What a Precious Metals IRA Is and How it Works

Learn what a precious metals IRA is and how it works. This article explains the basics of self-directed IRAs, the process of opening one, IRS regulations, eligible metals, and tax implications.

Written by Rick Erhart

Rick Erhart is an experienced precious metals professional with more than ten years in the field. He earned a degree in finance and is widely regarded as a specialist in self-directed IRAs.

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Precious metals can be a smart addition to a retirement portfolio, especially when markets get shaky. Metals like gold offer diversification, liquidity, and stability, making it a go-to choice during turbulent economic times.

Many investors turn to alternative assets like gold and other precious metals to balance their retirement savings, as these tend to move separately from stock market ups and downs.

Thanks to a precious metals IRA, you can hold physical gold, silver, platinum, and palladium in a tax-advantaged retirement account.

But how does it work? Let’s break down the process of investing in precious metals via an individual retirement account step by step.

What is a Precious Metals IRA?

A precious metals IRA is a form of self-directed individual retirement account (SDIRA) that allows investors to include gold, silver, platinum and palladium in their retirement portfolio. A precious metals IRA is also commonly referred to as a gold IRA, due to the widespread preference for gold among investors.

Traditional IRAs typically limit investments to stocks, bonds, and mutual funds. A self-directed IRA, on the other hand, offers more flexibility to invest in a wider range of assets. Apart from precious metals, you can use SDIRA to invest in real estate, private equity, and cryptocurrency.

How Does it Work?

A precious metals IRA works similarly to a traditional or Roth IRA in terms of structure, purpose, and tax treatment, but differs in the assets you can hold.

With a precious metals IRA, you can allocate funds to physical precious metals that meet stringent IRS purity standards. These metals must be insured and securely stored in an IRS-approved depository.

According to IRS regulations, you cannot store precious metals held in your IRA at home or keep them in your personal possession. Doing so is considered a taxable distribution, which could result in taxes and penalties.

How to Open a Precious Metals IRA

To invest in gold or silver as part of your IRA, you will need to open an account with a reputable custodian, fund it through a rollover from an existing retirement plan, and purchase gold or silver.

Now, let’s take a closer look at all the steps involved.

1. Select a Precious Metals IRA Company and Custodian

To start a precious metals IRA, you’ll need to choose a reputable precious metals IRA company and an IRS-approved custodian experienced in managing these accounts. The custodian oversees administrative tasks, coordinates the acquisition of precious metals, and ensures they are stored correctly.

The most trusted companies for starting a precious metals IRA are Augusta Precious Metals and Goldco. These top-rated companies have earned thousands of 5-star reviews and recognition from reputable financial media, including Forbes and Investopedia.

Your chosen precious metals IRA company will guide you through the process, ensuring compliance with IRS regulations. They’ll assist in establishing your self-directed IRA with a custodian, selecting eligible precious metals, and helping with rollovers from existing retirement accounts.

To open an account, you must submit a completed application along with a copy of your driver’s license or another government-issued ID.

2. Add Funds to Your Account

You can fund your precious metals IRA by transferring funds from an existing retirement account, such as another IRA, 401(k), 403(b), 457(b), TSP, or SEP IRA.

There are two ways of moving funds to a precious metals IRA: a direct transfer and an indirect rollover.

• In direct transfer funds move straight between accounts. The process takes around 5-7 business days.
• In an indirect rollover, you withdraw the funds and must deposit them into a precious metals IRA within 60 days.

Direct transfer is generally preferred over indirect rollover due to its lower risk of tax penalties and greater simplicity.

To begin the transfer process, you’ll need a transfer request form that includes information about your current IRA, its custodian, and the amount you wish to transfer.

Your precious metals IRA company will guide you throughout the process, ensuring the transfer complies with IRS rules and is straightforward and efficient.

You can also finance your precious metals IRA by making direct contributions. Direct contributions to your IRA are governed by IRS annual limits and may offer tax deductions for a Traditional IRA or tax-free withdrawals for a Roth IRA.

