IRA Showdown: Differences between traditional and precious metals IRAs

We talk about the benefits of Gold IRAs a lot at Noble Gold. But we haven’t yet succinctly described the differences between a traditional IRA and a precious metals IRA in quick read, for the people at the beginning of their retirement savings research journey.

First, you may even be wondering, what is an IRA? IRA stands for Individual Retirement Account. It is an investment vehicle similar to a “basket” that holds the stocks, bonds, mutual funds, precious metals, and other assets you are using as investments. These assets have to be approved by the government and held by a third party, which can be a bank or brokerage firm like Noble Gold.

An IRA is a sensible long-term investment which provides you with significant tax savings compared to mutual funds and other investments. There are limits to how much you can contribute to the account each year, and restrictions on withdrawals before retirement since it is meant to be a long-term investment. Both traditional IRAs and gold IRAs have the same laws for taking distributions (removing money from the investment).

So what is the difference between a traditional IRA and a precious metal IRA? Strategy is the main difference, relating to the amount of risk, protection, and predictability of your investment.

Traditional IRAs

  • Investing in paper assets such as such as cash, stocks, and bonds.

  • Stocks, bonds, and many other types of investments are not very liquid, meaning they may not convert back to cash as quickly as you may need it.

  • Vulnerable to inflation.

  • Stocks are volatile, meaning they have a chance of becoming more or less valuable. That chance is the level of risk involved.

  • In a traditional IRA, you must take out the required minimum distributions once you turn 70.5 years old.

  • In a traditional IRA, if you withdraw money before you turn 59.5 years old, you usually pay a 10% tax penalty.

  • Contributions to traditional IRAs are usually tax deductible.


Gold IRAs and Silver IRAs

  • Functions the same as regular IRAs, only instead of holding paper assets, it holds physical gold or silver coins or bars.

  • The precious metals are held in custody by law in a certified depository for safety.

  • Unlike bonds, gold and silver are highly liquid and can readily be converted to cash if you need it. These IRAs can also be liquidated into the physical metals if desired.

  • Gold has held value for 5,000 years. It will never be worth zero, which is a risk for stocks and bonds.

  • Physical assets like precious metals are less vulnerable to inflation and other financial and economic storms. For example, after the 2008 crash Americans lost at least 25% of their retirement savings on average, but those who had Gold IRAs did not suffer the same fate.

  • Metals generally rise in value as stocks fall in value. In the past ten years, the stock market has risen 60%, while gold has risen 120%.

  • Gold and silver IRAs are usually self-directed IRAs, where the custodian allows more diverse investments to be held in the “basket” of investments – the IRA. Self-directed IRAs can also contain other retirement accounts such as 401(k)s.

  • An investment portfolio is not truly diversified if all the investments in the IRA “basket” are vulnerable to stock market changes. Owning gold, silver, and other metals reduces the risk of investing.

  • If you already have an IRA, you may be able to add precious metals to the account.  If your account does not allow this, a new IRA can be set up and you can easily transfer your funds into it. Most retirement accounts can be rolled over into a precious metals IRA without taxes on the transfer.

Visit our Gold IRA educational page for a very detailed explanation.

To learn more from an actual human, call 888-632-3040 to speak with one of our friendly, no pressure associates.

Not ready to chat yet? Download our free Gold IRA Guide and learn how to invest your assets to thrive over the coming years.

Read more by Charles Thorngren