How Does A Gold IRA Work?

How Does A Gold IRA Work?

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For people in the US, retirement planning is an art form. There are entire career paths dedicated to helping people save money and plan out their dream retirement. But the process can also be very confusing, and you might run into conflicting advice.

You may have heard that it's possible to hold gold in a retirement account. But what's the reason for doing this? And how does the process work?

We've broken down the basics that you should understand about gold IRAs before getting started. If you're interested in investing in a gold IRA, we've also ranked our favorite companies offering these services.

About Retirement Accounts

How Does A Gold IRA Work?

First off, you need to understand some basics about how retirement accounts work. There are several different types of retirement account, but they share certain guidelines and advantages. About one-third of the American workforce regularly contributes to a retirement account by setting aside a portion of their paycheck automatically.

A retirement account is a type of investment portfolio. You put money in, and then that money is used to purchase different assets. Oftentimes, these assets are traditional options like stocks and bonds, which have the potential to grow over time. But these also introduce a significant amount of risk.

The money that you put into your retirement account is not taxed until you take distributions, so it has ample opportunity to grow. But because you haven't paid taxes on the income, you have to wait until you're retirement age to take anything out. If you do prematurely remove the funds, you'll have to pay taxes plus a hefty fee imposed by the IRS.

Retirement plans like 401(k)s are often offered by your employer. But individual retirement accounts are typically used by a single individual, rather than a group of employees. You might have one of these if you're self-employed, or if your employer offers diverse retirement options.

Then there's the question of traditional versus self-directed IRAs.

Traditional and Self-Directed IRAs

How Does A Gold IRA Work?

Both traditional and self-directed IRAs are subject to the same early withdrawal penalties and other tax regulations. They are both individual retirement accounts with tax-advantaged income. You will need to pay taxes on your distributions, no matter what type of account you have.

A traditional IRA is managed by an investment professional. This is a finance expert who will optimize your profile for stability and growth based on current market trends. You won't have much to say about where your money is invested. But if the investment manager is decent at their job, they should be able to show you some solid returns over time.

The major disadvantage here is that only traditional assets are allowed. You can't store gold in this account, because gold is considered an alternative asset. So if you want to buy gold, you'll need a self-directed IRA.

Self-directed IRAs don't have any investment manager. You get to choose what to buy and store in the account. However, your purchases must comply with IRS rules, and the account must be audited and maintained by a custodian. The custodian does the tax reporting and compliance, so you don't have to worry about that part.

Since you have direct control over your assets in a self-directed IRA, there's a lot more freedom. But that also introduces risk, especially for people who don't know much about finances. It's important that you balance your portfolio and make rational choices with regards to your long term future plans.

How a Gold IRA Works

How Does A Gold IRA Work?

Despite the complications of a self-directed retirement account, the process of opening and maintaining a gold IRA is relatively simple. These are the steps involved:

  • You'll fill out an application to open an account with your chosen custodian.
  • You'll file the paperwork to transfer funds from your current retirement account to your new one.
  • You'll buy IRA-approved gold from a gold dealer, usually one that specializes in gold IRAs.
  • The dealership will ship your gold to your depository of choice.
  • Your custodian will unload the gold, audit the holdings, and maintain the account.
  • You will pay annual fees to keep the account open and receive ongoing reports about the value of your holdings, until you're ready to start taking distributions.

Basically, you open the account, you fund it, you buy the gold, and your dealership and custodian take care of everything after that. You just have to sit back and wait for the confirmation that your package has arrived safely at the facility.


This process does come with a large amount of paperwork, and it can be overwhelming if you don't know where to start. That's why it's a good idea to start the process with a gold IRA company. They can show you the paperwork and explain what information is needed, turning an hour of research into a ten-minute sitdown. This saves you a ton of time.

Your IRA application will need basic information like your contact info and the type of retirement account that you're opening. This can typically be filled out and submitted in less than five minutes, depending on the custodian.

