Gold IRA Pros and Cons: Are They Worth Considering?

If you’re wondering about the pros and cons of a gold IRA, then your real question is whether or not a gold IRA is actually worth it? I don’t have to rely on my industry expertise to tell you that nothing is perfect. Of course, a gold IRA will have both pros and cons.

I’ve put in a lot of time studying gold IRA options in general, and I’ve also gotten to know many of the specific brokers quite well. This is your chance to learn about the many pros of gold IRA investing but also a few of the potential downsides. Knowing about both is crucial to find the account that might work well for you.

Gold IRA pros and cons matter in two different ways. First, they can help you figure out whether or not including a gold IRA in your investing is likely to be a smart move. Secondly, they can help you ascertain which particular broker might work best for you.

While I said in the first paragraph that nothing is perfect, that doesn’t mean that a gold IRA won’t be perfect for you. That depends a lot on which pros and cons matter to you.

Gold IRA Pros

a giant pile of gold bars with an arrow going up

Gold IRAs (see the top 5) have a lot of benefits to them that you can take advantage of. If they didn’t, people wouldn’t bother with them. Still, it’s one thing to know they’re generally good to have, which is why I’m going to walk you through the biggest perks you can expect out of the right account.

  • Protect Your Portfolio

Gold has been a unit of financial exchange and value storage for as long as civilization has been around. Its longevity makes it a very safe haven to invest in. You can use it as a hedge against inflation and economic crisis.

I’ve been around long enough to see paper assets, such as stocks and bonds, have their values crater overnight. You probably have, too. The dot-com bubble burst, twin recessions of 2001 and 2003, the Great Recession, and the pandemic have all been in the last 20 years.

Even real estate sometimes plummets, although maybe not as often. Gold doesn’t. It preserves value in your portfolio, and making your nest egg more conservative as you get closer to retirement is usually the way to go.

  • Diversify Your Portfolio

The best portfolios are diversified past just stocks and bonds. Both of those are paper-based assets that can and do lose value in a significant crisis.

You might still put a lot of your investment funds into them since they also generate tremendous wealth when times are good, but I can tell you they shouldn’t be your only play.

Alternative asset classes exist, and you should consider all of them. Precious metals are what I know about, but you might also want to look into commodities, real estate, and possibly cryptocurrencies. Your exposure to precious metals should be at least 5% just to make something of it, but you might even want to go up to 15% or more.

  • Tax-Advantaged Investing

If you do a rollover right, you can enjoy serious tax benefits with a gold IRA. You can move IRA or 401(k) assets into a gold IRA without taxes, fees, or penalties.

Then you can also avoid taxes when you do your required distributions or liquidations later on.

That means you can buy precious metals using tax-sheltered dollars from a retirement account, let the gold sit in a place that doesn’t get taxed, and then enjoy any growth in value it had without getting overly taxed at retirement time.

If you think about it, that’s actually kind of a triple-tax win. I love sticking it to the IRS, and I bet you do, too, even if they’re the ones making this all possible.

  • Simple to Set Up

If you’re doing a rollover, all you have to do is really make two phone calls. One is to the gold IRA broker you choose, and the other is to the previous plan administrator. You’ll have to fill out a few things and do a few signatures, but they’ll handle most of the paperwork for you.

The whole process might only take you a few moments. If you choose a direct transfer, you won’t even have to personally worry about handling the funds throughout the process.

  • Long-Term Thinking

A normal investment portfolio might need rebalancing every quarter, but a gold IRA is much simpler. Gold’s value tends to go up over time, but it does so slowly. This is something you can put together and then leave in place for many years, perhaps even decades.

  • It’s Totally Yours

A gold IRA is going to be just yours. If you invest in employer-sponsored plans, such as a 401(k), then you might have to move your funds out after you are no longer with the company. At all times, you’re bound by the plan rules.

If they do force you to do a transfer of funds or a rollover, then a gold IRA might be a good place to park some of that money.

  • Total Control

Closely related is the fact that a gold IRA would be under your control. You won’t have to follow any plan rules other than the IRS requirements to avoid taxes. You can pick and choose the precious metals you want in your account, so long as they meet the eligibility rules.

Gold IRA Cons

a person holds a gold bar in the palm of their hand

As you can see, investing with a gold IRA gives you quite a few benefits. However, it’s not always perfect, as there are some potential pitfalls that you should be mindful of.

  • Limited Funds Access

This issue isn’t just limited to gold IRAs but also many retirement accounts. You simply won’t have immediate access to the funds if you suddenly have lots of medical bills, wind up out of work, or face other kinds of financial difficulties.

The situations where you might be able to draw on IRA funds without penalty are very narrow, and they would reduce the power of your account.

  • No Income

Even though your gold IRA precious metals will sit in a tax-advantaged account, they’re not going to generate tax-advantaged income. Stocks and bonds might pay out dividends and yields that might not be taxed in a conventional IRA.

Your only potential profit from precious metals in an IRA is avoiding certain capital gains taxes if you sell at a higher value than you initially bought them at.

  • It Can’t Go On Forever

Gold is usually thought of as a long-range investment and not something you’ll profit from quickly. An accurate time horizon for most gold investors isn’t weeks or months but years or even decades.

In fact, a lot of gold IRA investors would love to hold onto their precious metal assets well into retirement.

The IRS won’t let you do this.

They have required minimum distribution or RMD regulations you must follow. These stipulate that you start taking your distributions once you turn 72.

Whether you’re retired by this age or not, you’ll have to start liquidating your gold IRA assets. That doesn’t mean you have to give up on gold, though. You might take your distributions as physical bars and coins, possibly even the very ones you purchased.

Deciding if a Gold Ira Is Right for You

I could spend all day talking about the pros and cons of a gold IRA, but that wouldn’t help you.

In fact, too much information would possibly lead to analysis paralysis when you should be focusing simply on whether or not a gold IRA is right for you.

That usually boils down to the biggest three benefits that gold IRAs offer, which are diversification, tax advantages, and growth in value.

Diversification to many can mean spreading their investments out over many different sectors of stocks and bonds, and that’s important.

However, investing in precious metals opens up exposure to an alternative asset class that might move differently than stock indices.

Also, you can even diversify within precious metals by investing in gold, silver, palladium, and platinum.

The tax advantages might be the biggest reason to do it. You can do a rollover of other tax-sheltered retirement accounts into your gold IRA without paying fees or losing any of your wealth.

In precious metal form, your wealth will retain its value without the IRS slicing into it, even at the end.

Growth in value is possible with precious metals over a long enough span of time. Gold outpaced stock market growth for nearly 40 years starting around 1971, and in the last decade, silver has been putting up double-digit growth in annual value very frequently.

It’s possible to make money off of this investment if you leave it long enough.

Final Thoughts

I know that you’re a busy person. I also know that if you’re like many people looking for useful content online that you might have skipped down to this section just to see if this particular content is worth reading or not.

Personally, I think so, but that’s a judgment call you have to make for yourself.

Whether you have already read it or are about to for the first time, you’ll enjoy learning the many pros of gold IRAs, a few cons to look out for, and whether or not one is right for you.

I hope you find the content useful, as it’s a powerful possibility but also a big decision to make.

About the author, Colin Kuehn

Colin is a trained journalist, with a master's degree from the University of Montana. He has worked in print, radio and television. His primary research focus is gold and sliver investing. Learn more about Colin and the team on our about page.

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