How A Gold IRA Works
Short answer. You open a self-directed IRA with a custodian, fund it from another retirement account, buy eligible metals through a dealer, and the metals are stored at an approved depository.
The Five Moving Parts
- Open a self-directed IRA. A custodian approved to hold alternative assets administers it.
- Fund it. Usually by rollover or transfer from an existing IRA or 401(k). You can also contribute within annual limits.
- Choose eligible metals. See the IRS rules.
- The dealer buys the metals. Your custodian pays the dealer from the account.
- The metals go to a depository. They are stored on behalf of the IRA. Not at your home. See why.
Ongoing
Expect account statements, annual fees, and, for a traditional IRA, required minimum distributions later in life. Distributions can be taken as cash after the metals are sold, or in kind, which has tax consequences.
Where People Get Tripped Up
- Taking possession of retirement funds during a rollover instead of using a direct transfer.
- Buying products that don't qualify.
- Not understanding the spread, which is the gap between what you pay and what the metal could be sold for.
Each Step In More Detail
Opening the account. You apply with a custodian that is approved to hold alternative assets. You will provide identification, choose traditional or Roth, and name beneficiaries. Fees usually start here, so ask for the schedule first.
Funding it. Money arrives by direct transfer from another IRA, a direct rollover from a 401(k), or a contribution within annual limits. A direct movement of funds between institutions avoids most tax traps. See rollover vs transfer.
Choosing metals. You select eligible products with the dealer. The custodian can confirm eligibility before you buy, and it should.
Buying. The custodian pays the dealer from your IRA, and the dealer ships the metals directly to the depository, not to you.
Storing. The depository holds the metals for the IRA. You receive statements, and you can usually confirm holdings with the depository.
Who Gets Paid For What
| Party | Typical charge |
|---|---|
| Dealer | The spread on the metals you buy |
| Custodian | Setup and annual administration fees |
| Depository | Annual storage, often higher for segregated storage |
Charges differ widely from company to company, so get all three in writing. See costs and fees.
Contributions Versus Rollovers
You can fund a gold IRA by contributing new money, up to the annual IRA limit that the IRS sets, or by moving existing retirement savings. Most gold IRAs are funded by rollover or transfer because the annual contribution limit is modest compared with typical balances. Check the IRS for the current limit and for income rules, especially for Roth IRAs.
Selling And Taking Distributions Later
- Selling inside the IRA: the dealer or another buyer purchases the metals, and the proceeds stay in the IRA.
- Distributions in cash: the metals are sold and the cash is paid out, with taxes depending on your IRA type.
- Distributions in kind: the metals are delivered to you, which counts as a distribution and can be taxable.
Required minimum distributions begin later in life for traditional IRAs. See gold IRAs for retirees.
Ready To Compare Companies?
Use our checklist to get written quotes, then see how gold IRA companies compare. If you have $50,000 or more, our Augusta review covers the strengths and drawbacks.
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Frequently Asked Questions
Who Holds My Gold?
An approved depository, on behalf of your IRA custodian. Ask which one before you buy.
Can I Add More Metals Later?
Usually yes, with additional contributions or by using cash in the account, subject to the company's and custodian's rules. Ask whether later purchases have their own minimums or fees.