How a Precious Metals IRA Works: The Three Parties, the Real Costs, and the Drawbacks
Short answer. A precious metals IRA is an ordinary self-directed IRA that happens to hold bullion instead of shares. Three separate companies are involved: a custodian administers the account, a dealer sells the metal, and a depository stores it. The account buys the metal and it goes straight to the vault in the account's name.
The tax treatment is identical to any other IRA. What differs is that you now pay ongoing storage, you own something that produces no income, and you cannot touch it without ending the tax shelter on that portion.
The three parties, and why that matters to you
With a normal brokerage IRA you deal with one company. Here you are dealing with three, and they are usually not affiliated. Understanding which is which is the difference between knowing what you own and taking someone's word for it.
| Party | What it does | What it charges | Who picks it |
|---|---|---|---|
| Custodian | Legal administrator of the IRA. Holds title, files the paperwork, reports to the IRS. | Setup fee, annual administration | You |
| Dealer | Sells the metal to your account and usually buys it back later. | The spread over spot, both ways | You |
| Depository | Physically stores and insures the metal. | Annual storage, flat or percentage | You, from the custodian's approved list |
Because you pick all three, you can be sold a package where all three are steered by whoever called you first. That is not automatically wrong, but you should know it is happening and check each piece separately.
What actually happens, step by step
You open a self-directed IRA
Self-directed simply means the custodian permits assets beyond stocks and funds. The account is a normal traditional or Roth IRA with the same contribution limits and the same tax rules.
You fund it
Usually by transferring an existing retirement account. The mechanics and the traps are in our rollover and transfer guide, including the 20% withholding problem.
You choose metal that qualifies
It must clear the statutory test and appear on your custodian's accepted list. See which silver qualifies for the legal detail.
The account buys, not you
You instruct the custodian, the custodian pays the dealer from the account, and the account owns the result. Buying personally and contributing the metal later is a prohibited transaction.
The depository takes delivery
Metal ships from the dealer to the vault, never to you. From then on you get statements rather than coins.
Eventually you take it out
Either sell inside the account and withdraw cash, or take an in-kind distribution where the coins are shipped to you. Both are taxable events on a traditional account.
The full cost stack
Four charges, and they are not presented together anywhere in a sales conversation. Ask for all four as numbers.
| Charge | When | What to watch |
|---|---|---|
| Setup | Once, at opening | Often waived on larger accounts. Ask. |
| Administration | Annually | Flat is predictable. Percentage grows with your balance. |
| Storage | Annually | Segregated costs more than commingled. Percentage-based storage compounds against you over a long retirement. |
| Dealer spread | Every purchase and sale | Usually the largest cost and the least disclosed. Ask for the buy price and the same-day sell price on the identical product. |
That last row is the one to press on. A quoted price over spot tells you the entry cost. Asking what the dealer would pay you for the same coin that afternoon tells you the round-trip cost, and that is the number that actually determines your outcome.
Where this genuinely does not suit people
Every page selling this product lists the upside. These are the structural drawbacks, and they are not opinions about the price of silver, they are features of the wrapper itself.
Drawback It produces no income
Bullion pays no dividend, no interest, no rent. Inside a tax-deferred account, that matters more than it looks, because the main advantage of tax deferral is sheltering income as it compounds. With metal there is no income to shelter, only eventual gains.
Drawback Costs run whether or not it goes up
Storage and administration are charged every year regardless of performance. A flat annual charge on a modest balance is a meaningful percentage, which is why most custodians set account minimums in the first place.
Drawback The required distribution problem
From age 73 a traditional IRA must pay out a required minimum distribution each year, rising to 75 from 2033. Shares can be sold in any amount. A one-ounce coin cannot be cut in half. So each year you either sell part of the holding to raise cash or take specific coins in kind and pay tax on their value. It is manageable, but it needs planning months ahead and almost nobody raises it during the sale.
Drawback You cannot see or hold it
For some buyers the appeal of physical metal is precisely that it is physical. Inside an IRA you get a statement, the same as any other account. If holding it yourself is the point, an IRA is structurally the wrong wrapper, and no arrangement changes that legally.
Drawback Concentration
Moving a whole retirement account into one asset class is a large single bet, whatever that asset is. Most custodians will happily let you do it. That is not the same as it being sensible for your situation, and that judgement is one for a professional who knows your full picture.
Traditional or Roth
Both work, and the choice follows the same logic as any other IRA rather than anything metal-specific. A traditional account gives you the deduction now and taxes the withdrawals later, with required distributions from 73. A Roth is funded with taxed money, grows without further tax, and has no required distributions during your lifetime.
The Roth angle worth knowing: because there are no required distributions, the indivisibility problem described above largely disappears. If the awkwardness of selling coins each year to satisfy a distribution bothers you, that is a genuine argument for holding metal in a Roth rather than a traditional account. Whether the up-front tax makes sense is a separate question for your tax professional.
Questions people ask
Is a precious metals IRA a different type of account?
No. It is a standard traditional or Roth IRA held with a custodian that permits physical metal. The contribution limits, tax treatment and distribution rules are the ordinary ones.
Can I hold metal and stocks in the same IRA?
With most self-directed custodians, yes, though some specialise narrowly. If you want a mixed account, confirm that before opening rather than after.
What happens if the depository fails?
The metal is your account's property, not the depository's asset, and it is held separately from the company's own balance sheet. Insurance covers loss and theft, not price movement. Ask for the specific insurance terms rather than the word "insured".
Can I add to it every year?
Yes, subject to the normal annual IRA contribution limits, and you can transfer in from other retirement accounts without those limits applying.
What happens when I die?
It passes to your named beneficiaries like any IRA, and inherited IRAs follow their own distribution rules. Keep the beneficiary designation current with the custodian, because that document controls regardless of what your will says.
Next
- Moving an existing account in, including the 20% withholding trap
- All eight rules in one place, with what each mistake costs
- Which silver qualifies, straight from the statute
- Compare providers on minimums, fees and buyback terms
Primary sources
- 26 U.S.C. ยง 408, individual retirement accounts and the collectibles rule
- IRS, required minimum distributions
- SECURE 2.0 Act of 2022, for the distribution age change to 73 and later 75
Metals Retirement is an independent research site. We are not a broker, dealer, custodian, law firm or investment adviser, and nothing here is investment, legal or tax advice. Whether a concentrated holding of any single asset suits you depends on your full financial picture, which we cannot see. We may be compensated by providers we compare, at no cost to you, and that compensation never changes what these pages say, including the drawbacks above. Last reviewed 26 July 2026.