The most intensive part of the paperwork is the rollover process.

You aren't legally obligated to transfer funds from one account to another. You can open a self-directed IRA and make a direct contribution from your savings instead. But there are limits to direct contributions, and not so many limits for rollovers. The one thing to know is that a rollover needs to be completed within two months of opening your account.

You'll need information about your current retirement account, your current custodian, and the amount of funds that you want to transfer. You will have to get in contact with your old custodian and make sure that they quickly transfer the funds to your new custodian. Sometimes this involves multiple phone calls and chasing down a representative.

Some gold IRA companies will handle this for you. Our top choice, Goldco, matches you with a representative who acts as your liaison. They will talk to your storage depository, your custodian, and the IRS on your behalf. All you need to do is provide the account information. They'll handle the rest for you.

You can expect monthly or quarterly reports with your holdings. These might be sent as paper statements or sent electronically. Most custodians will have online accounts where you can digitally view your account balance and various options.

Choosing the Right Products

How Does A Gold IRA Work?

Now, there's some further potential for complication when it comes to choosing items for your account. Again, that's why we recommend working with a specialist company. These dealerships know which products are eligible to be kept in an IRA and which aren't.

You can't keep historic coins or numismatic rarities in the account. You also can't keep any existing gold collections in the account. It's required by law that you purchase new gold using your liquid retirement funds instead. No jewelry or scrap metal is allowed. It needs to be bullion in the form of bars or approved coins.

Items must also meet certain purity standards. Silver needs to be 99.5% pure, gold needs to be 99.9% pure, and platinum and palladium alike need to be 99.95% pure. Many precious metals products don't meet these standards. Also, you aren't permitted to use any other precious metals, such as rhodium or copper.

Coins must be bullion from a sovereign mint. Some of the most popular options come from the US Mint or the Royal Canadian Mint. But you can also find IRA-eligible coins from countries like Australia, South Africa, Mexico, China, New Zealand, Austria, and more. Some investors prefer the US coins because they are among the easiest to liquidate.

You are permitted to put proof coins into your account if the coins comply with all other purity and mint regulations. But in order to do so, the coin must be in perfect condition inside its original packaging. You also need to have a certificate of authenticity. If you buy proof coins from a gold IRA dealership, they should have all of these components ready for you.

Bullion coins and bars must also be packaged perfectly and in mint condition. They need to be uncirculated. Bars need to come from an accredited refinery or to be certified through an official third party approved by the IRS. There are several different certifications that can apply.

Taking Distributions

How Does A Gold IRA Work?

Once you reach the age of 59 and 1/2, you are able to take retirement distributions without incurring any penalties. You aren't required to take distributions until you're 70 years old, at which point there are mandatory minimums for retirement.

So the question is: how do distributions work when gold is involved?

The answer is fairly simple. You have a choice. You can either have the gold itself shipped to you, or you can sell the gold and take the liquid cash as a distribution. If you do have the gold shipped to you, it will typically come in an insured package that must be signed for.

You'll then be free to sell the gold if you want, to hold onto it for emergency planning, or to make it part of your estate. A gold collection can easily be passed down to future generations in your will if you decide not to liquidate the coins instead.

Many people choose to sell their gold and take the cash because this helps to remove the logistics of finding storage and a potential buyer for your gold coins.

Liquidating gold isn't always easy, though. You want to make sure that you're getting a fair offer quickly. Oftentimes, gold dealers will quote low prices when you want to sell fast, causing you to lose out on your investment.

That's why it's a good idea to work with a gold dealership that has a buyback program.

How Buyback Programs Work

The concept behind a buyback program is also simple. You make a purchase from a reputable dealership for your retirement account. Once you're ready to take distributions, you can contact that same dealer for a price quote. They will buy back your items, often for a higher rate than you'll find elsewhere in the industry.

