war, etc.)

Since IRAs — including self-directed IRAs — are required by law to be in the possession of someone else (a custodian), owning gold in an IRA removes one of the key advantages of owning it in the first place: counterparty risk. If you suddenly needed gold to barter for food, you would first have to call your custodian and fill out the necessary paperwork to gain access to your own gold.

Other Issues With Owning Gold in an IRA

Rules Against Holding Collectibles
The tax code prohibits IRA holders from investing in life insurance, the stock of an S-corporation, or collectibles. Some types of gold coins are classified as collectibles and would violate the rules. What’s confusing and frustrating is that some gold coins and types of bullion are allowed, while others are not. And it’s not like the IRS maintains a master list of what is and what is not permitted.

Specialized Custodians
Standard custodians such as Fidelity, Schwab or TD Ameritrade will not handle physical gold in an IRA. So if you want to hold gold in your IRA, first you need to set up a self-directed IRA and then you need to find a custodian that specializes in self-directed gold IRAs. A quick search on Google for “self-directed gold IRA” yields plenty of results. I know American Bullion has been around for years, as has APMEX.

Costs of Purchasing and Storing Gold
Once you settle on a specialized self-directed gold IRA custodian, you need to remember there will be fees involved in all aspects of purchasing, storing and selling the gold. None of this is free. These costs end up raising the bar on how much the gold needs to appreciate in order for you to profit! I had a quick look through a few sites and could see that the fees really range; some charge a flat fee for management, while others charge depending on what you invest in.

The other issue is regarding taxes. You are wasting tax-deferred space for something that doesn’t generate income; thus, it is not saving you from any taxes. Just like any other traditional IRA account, the value of the account will be subject to taxes upon withdrawal. Unlike owning stocks, mutual funds, ETFs, etc., physical gold doesn’t throw off dividends, interest or capital gains distributions, all of which are sheltered in an IRA.

Required Minimum Distributions
Once you reach the age of 70½ your gold IRA will be subject to a required minimum distribution (RMD) just like any other non-Roth IRA account. The RMD is based upon the account value as of the prior Dec. 31. This means that the gold in the IRA will need an official valuation. Further, if this is the only IRA account or if there is not sufficient liquidity in the other accounts, you will need to have some of the gold sold to raise the cash to make the RMD.

Alternatives to Physical Gold

If gold and precious metals are an asset class that you want to include in an IRA, there are easier ways to do this than holding the physical metal. These include a number of ETFs and mutual funds. Here are a couple to consider:

  • The SPDR Gold Shares ETF (GLD) is a pass-through for the physical ownership of gold. As an ETF, GLD offers the daily liquidity that owning physical gold does not. The expense ratio is a reasonable 0.40%. One issue is that the “middlemen” are not required to offer full insurance, so ETF shareholders may not be fully insured against losses that are not due to the negligence of the custodian or others in the chain.
  • The Vanguard Precious Metals and Mining Fund (VGPMX) is a low-cost mutual fund that invests in companies involved in gold and other precious metals mining and exploration. Though not a pure gold fund, VGPMX’s results will track the price of gold and related metals to a large extent.

Read here more about how to invest in gold.


Owning physical gold in an IRA may seem tempting, but don’t do it. If you truly believe it is a good idea, at least double-check the rules from the IRS and the fees from the custodian before putting gold into your IRA. Be sure you understand all the rules surrounding physical ownership of gold in this type of account.

Larry Ludwig

Larry Ludwig was the founder and editor in chief of Investor Junkie. He graduated from Clemson University with a bachelor of science in computers and a minor in business. Back in the ’90s, I helped create some of the first financial websites for firms like Chase, T. Rowe Price, and ING Bank, and later went on to work for Nomura Securities. He’s had a passion for investing since he was 20 years old and has owned multiple businesses for over 20 years. He currently resides in Long Island, New York, with his wife and three children.

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  1. If a retired person in his seventies had a 401k with say, index funds valued around 400k and couldn’t afford to take a market crash loss. Wouldn’t it be smart to role over his entire 401k to a GOLD SDIRA to prevent a massive wipeout before its to late. Not interested in increasing his income but saving what little he has. Gold held in a depositary, not in an ETF makes a lot better sense. He would then be taking his RMD in gold coins. Why not Gold?