3. Acquire Precious Metals

Once your self-directed IRA is funded, you can select and purchase precious metals through a trusted precious metals dealer.

Decide which IRS-approved gold, silver, platinum, or palladium coins or bullion align with your investment objectives.

Precious metals must adhere to strict purity standards to qualify for an IRA. Gold requires a minimum purity of 99.5%, silver 99.9%, and both platinum and palladium 99.95%. 

Eligible products that meet these standards include: 

• Gold: Bullion bars or proof coins such as American Eagle, American Buffalo, Canadian Maple Leaf, British Britannia, Australian Kangaroo, and Austrian Philharmonic. 
• Silver: Bullion or coins like American Eagle, Austrian Philharmonic, and Australian Kookaburra. 
• Platinum: Bullion and select coins, including American Eagle, Canadian Maple Leaf, and Australian Koala. 
• Palladium: Bars or coins, such as the Canadian Maple Leaf.

Gold is often favored for its enduring value and reputation as a safe-haven asset. Silver is more cost-effective but carries greater risk. It has extensive industrial applications and enables the acquisition of larger quantities than gold.

Platinum and palladium are less commonly chosen because they are less liquid and have limited historical performance data. Most investors prefer gold and silver or focus solely on gold. Ultimately, your choice of precious metals depends on your financial goals.

4. Safely Store Your Precious Metals

Your precious metals must be kept in a secure, IRS-approved depository designed specifically for holding IRA assets.

Trusted precious metals IRA companies typically partner with trusted depositories, such as Delaware Depository, International Depository Services, or Brink’s Company. All of them are IRS-approved and certified to safeguard precious metals for IRA investors, financial institutions, and refiners.

Your account representative will guide you through the storage process and introduce you to the preferred depositories. All approved depositories usually have rigorous security measures in place to protect your assets.

Is a Precious Metals IRA Right for You?

Opening a precious metals IRA can be a smart choice if your goal is to broaden your retirement portfolio and protect your capital from inflation and market downturns. However, it may not suit those seeking quick or significant profits, particularly in the short term.

Gold tends to hold or grow its value over the long haul, offering potential for steady appreciation. Its price can vary, and there’s no assurance of gains or passive income. Gold has been performing well in recent years, but past performance is no guarantee of future results.

Silver is less rare than gold or platinum but has a lot of potential for long-term price appreciation, much like gold. However, it tends to experience sharper price fluctuations than gold. This is influenced by its dual role in industrial applications (like solar panels and electronics) and as an investment asset.

Platinum is an extremely rare precious metal, much like gold. It exhibits less volatility than silver, and its value is driven by industrial applications (catalytic converters for automobiles, jewelry), alongside demand from investors. Price fluctuations may occur due to economic conditions or supply constraints, primarily from South Africa and Russia.

Palladium is a very rare metal and is more volatile than platinum. Its price heavily influenced by industrial demand, particularly for catalytic converters in gasoline-powered vehicles. It has a limited supply that is sourced mainly from Russia and South Africa, and this makes it susceptible to disruptions from geopolitical events and mining challenges.

Unlike stocks or bonds, precious metals IRAs don’t generate dividends, meaning your returns depend entirely on the metals’ price appreciation.

Before committing to a precious metals IRA rollover, I would advise you to consult a financial advisor to evaluate how precious metals align with your broader investment strategy and see what assets make most sense to you.

Fees Associated With a Precious Metals IRA

Precious metals IRAs involve both one-time and recurring fees. To open a self-directed precious metals IRA, you’ll typically pay a one-time setup fee ranging from $50 to $150. 

On an ongoing basis, the IRA custodian will charge an annual maintenance fee between $50 and $150 to cover account administration.

Additionally, the depository storing your precious metals will assess an annual storage fee, which can range from $50 to $300. The actual fee depends on the facility and the value of your holdings.

We have an in-depth guide on precious metals IRA fees if you want to read more on this topic. Keep in mind that these fees can vary based on the precious metals IRA custodian and depository you select, so it’s wise to confirm the exact costs upfront.

