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How Can I Transfer My 401k Into Gold?

Precious Metals 101

Published: November 11, 2022

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If you’ve taken the first step and left your job, figuring out how and where to move your 401(k) is probably at the top of your to-do list. With a 401(k), you’re already a step ahead of the game, and transferring it into a gold IRA is quick and easy to do. A Gold IRA is one of the best ways to safely diversify your retirement savings portfolio and plan for the future, as it offers numerous benefits to owners.

Before you start rolling your 401(k) into a Gold IRA, it’s important to understand the ins and outs of what a Gold IRA is and the proper steps that need to be taken to make the transfer successful.

What is a Gold IRA?

A Gold IRA is a self-directed investment retirement account (SDIRA) that works just like the standard IRA. The main difference between the two is that instead of holding stocks and other paper assets, a Gold IRA holds physical gold and other precious metals in coins and bars.

Gold IRAs follow the same general rules as standard IRAs regarding contribution limitations and withdrawal rules. Once you find an IRA custodian trustee to handle the paperwork, your job of investing is easy.

Why is Gold a Good Investment?

In times of economic uncertainty, your paper investments’ reliability is left up in the air. Physical gold offers safe investment opportunities to hedge against inflation and continue growing your savings during stock market volatility. Physical gold provides a safety net to help you enter your retirement years with money when the rest of your investments have an uncertain future.

That said, investing in physical gold shouldn’t be your only investment but be part of a diversified portfolio. Diversifying your investments provides the safest option, so you have money in your pocket when you need it most.

Advantages of Owning Physical Gold

Besides being an in-hand investment, physical gold provides investors with several benefits, including:

  • Protecting your portfolio in times of economic or geopolitical crises.
  • Hedging against your stock market investments.
  • It is easy to store and has low maintenance and storage costs.
  • It is a tangible, liquid, and portable asset.
  • There’s no counterparty risk involved.
  • It is a legal tender, making it an essential asset during desperate times.

401(k) Rollover Eligibility Requirements

If your interest is peaked and you’re ready to transfer your 401(k) to a Gold IRA, making sure you’re eligible for a transfer before making the jump is essential. Eligibility is limited to specific individuals and varies from plan to plan, so contacting your 401(k) administrator to check if your plan is eligible is the first step.

For 401(k) plans that are eligible, transfer eligibility falls onto the account holder. You must be at least 59 ½ years old or at least 55 years old and no longer for the employer who provided your 401(k) plan.

If you’re younger than 54, you may not be eligible for a transfer without incurring a tax penalty. If that’s the case, you’ll have to wait until you’re of age or leave the company.

Types of Gold IRA Rollovers

After choosing to transfer your 401(k), you’ll need to determine what kind of transfer you’ll make. Two possible types of 401(k) transfers are direct and indirect.

Direct Rollover

A direct rollover is the easiest way to rollover your 401(k) into a new Gold IRA. There are two parties. The first is the person in charge of your 401(k) account, known as the 401(k) administrator. The second is the custodian trustee in charge of your Gold IRA.

In a direct rollover, you call your 401(k) trustee and inform them you want your funds transferred directly into your new Gold IRA. The IRS will send you a 1099-R form notifying you of your retirement fund transfer, but make sure that the distribution code is marked to indicate that it is a non-taxable event. You’ll be subjected to a 20% tax withholding fee if you don’t.

Indirect Rollover

While an indirect rollover is still pretty simple, a third party is involved in the transfer – you. In an indirect rollover, your 401(k) administrator will send you a check for 80% of the funds in your account, and you become responsible for depositing that check into your Gold IRA.

The IRS gives you a 60-day window to complete the transfer, or you’ll be penalized with a 20% tax withdrawal fee. If you’re younger than 59 ½ years old, a 10% early withdrawal penalty is also tacked on.

It’s important to note that your 401(k) trustee will only send you 80% of your funds and send the other 20% to the IRS in case of potential tax penalties. However, to alleviate any of those tax liabilities, the full 100% of your 401(k) must be transferred into the Gold IRA, meaning you’re responsible for fronting that withheld 20% out-of-pocket. Considering that you follow all of the IRS rules for a Gold IRA and roll over your complete 401(k), come the following tax season, the IRS will refund that withheld 20%.

This 80/20 60-day rule is a headache to most investors, and many choose the simpler direct rollover route.

A Guide to Transfer Your 401(k) to a Gold IRA

Transferring a 401(k) to a Gold IRA is a simple and direct process. If you’re looking to roll over your 401(k) into a Gold IRA but are unsure where to start, following the steps below will ensure your retirement savings are safely transferred and invested correctly.

Find a Gold IRA Provider

Finding a trustworthy company specializing in precious metals IRAs that can handle your Gold IRA transfer is the first step. Although setting up a Gold IRA is a simple process, and any Gold IRA can do that, different Gold IRA companies offer various in-house services. It’s important to consider the following factors when choosing a Gold IRA company:

  • Is there an initial investment required?
  • Are there any associated fees charged?
  • Do they offer depository and custodian services?
  • Are there any potential shipping costs to ship your gold to the IRA storage facility or if you withdraw your precious metals?
  • Do they have extensive precious metals background knowledge?
  • Do they have reputable customer service?

The right Gold IRA provider can help you navigate opening your account, finding a reputable custodian trustee and depository, and, if you’d like, help in picking out precious metals.

Your decision on a Gold IRA provider will also depend heavily on how hands-on you want to be in your investments. Since a Gold IRA is a self-directed account, you typically control your assets. On the other hand, other Gold IRA providers can take a more managerial approach, perfect for beginners.

Appointing Your IRA Custodian and Meeting Storage Requirements

Although this step is done during the hunt for a Gold IRA provider, it’s important to understand and comply with two Gold IRA rules before setting up and activating your account.

