How Does Gold IRA Work? Do Not Buy Gold Without Reading This


A gold IRA or precious metals IRA allows you to hold gold as part of your investment portfolio. It works as a hedge against inflation, presents an opportunity to turn a profit, and in times of stock market upset, creates a safe haven for your retirement account. 

Some companies that are associated with precious metal IRA include Birch Gold Group, Noble Gold Investment, Regal Asset, Augusta Precious Metals, American Hartford Gold, Lear Capital, JM Bullion, Equity Trust, and Oxford Gold Group.

Other financial institutions like Vanguard and Fidelity do not sell physical gold directly, but they do offer some exposure to the market since they invest a portion of their portfolio into gold assets. All these companies offer solid track records and have comparable custodianship fees. Finding the best gold IRA company, therefore, really depends on your individual needs. 

You can buy gold IRA using Roth IRA or traditional IRA. If you have a 401(k), you can do a gold rollover, which will switch some of your existing retirement savings over to a gold IRA account. With these funds, you can buy gold or silver coins, American bullion, and the American Gold Eagle (a type of gold coin), and store it with an IRA custodian that is approved or certified by the IRS. 

How Does Gold IRA Work? Five Steps to Secure Your Retirement Savings

Once you've decided to manage your own retirement account, here are the steps you need to take to make sure you keep your funds safe in a gold IRA account.

  1. Decide whether you will invest in physical gold, or paper-based gold assets. This is important because the risks of investing in physical gold differ from the risks of paper assets.

    Physical gold is reliable and has historically been a high-value metal, but investing in actual gold requires you to find a broker/custodian to store the gold for you. This means there will be additional investment costs in the form of custodian and storage fees. 

    Paper-based gold assets don't have quite the same stability as physical gold, and its volatility is much like the stock market's. However, you get to trade assets that reflect the real-world price of gold, instead of something abstract like stocks and mutual funds. 
  2. Find a good broker/custodian. Gather as much information as you can from as many reliable companies as possible. Some companies may have locked-in contracts where you have to leave your investment for a certain amount of time before you can withdraw it. It is important to read and understand the fine print before making the jump. 
  3. Get the necessary forms for the IRA rollover, if you plan to fund your account this way. You can get these forms from your 401(k) administrator, who will also receive and process the filled out forms. Since this is a rollover and not a transfer, the funds will go directly to you, instead of the IRA custodian.

    Keep in mind that you will need to deposit the funds to a gold IRA account within 60 days or face a penalty of 10% if you are under the age of 59.5.  
  4. Read about gold price trends before making your first purchase. While gold is a slow-moving stock, its price varies slightly daily. By observing changes in the market, you can maximize the amount of gold you buy for the money you intend to invest. This becomes especially important if you are investing bigger amounts. 
  5. Invest no more than 30% of your overall portfolio. Gold is just a hedge against inflation, so majority of your portfolio should be invested in stocks that earn dividends in order to grow your wealth. 

What is a Gold IRA Rollover and How Does It Work? 

A gold or silver IRA rollover is the transfer of funds from one retirement account to another. If you have an existing IRA or 401(k), you can fill out the necessary forms to rollover some of your funds to a gold IRA. Most precious metals IRA start with a gold rollover, so it's a fairly quick and easy process to complete. 

Traditional IRA and Roth IRA are two of the most common gold IRAs you can choose from. If you choose a Roth gold IRA, you will get taxed upfront, but you won't need to pay tax on the money you will earn in the future. You can also make risk- and penalty-free withdrawals until the age of 59.5. A traditional IRA will tax the capital and the profits of your gold IRA upon retirement. 

Once your rollover is done, you can use those funds to buy physical gold or gold-related paper assets.

What is the Benefit of a Gold IRA? 

A gold IRA account has benefits that the stock market and mutual funds do not offer, including stability and even an increase in value during turbulent economic periods. The draw of physical gold and other physical precious metals is in their age-old reputation of being a placeholder for value. At no point in history was gold ever worthless, and historically, it moves in the opposite direction of the stock market. 

For example, the price of other investors' gold IRA investment increased dramatically during COVID-19 pandemic, from $1500 in December 2019 to $1800 in 2022. This is a sharp contrast to the freefall that the stock market took at the height of it. Even now, as the world is slowly going back to normal, the price of gold has not dropped or corrected, and is still going strong. 

In short, gold is an excellent investment that protects your retirement savings against inflation and deflation. It diversifies your portfolio and allows you more freedom to experiment with other stock market options. 

What Does It Mean When Gold is IRA Eligible? 

IRA eligible gold is gold that is 99.5% pure. Aside from this, gold and other precious metals need to follow certain requirements before it is eligible or approved by IRA companies or IRA custodians. 

For gold coins, the metal needs to be 99.5% pure and must have authenticity certificates. They must also be in their original mint packaging. The coins need to be brilliant, free of damage, and uncirculated. Some of the most common gold coins you can buy are the American Eagle, American Buffalo, and American Liberty one-ounce gold coins.

For gold bullion and gold bars, the metal needs to be 99.5% pure and produced by the national government mint or institutions of equal caliber. Small bullion under 400-oz must follow exact weight specifications.

Because of the strict standards of quality and provenance, you cannot just add gold that you already own into the portfolio. Some investors open a gold IRA account thinking that they can also source gold anywhere else and add it into some local Delaware depository and get away with it. All gold in your portfolio but pass the eligibility standards before the IRA custodian accepts it. Any IRA company that allows you to bring in random gold bars and agrees to hold it as part of your portfolio is one that is not to be trusted.

What are the Risks Associated with a Gold IRA Kit?

There are no genuine risks in taking or receiving a gold IRA kit. This is just a collection of paperwork like account opening forms, fund transfer documents, and the contract between investor and custodian. Asking for this kit is free and many investors ask for one to look over the fine print before deciding if this is the custodian for them. 

If you take your time to read and understand the documents in the kit, the chances of finding yourself in a sticky situation are very low. Aside from the account set-up forms, you also need to complete more important documents like purchasing instructions, safety clauses, and the distribution or withdrawal agreement. 

Since you are investing your retirement funds, you need to make sure that you know every detail of the kit, and all your questions have been answered before signing anything. As the account holder of a self-directed IRA, you are solely responsible for your portfolio, so you should do due diligence to avoid unnecessary risks. 

How Do You Start a Gold IRA?

As mentioned above, a simple IRA account can be opened using a traditional and a Roth IRA at a reputable IRA investment company. Custodians of IRA gold have their own IRA kit and client requirements that you need to fill out and send back to them. 

How Does Buying Gold with IRA Work?

You can buy gold using a self-directed IRA. The most common way to fund a gold IRA is by doing a rollover from an existing IRA, retirement account or a 401(k). 

When your account has been set up, you can give the custodian purchase instructions to buy gold and they will take care of the transfer and storage of the precious metal for you. 

Does Vanguard Offer Gold IRA?

Vanguard does not offer gold IRA but they have some mutual funds that invest a portion of their portfolios in gold. The most popular one of these investment tools is the Vanguard Global Capital Cycles Fund, which has up to 25% of its assets in gold-related paper assets. 


A precious metals IRA is an excellent way to protect your retirement account against inflation and deflation. Opening an account with a reliable gold IRA company allows you to invest in gold and diversify your portfolio, but you must take into consideration the fees that they will charge for storing your gold and keeping it safe. You must ask yourself if the custodianship charges are worth it or if it is better investing in paper-based assets instead. 

About the author 

Emillene Torres

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