Tax Implications of Precious Metals IRAs

Investments in a precious metals IRA grow without annual taxes on gains, meaning you won’t owe taxes on the increased value of your metals until withdrawal.

The IRS sets annual contribution limits for precious metals IRAs. In 2025, you can contribute up to $7,000 if under 50, or $8,000 if 50 or older, provided contributions don’t exceed your taxable income. 

For Roth IRAs, eligibility to contribute depends on your Modified Adjusted Gross Income (MAGI), with higher earners potentially facing restrictions.

Withdrawal Guidelines

Withdrawals are generally penalty-free after age 59½. Taking funds out earlier usually triggers a 10% penalty plus income taxes, though exceptions apply for cases like medical costs, disability, or a first-time home purchase. 

Traditional IRA withdrawals are taxed as ordinary income, while Roth IRA withdrawals are tax-free if the account is at least five years old and you’re over 59½. 

For Traditional IRAs, Required Minimum Distributions (RMDs) must start at age 73 (for those reaching this age after January 1, 2023), with penalties for failing to comply. Roth IRAs have no RMD requirements during the account owner’s lifetime.

Inside a precious metals IRA, gains on your metals are not taxed until withdrawal. Outside an IRA, selling physical precious metals for a profit may be treated as selling collectibles, with a capital gains tax rate of up to 28%.

Pros of Precious Metals IRAs

• Portfolio Diversification: Investing in precious metals balances stock market holdings, reducing exposure to market swings. 
• Tax Benefits: These accounts provide the same tax advantages as Traditional or Roth IRAs, supporting tax-efficient growth. 
• Safe-Haven in Times of Uncertainty: The finite supply and enduring value of precious metals help preserve wealth during inflationary periods and market uncertainty.

Cons of Precious Metals IRAs

• Increased Costs: Storing physical metals incurs higher fees compared to other IRA investments. 
• Strict Regulations: Only IRS-approved metals meeting specific purity standards are permitted, limiting investment options. 
• Lower Liquidity: Buying or selling precious metals takes longer than trading stocks, reducing flexibility. 
• No Passive Income: Unlike stocks or bonds, precious metals do not generate dividends or interest, depending entirely on price appreciation for returns.

Why Choose a Precious Metals IRA?

A precious metals IRA provides tax advantages, investment flexibility, and a potential shield against economic uncertainty. With a Traditional IRA, you can make pre-tax contributions, which may reduce your taxable income now, allowing your investments to grow tax-deferred.

Withdrawals after age 59½ are taxed. However, there are a few exemptions when certain early withdrawals may avoid penalties, such as first-time home purchase. This option suits those anticipating a lower tax bracket in retirement.

Conversely, a Roth IRA uses after-tax contributions, enabling tax-free growth and withdrawals after age 59½, provided the account has been open for at least five years. It has no mandatory distribution requirements and is ideal for those expecting to face higher taxes in retirement.

Investing in a Precious Metals IRA vs. Precious Metals ETF

A precious metals IRA is designed for those focused on long-term wealth preservation, allowing you to hold physical gold, silver, platinum, or palladium in an IRS-approved depository. You cannot personally possess the metals without incurring taxes and penalties, but you benefit from owning a tangible asset.

Aspect	Precious Metals IRA	Precious Metals ETF
Ownership	Physical ownership of metals (stored in IRS-approved depository)	No physical ownership, holds financial instruments (e.g., shares)
Liquidity	Low (must sell back to dealer)	High (traded on stock exchanges)
Costs	Setup fees ($50-$100), annual maintenance ($100-$150) storage ($100-$150)	Expense ratio: 0.10%-0.50% annually, trading commissions, bid-ask spreads (generally low)
Risks	Storage risk, counterparty risk with depository, market risk	Counterparty risk with ETF provider, market risk, tracking error (ETF may not perfectly track metal prices)
Tax Implications	Tax-deferred growth, penalties for early withdrawal (before 59.5)	Capital gains tax on profits, may have different tax treatment depending on ETF structure
Diversification	Can be part of retirement portfolio diversification	Can be part of broader investment portfolio
Regulatory Considerations	Must meet IRS standards for metals and storage	Must be SEC-registered, follows ETF regulations
Performance	Tied to spot price of metals plus costs	Tracks metal prices minus fees, may have slight tracking error
Minimum Investment	Varies by custodian, often around $10,000 and more	Cost of one share, typically $50 to several hundred dollars
Ease of Setup and Management	More complex: choose custodian, depository, dealer, ensure IRS compliance	Simpler: buy through brokerage like any stock

