What if we told you there’s a new retirement savings option you’ve never heard of? In 1997, the Taxpayer Relief Act established the Gold IRA. This long-term retirement account allows a custodian to hold precious metals for the account holder. Investing in Gold will enable investors to hedge against volatility in the stock market and other long-term investments.
As you begin to save for retirement and become familiar with keeping options like the 401k and Roth IRA, understanding the benefits of a 401k Gold IRA rollover account is essential. In this 401k Gold IRA rollover guide, we’ll overview the process of opening a Gold IRA and how to roll over existing funds from your 401k account.
What Is a Gold IRA?
A Gold IRA is a long-term retirement account that allows the account owner to hold precious metals through a custodian. All IRAs must be a custodian to help manage paperwork and ensure proper tax reporting for gold transactions.
Despite its name, this plan allows you to hold Gold, silver, platinum, and palladium. Because these plans are self-directed IRAs, you can invest in more diverse holdings than a traditional IRA.
However, remember that the IRS has a specific list of requirements for all metals before having them in your Gold IRA. Here’s an overview of the requirements:
- Gold – 99.5 percent pure
- Silver – 99.9 percent pure
- Platinum and palladium – 99.95 percent pure
- Bars, rounds, and coins – produced by a refiner, assayer, or manufactured that’s accredited/certified and meets minimum fitness requirements
- Certification can be through any of the following: NYMEX, COMEX, NYSE/Liffe, LME, LBMA, LPPM, TOCOM, ISO 9000, or a national government mint
- Proof coins – encapsulated in complete and original mint packaging; in excellent condition and include the certificate of authority
- Small bullion bars – manufactured to specific weight requirements
- Exceptions: 400-ounce Gold, 100-ounce Gold, 1000-ounce silver, 50-ounce platinum, and 100-ounce palladium bars
- Non-proof (bullion) coins – in brilliant and uncirculated conditions; free from damage
Many people now wonder why they would invest in a Gold IRA. Couldn’t they just put that money in the market? For most, it seems like far less of a hassle for a similar result.
Yet, as a precious metal, Gold has intrinsic value. While the stock market and other investments are volatile, Gold remains valuable regardless of current events. Additionally, Gold and other precious metals have a strong history. The gold standard — the system where the value of paper money was directly linked to Gold — laid the foundation for how people viewed currency. It’s always been used as a store of value and a medium of exchange. Meanwhile, paper currencies have historically collapsed to a purchasing power of zero.
Some investors firmly believe that a natural disaster or geopolitical catastrophe could wipe out paper money and other investment. This would make it highly advantageous to have Gold in a worst-case scenario. Gold an excellent addition to any diversified investment portfolio.
How to Open Gold IRA
Before you can roll over your 401k money into a Gold IRA, you must open this gold-specific account. This process requires several key partners, including a custodian and a broker.
As noted above, a custodian is an individual who holds the Gold you purchase through your IRA. Because of legal requirements, you cannot have this asset alone. Contact a bank, credit union, or trust company to find a custodian. Get several names and research the custodians and companies you intend to work with. You want to make sure whoever you choose to work with has a track record of strong performing Gold IRAs.
A broker is another important partner in this journey. They’re the person who will call you the Gold (or other precious metal) that fits the criteria listed above. If you aren’t sure where to start your research there, your custodian should have a list of brokers they’ve previously worked with. Although, steer clear of any custodian who tries to pressure you to work with a broker or someone who doesn’t seem connected within the industry.
Once you’ve decided on your custodian and broker, you can open your account. The next step is purchasing precious metals. If you’re rolling over money from your 401k, you’ll use those funds to buy the precious metals.
When it’s time to retire, you’ll have two options:
- Collect the metals
- Liquidate them into cash
Either action will be treated as a distribution with the IRS.
Understanding 401k to Gold
If you’re ready to invest in Gold using your retirement funds, make no mistake; nearly all 401k plans do not allow individuals to invest directly into precious metals. As a result, you won’t be able to purchase gold bullion or gold coins as part of your retirement portfolio, even if it meets the IRS’ strict requirements.
So, how does 401k to gold work? This is where the Gold IRA comes in. The Gold IRA offers investors a particular type of individual retirement account that enables them to add approved precious metals as qualified investments.
401k to Gold IRA Rollover
At this point, you’ve either created a Gold IRA or had an existing one. You’re now ready to roll your 401k funds into the Gold IRA. Transferring money from a retirement account like a 401k is necessary because a self-directed Gold IRA is an individual account. The IRS has specific rules about how it must be set up and managed and the type of assets reported in the statement.
While you may think you need to find 401k to Gold rollover companies to complete this process, you can primarily coordinate it independently with assistance from the companies and parties managing your existing 401k and Gold IRA accounts.
Here are the steps to the rollover process:
- Contact the company managing your 401k art the process of rolling over your 401k to your Gold IRA, and reach out to the company currently operating your account. You’ll need their assistance with the process. If you’re missing any usernames, passwords, or other vital information, now is the time to find it.
- Choose between direct or indirect rollover.
- Direct: The funds move directly from one account to another
- Indirect: You withdraw the funds from one account and then deposit them in another
The direct route is typically much more straightforward and has less risk of IRS penalties. If you must do an indirect rollover, you’ll have 60 days from receiving the funds to transfer the money to your custodian or Gold IRA company.
Otherwise, the funds will become a taxable withdrawal if you don’t complete the transfer in 60 days. For anyone 59.5 years or younger, this will result in a 10 percent entirely withdrawal penalty, which is completely avoidable! Don’t let this happen just because you didn’t complete the process.
- Satisfy any special requirements.
Regardless of whether you choose a direct or indirect rollover, you’ll need to double-check whether the company you’re working with has any special requirements you must meet. After these obligations are met, your 401k company will send a check with your funds to you (indirect) or your Gold IRA custodian (direct). This will complete your 401k Gold IRA rollover.
Why Rollover Your 401k to Gold IRA
It’s not easy trying to make decisions about your retirement savings. Many people put off saving for retirement or investing in retirement savings for year decisions on what they should do.
Don’t let indecision stop you from pursuing a 401k Gold IRA rollover if it’s your right choice. But is it the right choice? Answer these two questions to find out:
- Do you want to diversify your retirement savings (i.e., you don’t want too many eggs in one basket)?
- Do you want a retirement option that doesn’t reflect the volatility of paper currency or the stock market?
If yes, then going 401k to Gold through the rollover process is for you! Join the thousands of other investors using gold investments to hedge against other investments.
Our 401k to Gold IRA rollover guide 2023 is intended to help you get started on this topic, but there are lots more to learn. If you’re ready to dive deep, get the FREE Gold IRA Guide today for more 401k Gold IRA rollover information. Today is a great day to start investing and protecting yourself from the risk held in paper money.