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Holding Gold in an IRA or 401(k)

Holding Gold in an IRA or 401(k)

In a time of financial uncertainty and a real threat of currency devaluation, precious metals are viewed by many investors as an attractive option. The advantage of using an IRA or 401(k) plan to buy gold and other metals is that all earnings from the investment(s) would flow back to the plan without tax.

However, as this article will show, not all retirement plans will allow one to purchase physical metals or coins. Generally, you need to self-direct your IRA, or, if you are self-employed, utilize the Solo 401(k) plan. Be wary of the IRS rules. As we’ll discuss later, you should not personally take physical possession of the metals your plan invests in.

Key Points
  • Gold and other metals have long been a safe investment and a hedge against inflation
  • Retirement plans allow for tax-free investing across all asset classes
  • You generally need to self-direct your plan to gain the ability to invest in nontraditional investments with retirement funds

Why Invest in Gold & Other Metals?

Gold has always been considered a safe investment and generally doesn’t correlate to other asset classes. In most instances, as other assets dip, precious metals tend to retain their value, and even rise.

Here are some of top reasons people look to gold:

  • Diversification: As we touched on earlier, gold is seen as a hedge against inflation and economic turmoil. It tends to hold its value over time. (View the historical chart)
  • Store of Value: As evident by the Gold Rush and other events through history, gold has always been looked upon as valuable. Plus, there’s a finite amount in the world and its scarcity grows each year.
  • Global Strife: Whether it’s war, trade disputes, natural disasters, metals are a safe haven investors run to as protection.
  • Demand: Whether it’s jewelry, tech, medical uses or a variety of other industries, metals are imperative to our daily lives; the demand will always be there to help keep precious metals relevant and in demand.

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Investing in Gold, Metals and Coins with Retirement Funds

Investing in any asset with your IRA or 401(k) offers enormous benefits, especially when it comes to taxes. Combine the value and stability of gold with the tax advantages of a retirement plan, and you get a winning formula.

How to Buy Precious Metals with an IRA

If you want to buy physical gold, precious metals, or IRS-approved coins, you will need to establish a Self-Directed IRA.  The reason for this is that a traditional bank or brokerage firm, such as Fidelity, will not allow you to invest in physical metals or coins.  Your exposure to these assets are limited to only what the institution offers you.

A Self-Directed IRA is a type of a retirement account that allows for alternative asset investments, such as precious metals. But even those can come with limitations. At IRA Financial, there are no such limitations; so long as the investment is not prohibited by the IRS, you can make it!

There are two types of Self-Directed IRAs: the Full-Service (Custodian Controlled) and the SDIRA LLC (“Checkbook Control IRA“). The former is a more “hands-off” approach, as the custodian is responsible for making the investment on your behalf. The latter is for someone who wants complete control of their IRA. An LLC is established which is owned by your IRA. This allows you to manage your own account, and make investments whenever you want.

How Does it Work?

First you need to set up your account. Depending on the IRA you choose, the process will differ slightly. You’ll need to find an IRA custodian that fits your needs. Make sure they offer the type of plan you want, and the investments you wish to make.

Once established, you need to fund the plan. You can transfer IRA funds, roll over 401(k) or other plan funds, or make a direct contribution.

If you want checkbook control, you’ll need to create an LLC, acquire a tax ID#, and prepare the LLC operating agreement, which IRA Financial would do for you if you become a client. You, as the IRA owner, are manager of the LLC and are in total control.

Next, it’s time to make the investment; again, this will vary based on your IRA.

Full service clients will provide the custodian with the metals dealer invoice for purchase of the metals and also a depository selection (which will hold the metals). The custodian will use plan funds to make the purchase, and the broker will send the metals to the depository of choice. Title to the metal will be in the custodian’s name, for the benefit of your IRA. You should provide the custodian with receipts of the purchase and from the depository the metals are stored at to your custodian.

LLC clients will transact with the metals dealer personally to make the purchase. The broker would make the purchase on behalf of the LLC and send them to the depository of your choosing. Title of the assets would be in the name of the LLC itself, offering you greater privacy. Keep for your records any invoices involved in the purchase of the gold or other metals, along with proof of the depository being used.

All proceeds from the sale of the metals will flow back to the IRA without tax. So long as the metals (or cash from the sale of them) remain in the plan, you don’t need to worry about taxes. Once distributed from the plan, you will owe taxes, unless you utilize a Roth IRA and satisfy the qualified distribution rules which allows for tax-free withdrawals!

How to Buy Precious Metals with a 401(k)

Just like a basic IRA, if you work at a company that offers a 401(k) plan, you will not be permitted to purchase physical gold, other metals, or coins.  However, if you have former employer 401(k) funds, they can be rolled into a Self-Directed IRA tax-free. You can then follow the steps outlined above.

But what if you are self-employed? If you don’t have one already, you can open a Solo 401(k) plan, which, assuming the plan provider allows for it, you can use you Solo 401(k) to invest in gold and other IRS-approved metals.

There are just a couple of eligibility requirements to start a Solo 401(k). You must have some form of self-employment income, and you cannot have full-time employees if you are more than just a sole proprietor.

How Does it Work?

First, you need to establish your Solo 401(k) plan; choose the provider, such as IRA Financial, that fits your needs. You will serve as trustee of the plan. Next, you will open a bank account for the plan. You can choose your own bank, or if you wish, IRA Financial can establish the account, hassle-free for you at Capital One.

Time to fund the new bank account! Like an IRA, you can roll over or transfer other retirement plan funds, or you can make a direct contribution. Once the plan is funded, it’s time to select your gold dealer and make the purchase. Use the Solo 401(k) bank funds to buy the metals.

As with an IRA, you should select a regulated depository to store the metals at. Retain copies of all receipts. Title to the metals will be in your name, trustee of your 401(k) plan. All income generated from the metals will flow back into the plan without tax. Taxes will only be due once you distribute from the plan, unless, of course, you have a Roth 401(k) and take a qualified distribution.

Why the Need for a Depository?

The language in the Internal Revenue Code (IRC) is crystal clear.  IRC Section 408(m) clearly states that gold, silver, or palladium bullion must be held in the physical possession of a U.S. trustee, otherwise known as a U.S financial institution or IRS-approved non-bank custodian, such as a depository.

In addition, the Tax Court in McNulty v. Commissioner, 157 T.C. No. 10 (November 18, 2021) confirmed the position of the IRS that an IRA or 401(k) owner cannot take personal possession of metals and coins held by the plan. This would create a taxable distribution of the assets. This is why it’s important to maintain clear records; the IRS may scrutinize the investment, so leave nothing to chance.


History doesn’t lie – precious metals, especially gold, are seen as a safe investment, a hedge against inflation, and a good store of value. Numbers also don’t lie – investments grow without tax when held inside a retirement plan. The longer you can delay taxes, the better off you will be.

It’s important to note that IRA Financial is plan provider and does not offer investment advice. The content of this article is for educational purposes and to explore how to self-direct your retirement to prepare for the future. It’s best to work with a financial advisor and other professionals before making any investment, whether it seems safe or not. Feel free to contact us using the form to the right.


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