Keep in mind that storage fees and other costs are involved. In contrast, a precious metals ETF is better suited for short-term investors or traders, as it follows the price movements of metals without the need for physical storage or insurance.

ETFs provide higher liquidity but come with counterparty risks, as you don’t directly own the underlying metal.

FAQs About Precious Metals IRAs

How does a precious metals IRA differ from a gold ETF?

A precious metals IRA holds physical metals, giving you direct ownership, while ETFs like GLD track gold prices without physical possession, involving counterparty risks. 

What portion of my portfolio should I allocate to precious metals?

Most financial advisors recommend limiting precious metals to about 10% of your overall portfolio. However, the ideal percentage depends on your personal risk tolerance and investment goals. 

A key benefit of a precious metals IRA is diversifying your retirement savings, so dedicating a large share of your funds to gold, silver, or other metals may not be the best approach.

While gold has shown stability as a safe investment over decades, putting all your retirement savings into precious metals and betting everything on one asset may not align with a balanced strategy.

Ultimately, the decision is yours, but spreading investments across various assets can help manage risk effectively.

Is there a minimum investment for a precious metals IRA?

Precious metals IRA companies often set varying investment minimums, typically starting at $10,000. However, some require up to $50,000.

Can I use my 401(k) to fund my precious metals IRA?

You can roll over funds from an employer-sponsored 401(k) to a precious metals IRA if you’ve left your employer or are at least 59½ years old.

The IRS sets age 59½ as the point for penalty-free withdrawals or rollovers, designed to promote long-term retirement savings. This age serves as a practical midpoint between early career and standard retirement years.

Can I move an existing IRA into a precious metals IRA?

Yes, you can transfer or roll over an existing IRA into a precious metals IRA with help from your custodian, ensuring a smooth and compliant process.

What IRAs are eligible for rollover or transfer?

You can perform a direct rollover with various IRA types, such as Traditional, Roth, SEP, SIMPLE, and Solo IRAs. Reach out to your IRA custodian to confirm any specific details or restrictions.

Can I have multiple IRAs?

Yes, you may have multiple IRAs, but your total annual contribution limits remain the same.

What purity standards must precious metals meet for an IRA?

Precious metals in an IRA must meet specific fineness requirements: gold at .995, silver at .999, and platinum and palladium at .9995. An exception is made for American Gold Eagle coins.

Non-eligible items include pre-1933 gold coins, gold Krugerrands, and 90% U.S. silver coins. 

How long does a rollover take?

The timeline depends on the custodian. For example, with Equity Trust Company, setting up an account takes 1-2 business days. However, funding may require up to a week, depending on the source of the funds.

How long does it take for metals to reach the depository?

Once funds clear, precious metals are shipped within 1-5 business days and typically arrive at the depository within an additional 1-5 days. 

Are the metals insured?

Yes, precious metals are fully insured during transit and while stored in the depository, providing peace of mind for investors. 

How do depositories ensure the security of my metals?

Approved depositories maintain detailed accounting and provide regular reporting to confirm the safety and security of your metals. 

Can I take physical possession of the metals?

No, metals must remain in an IRS-approved depository. Taking possession is considered a taxable distribution, so consult a tax professional before making decisions.

Conclusion

A precious metals IRA offers a tax-advantaged way to diversify your retirement portfolio with physical gold, silver, platinum, or palladium, providing a hedge against inflation and market volatility.

While it involves higher fees and stricter regulations than traditional IRAs, it suits long-term investors seeking stability over quick gains. Consult a financial advisor to ensure it aligns with your goals, and choose a reputable custodian to navigate the process compliantly.