The money you save in an individual retirement account (IRA) shouldn’t just sit in cash. Your goal should be to grow your IRA at a faster pace than inflation so it gives you plenty of buying power once retirement arrives.
It’s common to invest an IRA in assets like stocks, ETFs, and bonds. But those aren’t your only options. You can also invest your IRA in precious metals. Here, we’ll review the pros and cons of putting your retirement savings into these alternative assets.
What are precious metals IRAs and how do they work?
A precious metals IRA is a retirement account that allows you to hold certain physical metals in your investment portfolio. The IRS allows gold, silver, platinum, and palladium to be held in an IRA provided they meet certain fineness requirements.
If you’re interested in investing in precious metals for your retirement, you’ll need to find a custodian or broker that allows you to open a precious metals IRA. From there, you’ll be subject to the same annual contribution limits as with a traditional or Roth IRA. In 2025, the limit is $7,000 if you’re under age 50, or $8,000 if you’re 50 or older.
How are precious metals IRAs different from regular IRAs?
Precious metals IRAs work similarly to traditional and Roth IRAs in terms of annual contribution limits and distribution rules. With a traditional IRA, you can contribute pre-tax funds to your account, and your investments can grow on a tax-deferred basis. However, your withdrawals are taxed in retirement, and your account is subject to required minimum distributions (RMDs).
With a Roth IRA, contributions are made on an after-tax basis, but investments can grow tax-free, and withdrawals aren’t taxed. Roth IRAs also don’t impose RMDs.
With a precious metals IRA, you’re investing in physical assets, as opposed to stocks or other assets that commonly trade electronically. For this reason, you’ll need to find a custodian that offers this option and has the means to store your investments safely. You can’t store precious metals that are part of your IRA at home.
Pros of investing in precious metals IRAs
- Diversification: If you have another retirement or brokerage account you’re investing in the stock market, a precious metals IRA allows you to branch out and offers some protection against market volatility.
- Tax advantages: A precious metals IRA gives you the same tax benefits as a traditional or Roth IRA. Holding precious metals in one of these accounts could help you shield income and gains from taxes.
- Inflation protection: Although precious metals carry risk like all investments, they’re often said to be a hedge against inflation due to their limited supply and tendency to hold their value over time. By holding these assets in an IRA, you can prevent inflation from eroding the value of your retirement account.
Cons of investing in precious metals IRAs
- Higher fees: By nature, a precious metals IRA requires assets of yours to be physically stored. Because of this, you’re typically looking at higher fees.
- Restrictions: There are limits on the types of precious metals you can hold in an IRA, and those metals must meet certain purity standards.
- Less liquidity: Stocks and other electronically traded assets can be bought and sold quickly. Precious metals aren’t as easy to buy and sell.
- No income-earning opportunities: When you invest an IRA in stocks that pay dividends or bonds that pay interest, your balance can grow by virtue of not just your assets gaining value, but also through dividend or interest income. Precious metals don’t pay dividends or interest, so your savings’ growth will hinge solely on how much value these assets gain.
Bottom line
A precious metals IRA gives you an opportunity to branch out beyond the typical saver’s investment portfolio. Though you may not want to invest your entire nest egg in precious metals, when combined with more traditional investments, they could be a smart component of your broader strategy. And if investing in physical metals falls outside your comfort zone, you can buy into a precious metals ETF instead, which allows for more liquidity and flexibility.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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