  2. agree with the article, except wherethe author states gold is “currency”. it is not, gold is “money” as it meets the requirements to be considered money. Currency in itself is simply a representation of money, not money itself (a US dollar has no intrinsic value and is merely a representation of Gov Debt).

    buy gold and silver as a hedge like the article says, but keep it yourself and dont tell anyone else

  3. Yeah. I was DUMB. I thought that by buying gold and silver coins, I was making an investment that would grow. WRONG! I bought $10K worth of coins, only to have them have a “value” of $ 4330 when they hit my IRA. Now, I want to get them out of the “custodial safety deposit” and keep them at home.

    How does one do that and if so, can I claim a loss?

    Please let my mistake(s) be a lesson to all!! I am THE poster child for what NOT TO DO when investing.

  4. owning physical gold and silver. i am over 59 and 1/2 years old, i’m retiring in july. my concern is a 2008 like financial collapse but worse. i;m going to get a check and take it to my broker and and when it posts then i can without paying tax. i have 1.1 million on the line also I’ve heard after too big to fail the banks could your use you’re money to pay their debts. thank you.

  5. Well i wouldn’t call it a dumb idea actually because you do the same thing when putting your money in the bank. Your asset becomes the bank liability. Yes, you earn some interest on that money which you won’t on gold and silver, but the probability of that asset to go higher is much greater than your cash.

  6. Nor shares nor gold both not generate taxable income when held – so gold is not bad here.

  7. The US Government could quite plausibly create a wind-fall tax on capital gains from sales of physical gold or silver (rather than outright confiscation). I believe the idea behind storing gold or silver in a Roth IRA is to create a tax shelter against such an egregious move by the government.

    As the government’s dire financial situation is exposed, it will start to take more and more draconian steps to preserve itself: capital controls, ban on cash, bank levies, negative interest rates, and bail-ins. Desperate times require desperate measures.

    That said, what’s to stop them from changing Roth IRA rules. Someone will have to pay for all this debt. History shows governments impose this payment on any remaining stored wealth held by savers in whatever form it is held.

    There are very few real financial life boats (if any).

  8. In response to your comments on holding physical gold in an IRA: wouldn’t the value of your investment in a gold or silver ETF rise and fall with the stock market? Where is the hedge advantage there.

    1. the simple answer is no
      the long answer
      if you invest in gold first who determines the value of the gold purchased and how is it valued by whom the fact is there is no real value here go out and try buying gold simply as god with out owning a IRA it does not take a lot to get started There are places where you can purchase gold at or near its market value if you purchase a lot of it if you don’t then you will find that the cost will change considerably so say you buy 1/10th of an oz of gold the market value of gold for one oz 1373 to 1355 but you will not pay that for silver one oz is only 15.81 market for 100 oz purchase or 17.81 for one oz American eagle now if you purchase one coin and want it stored or shipped if you store it there is a storage fee typically 190 a year a selling fee a buying fee and so on by the time you buy or sell a coin you will have lost all its value and typically more. if you purchase a single silver American eagle proof you will typically pay around 60 dollars for it by the time you have sold it and tried to get your money back in todays market you will be lucky to get for the one oz proof eagle maybe 20 or 30 for it does this sound like a good investment to you ?

    2. Gold ETF,s as this author speak of, hold very little or no gold at all. Read the prospectus. GLD can hold central bank “leased” gold as part of their portfolio. That “leased” gold IS NOT DIRECTLY OWNED as part of the custodian’s (GLD) holdings. They therefore own/ hold very little, if any actual gold at all. You are owning a vehicle that speculates purely on the price of gold, rather than holding any of it. Those ETFs can also use “claims” on gold held by second and third parties, as part of their holdings, too. Read the prospectus. This author does not know what he is talking about and has probably never held a precious metal IRA In his entire life.. Ask him to tell you the truth. My precious metal IRA costs 45 basis points a year( 0.45) including fees, storage AND ONE MIlLION dollars worth of insurance on one million worth of bullion. Of course if you want to pay more in fees and such, you can do that in Switzerland and pay 1-1.5% for the same exact services. Do you call those high fees? I know MANY brokerages that charge 3%/ year for their services on stocks Can you buy insurance on your IRA stocks? And I am not talking about shorting the other side of the trade. I hold my Gold and Silver IRA offshore and have not looked back even once. And with the added benefit of British Common Law, it is further protected from our litigious society of the US.

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