This helps these companies to instill a sense of trust in their customers. While companies legally can't guarantee buybacks -- in case of financial trouble or bankruptcy years down the line -- many do promise that they'll do their best to buy back your coins. All three of the dealerships on our list have this kind of program.

You're most likely to turn a profit if you hold onto your gold for at least a decade before requesting a buyback. Buyback prices are never as high as the sale prices, but they can come close. The idea is to secure part of your retirement in gold so that the loss becomes negligible.

If you call your dealership and get a buyback price quote, you'll typically confirm the transaction over the phone. Then you'll be sent a detailed invoice. Your custodian will package and ship the items to your gold dealership. Once they arrive and are authenticated, the funds will be wired to your retirement account. From there, you can remove the cash at will as a standard distribution.

Our Top Three Gold IRA Choices 

#1. Goldco


If there's one major thing to know about Goldco, it's that they make the IRA process easy. All of the rules listed in this article might make the process seem daunting. And it can indeed be difficult to manage account applications, rollover paperwork, purchase invoices, and custodian communication.

Goldco facilitates all of that for you. They walk you step by step through all of the paperwork, and then they call your custodian and depository themselves. You never need to talk to a single person except your account representative. They'll also make sure that all of your chosen products are IRA-approved and meet IRS purity standards.

Augusta Precious Metals

Augusta Precious Metals has many of the same customer service qualities as Goldco. They'll also handle your paperwork and give you a dedicated representative. Where Goldco's minimum investment is $25,000, Augusta's is $50,000. If that's within your budget, their services are excellent.

The company has also committed to a lifetime of client education. Even before you buy any gold, you can request a one-on-one webinar with one of the company's leaders. He will answer your questions and teach you the ins and outs of the precious metals industry. The goal is to help you access enough information to make confident purchases.

After you become a customer, you'll have an account for life. You can view your holdings and their value in real time, as well as contact your rep with questions and concerns. The company will send you ongoing updates and insights about the economy, including warnings if they believe that there's financial turbulence ahead.

American Hartford Gold

For people who struggle to meet the minimum investment requirements of Goldco or Augusta, American Hartford Gold is a lifesaver. With no setup costs or minimums, this company makes gold IRAs available to investors on a shoestring budget. And unlike many companies with a similar initial setup, AHG doesn't have hidden fees or undisclosed markups to make up the difference.

The main trade-off with this is that the company's inventory is limited. They typically acquire bulk amounts of years-old coins, rather than investing in the latest minted options. These still have purchasing power over time, but they may not be exactly what every investor is looking for.

Despite being slightly older, the coins still retain their value. Proof coins are kept in their initial packaging with certificates of authenticity, while other coins are fully uncirculated and in perfect condition. These are requirements laid out by the IRS for storing coins in a gold IRA.

Final Thoughts

A gold IRA is a simple but effective way of protecting your retirement assets against inflation, stock market crashes, and global turbulence. While it's not recommended to put your entire life savings into gold, a small portion is a good sign of a diversified portfolio.

But the gold IRA process can be overwhelming. Since you need a self-directed account, you are fully responsible for buying the right products. There's no investment manager to handle the red tape. You need to be sure that your items are compliant with IRS regulations, and you need to choose a custodian and depository by yourself.

That's a big and time-consuming ask, especially if you don't have a strong financial background. So gold IRA companies take some of the pressure off. Their experts help to streamline the paperwork and make sure your purchases are IRS-compliant. In exchange, you'll use your retirement funds to buy gold from their dealership.

These companies also typically have networks with storage and custodian partners. Some might have multiple options, while others may have just one dedicated partner. It's important to look up the custodian and storage options to make sure that they have good consumer reviews. All of the partners with our top three companies have excellent reputations.

If you're looking for a gold IRA company to help you, our top choice overall is Goldco. But people with a little extra spending money will appreciate the lifetime services and educational resources of Augusta Precious Metals. Meanwhile, people operating on a budget will do well with American Hartford Gold's lack of fees and minimum requirements.

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