  1. Approved precious metals invested in an IRA must be stored in an IRS-approved depository facility. They are not allowed to sit in a safety deposit box at the bank or your sock drawer.
  2. An IRS-approved custodian trustee must be appointed to manage your Gold IRA activity. Your Gold IRA account is self-directed, and you make the buying and selling decisions. However, your custodian trustee is responsible for executing those decisions. They are also responsible for reporting important information regarding your account to the IRS. IRS-approved custodians are typically banks or trust companies.

The right Gold IRA provider will provide custodian and storage services to you as part of an “all-inclusive” provider package. Even if your provider doesn’t offer these in-house services, they should have connections to help put you in contact with different custodian trustee firms and storage facilities.

Activate Your Account

Once you’ve picked your Gold IRA provider, the next step is to open your account. The account type is one of the biggest decisions you’ll make when opening your account.

You’ll choose between a traditional IRA or a Roth IRA. The type of account you open will determine your tax benefits and future withdrawal allowance. We typically recommend Roth IRAs for the benefits they provide, but we’ll discuss Roth IRA benefits later on.

Conduct the 401(k) Rollover

Once your account is open and active, it’s time to contact your 401(k) plan administrator and have them initiate the transfer. Depending on what type of rollover you choose will determine how fast the transfer will be.

It’s important to remember that a direct transfer, where your 401(k)’s administrator directly transfers your money to your Gold IRA’s administrator, is the easiest method and ensures you don’t fall victim to any tax penalties.

However, an indirect rollover is the best option if you want to control when and how your retirement money is transferred. Your 401(k) administrator will send you the money from your account, where you act as the middleman to move it to your Gold IRA’s administrator. Make sure to follow all transfer regulations within the allotted timeframe to avoid being penalized.

You can transfer all or a portion of your 401(k) funds. Diversifying your retirement savings portfolio is the safest way to plan for the future.

Buy Gold Through the IRA

Once your 401(k) rolls over to your Gold IRA, congratulations, you’ve entered the final step and can finally begin investing! With a Gold IRA, you can invest in a world of IRS-approved precious metals, including coins and bars. Precious metals have to meet specific purity requirements to be deemed IRS-qualified.

Gold, platinum, and palladium coins and bars must have a minimum purity of 99.5%. Silver must have a minimum purity of 99.9%. The only exception to the rule is the American Gold Eagle coin which has a purity of 91.67%.

Gold IRAs follow the same yearly contribution rules as other IRAs – up to $6,500 and $7,500 for individuals over 50. When you’re ready to make purchases, you’ll need to send your custodian trustee a “buy direction letter” instructing them what to buy and how much.

Why You Should Consider a Roth IRA for Your Gold

You’ve decided to diversify your retirement portfolio and transfer your 401(k) to a Gold IRA, which is excellent. But, just like your standard retirement accounts, you have options regarding the type of IRA you’d like to open. Traditional, SEP, or Roth, where do you put your investments?

The answer is simple – a Gold Roth IRA, and here’s why.

Reduces Investment Risks

You should never put all of your eggs in one retirement savings account. If you want to be a savvy investor, the wisest decision you can make when planning for retirement is to diversify your retirement portfolio. Diversifying your portfolio is an easy way to protect your future if one of your savings accounts fails.

Standard IRAs see countless price fluctuations, and while high-risk investments are typically safe over 30 or 40 years, as you reach retirement age, you’ll want to safeguard your funds with stable investments. One of those stable investments should be a Gold IRA. They are the perfect investment vehicle to diversify your investment portfolio, allowing you to maximize your retirement savings and enjoy your golden years without financial worry.

Tax Benefits

Investing in gold is expected to yield long-term growth, and a Gold Roth IRA’s taxes and tax benefits work just like regular Roth IRAs. Unlike a traditional Gold IRA, with a Gold Roth IRA, you make after-tax dollar contributions, allowing your investments to grow tax-free over the years.

With a Gold Roth IRA, when you reach 59 ½, the legal retirement age, you’ll be able to make tax- and penalty-free withdrawals. Uncle Sam got his portion already, and you can reap the benefits of the inflated value of gold.

Control Over Your Investments

In a standard non-self-directed IRA, you can say goodbye to any investment decisions because your investments are overseen by a broker or brokerage house that manages your account and makes those decisions for you.

A Gold Roth IRA is a self-directed individual retirement account. As the sole account owner, you have complete control over what you want to invest in and how much you want to invest. Even though the IRS has a list of approved precious metals that qualify as investment options, your Gold SDIRA gives you the freedom to handle your account the way you want.

Gold Prices Only Tend to Increase

With a rich monetary history, gold has only ever shown a consistent increase in value. Gold is a limited resource, and the more it is utilized for jewelry and other consumer uses, your invested gold’s value will continue to increase. Being a long-term investment, you can expect your gold to generate sizable gains.

An added benefit is that in times of economic crisis, gold’s value tends to move opposite paper assets. Physical gold’s value typically increases when stocks and other paper investments decrease. People tend to hold onto tangible assets when the stock market is experiencing significant volatility and are unsure how their paper investments will come out on the other side.

Transfer Your 401(k) to a Gold IRA Today

If you’re looking to diversify your portfolio and want a retirement option that isn’t affected by the volatility of the stock market, transferring your 401(k) into a Gold IRA is the way to go. With the uncertainty of the current market, take advantage of the benefits that a Gold IRA offers.

For more information on protecting your assets against inflation with a Gold IRA, call (877) 646-5347 or fill out our Contact Us form and speak with one of our agents. Our representatives are standing by to answer any questions you may have regarding gold bars, coins, or beginning your IRA journey.

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