Investing Retirement Planning IRAs Should You Invest in a Gold IRA? Use Caution When Considering the Use of a Gold IRA for Your Retirement By Scott Spann Scott Spann Facebook Twitter Website Scott Spann is an investing and retirement expert for The Balance. He is a certified financial planner with over two decades experience. Scott currently is senior director of financial education at BrightPlan. Scott is also a published author and an adjunct professor at Maryville University, where he teaches personal finance. learn about our editorial policies Updated on February 22, 2022 Reviewed by Akhilesh Ganti Reviewed by Akhilesh Ganti Website Akhilesh Ganti is a forex trading expert and registered commodity trading advisor who has more than 20 years of experience. He is directly responsible for all trading, risk, and money management decisions made at ArctosFX LLC. He has Master of Business Administration in finance from Mississippi State University. learn about our financial review board Fact checked by Aaron Johnson Fact checked by Aaron Johnson Aaron Johnson is a researcher and qualitative data/media analyst with over five years of experience obtaining, parsing, and communicating data to various audiences. He received a Master of Science in Social Anthropology from The University of Edinburgh, one of the top-20 universities in the world, where he focused on the study of emerging media. learn about our editorial policies Share Tweet Pin Email Photo: mevans / Getty Images Should you invest in gold? Answers to this question tend to gravitate toward one extreme or the other. Many investors on one side of this discussion believe that investing in gold is a losing proposition because it does not pay any interest and dividends and it costs money to store and protect. While debated, it is believed that Warren Buffett made the following statement regarding his position against investing in gold. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” On the other end of the precious metals spectrum there are investors who believe that the U.S. dollar is quickly losing purchasing power, and gold will provide a store of value during times of crisis. There’s also a growing concern that inflation and debt will eventually make the dollar worthless. While inflation concerns are legitimate, the argument for gathering gold, silver, or any other precious metals isn’t necessarily supported by the facts. Gold is generally viewed as a better hedge against a crisis than its suggested use as an inflation hedge. If we suffer a devastating economic collapse, the main currency will more likely be items such as gasoline, food, clean water, and medicine than the use of precious metals such as gold, silver, platinum, or palladium. That being said, since the Great Recession there has been a wave of advertisements encouraging retirement savers to convert their cash savings into precious metals within an Individual Retirement Account or Gold IRA. Before you decide to commit your hard-earned retirement nest egg toward any investment, you should take time to understand how these accounts work. What Is a Gold IRA? While the majority of IRAs invest in more traditional assets like stocks, bonds, and cash equivalents, the tax code also permits “self-directed” vehicles that can hold precious metals such as silver or gold. But this does not mean that all types of precious metals are allowed within an IRA. The tax code designates specific gold, silver, and platinum coins that qualify and sets the purity standards for gold, silver, platinum, or palladium bars that can be held in these specialized accounts. Other forms of precious metals such as collectible coins and jewelry are not allowed. In order to properly set up an Individual Retirement Account (IRA), you need to locate a custodian who will allow you to hold precious metals such as gold within the IRA. You will also need to identify an approved depository. The next step is to buy the actual gold or precious metals such as silver, platinum, and palladium that have been approved, and then transfer those assets to the depository in a manner in which the custodian can account for it. Examples of accepted forms are the gold and silver American Eagle and Canadian Maple Leaf coins, the Austrian Philharmonic coin, PAMP Suisse Gold bars, and most platinum bars. Investing in a Traditional or Roth IRA The tax rules allowing gold to be held in IRAs apply equally to traditional IRAs and Roth IRAs. Simplified employee pension (SEP) accounts and SIMPLE-IRAs are also allowed to hold precious metals. The same decision-making process applies when choosing between a traditional and Roth IRA. There are pros and cons to both types of accounts. Traditional IRAs have deductible contributions and tax-deferred growth. On the other hand, Roth IRA distributions are tax-free and contributions are made using after-tax dollars. Is it Safe to Own Gold in an IRA? In retirement, you need an investment that either generates current income or is reasonably expected to appreciate in value so you can sell it in the future and use it for consumption purposes. You are essentially wasting tax-deferred space for something that does not 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 does not generate any dividends, interest, or capital gains distributions, all of which are tax-sheltered in an IRA. Required Minimum Distribution Rules Once you reach age 72 (70.5 if you reach 70.5 before January 1, 2020), annual required minimum distributions (RMDs) must be taken from traditional IRAs. Roth IRAs are not subject to RMDs. For traditional IRAs, you need to have sufficient liquidity to take your required distributions. This can be a challenge for Gold IRAs and could potentially require you to sell holdings to meet RMD rules. The good news is that the entire required minimum distribution can be taken from other IRA accounts. RMD rules should be taken into account when making the traditional vs. Roth decision for a Gold IRA. Should You Invest in a Gold IRA? Investing in a Gold IRA is similar to investing in other asset classes. You must make sure that your investment portfolio matches your overall risk tolerance and time horizon. You also need to verify that the decision to include alternative asset class investments such as gold fits your holistic financial plan. Remember that including gold in your retirement plan adds some diversification and may help you feel better about economic uncertainty, but it should only be a small part of your overall retirement nest egg. Advertisements for Gold IRAs appeal to our fears and on the surface may appear to be backed by a persuasive argument. Think twice before establishing a Gold IRA. Including gold or other precious metals as a significant portion of your IRA is usually a long-term mistake due to high costs, relative volatility, and a mixed investment record. There are alternative methods to include gold in your IRA. Gold ETFs allow you to buy and sell shares and hold them in a conventional IRA or 401(k). Another benefit is that there are no minimums and no special accounts needed. In general, alternative asset classes should not exceed 5 percent to 10 percent of your entire investment portfolio for retirement. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Amine Lahiani, Salma Mefteh-Wali, and Dinara G. Vasbieva. "The Safe-Haven Property Of Precious Metal Commodities in the COVID-19 Era." Resources Policy. Internal Revenue Service. "Investments in Collectibles in Individually Directed Qualified Plan Accounts." Office of the Law Revision Counsel of the United States House of Representatives. "26 USC 408: Individual Retirement Accounts." Horizon Bank - STRATA Trust Company. "IRA Allowable Precious Metals." Internal Revenue Service. "Topic No. 451 Individual Retirement Arrangements (IRAs)." Internal Revenue Service. "IRA FAQs." Internal Revenue Service. "Retirement Plan and IRA Required Minimum Distributions FAQs." Charles Schwab. "Commodity ETFs."