Gold IRA vs. gold bars and coins: How to choose the right type for you

Between the persistent issues with inflation, numerous Fed rates increases and a housing market that's hard to tame, it's been an interesting couple of years for the economy. And, while there are plenty of expert predictions for what's to come, it's tough to know what will really happen economically in the coming months and years. 

Given the unknowns, it's a smart time to ensure that your financial plan is in order — and that includes your investments. And, during times of economic uncertainty like these, many investors turn to precious metals, like gold, because of the many unique benefits it can offer. 

There are many ways to invest in gold, but two popular options are gold individual retirement accounts (IRAs) and physical gold bars and coins. If you're planning to add gold to your portfolio, how can you decide which option is right for you?

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Gold IRA vs. gold bars and coins: How to choose the right type

Each option has its own set of advantages and considerations. Here's what to know before making a decision.

What to know about gold IRAs

A gold IRA, or a self-directed precious metals IRA, offers investors the opportunity to hold physical gold within a tax-advantaged retirement account. This type of IRA allows you to diversify your retirement savings beyond traditional stocks, bonds and mutual funds by adding gold to the mix. While there are numerous ways to do this, the gold held in a gold IRA is typically in the form of bullion coins or bars with a high purity level.  

One of the primary benefits of a gold IRA is the potential for tax advantages — as this type of retirement account offers the same tax benefits as a traditional IRA. If you're focused on setting yourself up for retirement, this can be a smart choice.

Another perk of this type of IRA is that it allows you to diversify your portfolio with a less risky asset. Traditional IRAs and 401(k) accounts are subject to market fluctuations, but a gold IRA is backed by physical gold, which tends to hold its value over time. Gold has historically shown resilience during economic downturns, making it a potential safe haven for your retirement retirement funds.  

That said, there can also be potential downsides to a gold IRA. These include:

• Custodian fees: Gold IRAs often require a custodian to store the physical gold, which may come with associated fees.
• Limited accessibility: While gold in a gold IRA can provide security, it's less accessible compared to physical gold bars and coins.

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What to know about physical gold bars and coins

Investing in physical gold bars and coins also has numerous benefits. For starters, it offers a tangible and direct ownership of the precious metal. This option is suitable for those who want to have direct control over their gold holdings and those who may want quicker access to their investment if needed.

With physical gold, you have immediate access if you need to liquidate it — which isn't as easy with a gold IRA. And, you don't have to pay custodian fees if you're holding the physical gold yourself. That can potentially make this investing route cheaper than a gold IRA.

Gold bars and coins also offer many of the same advantages as a gold IRA. Your gold investment is still a hedge against inflation and it can be used to diversify your portfolio and offset risk from other investments. There are also no custodian fees to contend with.

But there are also a few downsides to consider with gold bars and coins. These include:

• Storage and security costs: Storing physical gold securely can be a challenge, as it requires proper storage solutions to prevent theft or damage. It can also be costly if you choose to store your gold with a third party. 
• Lack of tax advantages: Unlike gold IRAs, investing in physical gold doesn't offer the same tax benefits associated with retirement accounts. That can be a big downside for some investors — especially those who are using gold investing to prepare for retirement.

Choosing the right option for you

Deciding between a Gold IRA and physical gold bars and coins depends on your investment objectives, risk tolerance, and preferences. If you prioritize tax advantages, diversification within your retirement portfolio and potential protection against economic downturns, a gold IRA might be the better choice. Or, if you're ramping up your efforts to prepare for retirement, a gold IRA might make more sense in the long term. 

On the other hand, if you value direct ownership, quicker access and the potential for numismatic appreciation, physical gold bars and coins could align better with your goals. 

The bottom line

Both gold IRAs and physical gold have pros and cons to consider. With gold bars and coins, you get many of the same benefits as you would with a gold IRA — but don't get the same tax advantages. Both come with their own associated costs, too — which you should keep in mind as you weigh your options. By carefully weighing the pros and cons of each approach, you can make an informed decision that better helps secure your financial future.