If you’re like most people, you’re probably wondering what the difference is between gold IRA vs physical gold.

Aren’t they pretty much the same thing?

Well, not exactly.

There are a few key differences that you should know about before making your decision.

So read on to learn more!

What Is A Gold IRA?

A gold IRA (or a precious metals IRA) is an Individual Retirement Account that allows you to invest in gold without having to take physical possession of it.

Gold IRAs are typically self-directed, which means that you have a lot of control over how your money is invested.

What Is Physical Gold?

Investing in physical gold means taking possession of the metal itself.

There are a few different ways to do this, but the most popular option is to buy gold coins or bars from a dealer or bullion company.

You can also invest in gold stocks, which give you exposure to gold without having to take physical possession of it.

Gold IRA vs Physical Gold: Basic Differences

Let’s discuss some very basic differences between the two.

Gold IRA

  • They’re self-directed (a regular IRA or a Roth IRA)
  • Offer tax benefits
  • Investment monitored through a custodian
  • Comes with some contribution limits
  • Fees associated with setup, storage, custodian fees, and for maintenance
  • Offers security, insurance, storage, etc.

Physical Gold

  • Doesn’t offer tax benefits
  • Investment monitored by you
  • Buy as much as you can
  • Lesser Fees than gold IRAs
  • Security, insurance, and storage have to be taken care of by you

Gold IRA vs Physical Gold: IRS Reporting Rules

The main difference between a Gold IRA and physical gold is the way that the IRS (Internal Revenue Service) treats them. Here are a few things you should know about them.

Gold IRA

  • Can’t physically hold or store your gold, must be held at an IRS-approved depository
  • Need to file Form 1099-B when filing taxes
  • Form 8606 must go along with your 1040 form to report any taxable income or losses from retirement accounts
  • Required to report it on Schedule B of your 1040 if the value of your account exceeds $1,000 at any point during the year

Physical Gold

  • Physical gold is a capital asset and is taxed as a collectible
  • Physical gold held for more than one year is subject to long-term capital gains tax, which is currently lower than the short-term rate
  • IRS requires that all precious metals, including gold, be reported on Form 1099-B along with Schedule D – Form 1040 while filing taxes

Gold IRA vs Physical Gold: Taxation Rules

Both options have different taxation rules.

Gold IRA

  • Tax deductions on contributions for traditional IRAs
  • Tax-free growth for traditional IRAs
  • Withdrawals are taxed at ordinary income rates for traditional IRAs
  • No capital gains tax on the gold appreciation
  • Can sell holdings before age 59½ without penalty
  • Sell before 12 months, pay capital gains tax on the appreciated value

Physical Gold

  • Capital gains or losses on physical gold are taxed like any other investment
  • If you hold collectible gold bullion or coins for more than 12 months, the gain on selling it is taxed as a long-term capital gain
  • Ordinary income tax rates apply if you sell after holding it for less than 12 months

Related: 7+ Gold IRA Tax Rules To Live By

Gold IRA vs Physical Gold: Types Of Assets They Can Hold

Let’s explore which type of assets you can hold in each of them.

Gold IRA

  • Can hold precious metals, such as gold, silver, platinum, and palladium in coins, bullions or bars and real estate or cryptocurrencies

Physical Gold

  • Can hold gold in any form from pure nuggets to jewelry, collectible coins, and gold bars/bullion (most profitable)
  • Gold futures
  • Gold ETFs

Gold IRA vs Physical Gold: Pros And Cons

When it comes to gold, there are two main options: a physical gold investment or a Gold IRA. Here we’ll take a look at the pros and cons of each option.

Gold IRA Pros And Cons

Pros

  • Can hold other precious metals, and real estate or cryptocurrencies
  • Diversify your entire retirement portfolio
  • Offers tax deductions or deferrals in tax benefits
  • Custodians handle the paperwork while you chill
  • Insurance, security, and storage are provided
  • Best for long-term holding

Cons

  • Can’t hold gold physically in an IRA, else it becomes a collectible
  • Must be held with a custodian at an IRS-approved depository/bank
  • Maintenance fees annually apply
  • Pay penalty on early withdrawals

Physical Gold Pros And Cons

Pros

  • Can have immediate access
  • Lower fees than gold IRA
  • Buy gold in mostly all available forms
  • No penalty on early withdrawal or such stuff

Cons

  • You’re responsible for safety, storage, and shipping
  • Pay shipping/handling costs
  • Hard to find buyers if you need to sell it immediately
  • Capital gains tax applied on selling it
  • Offers no tax benefits
  • Gold bought might not be authentic

Should You Invest In Gold IRA?

There are a variety of compelling reasons to set up a Gold IRA.

For one, you can take advantage of IRA tax benefits.

Not only can you invest in gold to expand your portfolio, but you can also get exposure to other alternative investments like cryptocurrencies, real estate, and other precious metals.

If you’re planning on holding your gold long-term, then paying fees to a custodian may be worth it for the security and peace of mind that comes with it.

Plus, if you feel confident in your ability to manage an IRA, then setting one up shouldn’t be too much trouble.

Related: 13+ Major Self-Directed Gold IRA Scams That Could Cost You Millions 😱😨

Should You Invest In Physical Gold?

If you’re thinking about investing in gold, you might be wondering whether physical gold or gold ETFs are the better choices.

While there are pros and cons to both options, there are several reasons why investing in physical gold can be a good idea.

You’ll have more alternatives when it comes to the specific types of gold you invest in, for example.

You can also have complete control over your gold, whether you’re storing it in your home for direct, easy access or in a bank’s safe deposit box.

And if you need to make withdrawals from your investment, you won’t be subject to IRA rules regarding the timing of disbursements.

Gold IRA vs Physical Gold FAQs

general-faq
Is a gold IRA a good idea?

A gold IRA may be a good idea for the following reasons.
First, it can provide you with some insurance against stock market crashes and other economic downturns.
Gold is often seen as a safe investment during times of financial instability. Additionally, a gold IRA can offer you tax benefits.
For example, if you sell your gold investments after holding them for more than one year, you may be able to pay capital gains taxes at a lower rate than if you sold other types of investments.

Can I take physical possession of the gold in my IRA?

No, the Internal Revenue Service (IRS) does not allow physical gold in an Individual Retirement Account (IRA).
However, you can invest in gold coins and bars indirectly through a custodian or a gold IRA company.

Is it better to own physical gold or gold stock?

Gold stocks are a more liquid form of ownership and they offer the potential for capital gains and dividend income.
Physical gold is more difficult to sell, but it does have the advantage of not being subject to claims on it by other creditors in the event of bankruptcy.
In short, if you’re looking for liquidity and capital gains potential, go with gold stocks.
If you’re looking for safety and don’t mind sacrificing a bit of liquidity, go with physical gold.

Who holds the gold in a gold IRA?

The depository or custodian that you choose to set up your gold IRA with will hold the gold for you.

Conclusion

conclusion

When deciding between a gold IRA and a physical gold investment, there’s no right or wrong answer—it all comes down to what makes sense for your individual situation.

If you’re looking for an easy way to add exposure to gold without having to take physical possession of it, then a gold IRA may be the way to go.

On the other hand, if you’re comfortable with storing and insuring your investment yourself, then buying physical gold may be a better option for you.

Ultimately, it’s important to do your research and choose the option that best fits your needs and goals.