401k to Gold IRA Rollover Guide – What You Need to Know25 min readReading Time: 17 minutes
Many people have a retirement account, and they think it’s enough. Typically, it focuses on the offerings of the stock market, such as stocks and bonds or other assets focused on the US dollar.
However, this free gold IRA investment guide is here to show you how you can easily convert some of that to bullion coins and gold bars. Doing this might protect your investment from inflation, economic uncertainty, and currency debasement.
The process is called a Gold IRA rollover. Essentially, it’s an official term that focuses on the process of opening your self-directed IRA, but the retirement accounts use precious metals, such as gold and silver, instead of traditional options.
Our gold IRA rollover guide can help you simplify the process and build your retirement portfolio efficiently.
While funding the new gold IRA with cash is always your option, typically, a rollover is a tax-advantaged and safer strategy for moving over your retirement savings. With that, it is tax-deferred, which means you don’t have to pay high taxes for your IRA.
Here, we discuss the steps you must take for your gold IRA rollover.
The first thing you must know is that you can fund your new gold IRA in two ways: a transfer or a rollover. Most people confuse the processes, calling them both a rollover. However, each option is different. You can learn what sets apart your IRA rollovers from a transfer. Though it is a bit confusing, we can help you get through it efficiently.
What Are the Differences Between a Transfer and a Rollover?
Most people call the movement of funds from retirement accounts to something else a rollover, but the IRS has a clear definition of what a rollover and transfer are.
What is a gold IRA rollover? With this option, the money you move is paid to you first and then you deposit it into another retirement account. However, with a funds transfer, the original IRA custodian transfers the funds into a Gold IRA account to the new custodian you designate to get the funds. In a sense, you never see your money.
Typically, precious metals are underused for a person’s retirement savings, but with this new IRA option, you can have gold and silver, and it can be extremely beneficial for many reasons. We talk about this later, so you can understand why you might want to have gold, silver, and other things.
Rules for a Gold IRA Rollover
If you choose to do a gold IRA rollover, you receive the money from the custodian you use now and have 60 days from the day you receive those funds to put it into a gold IRA company of your choosing or find another custodian.
However, if you don’t complete your transaction within that time frame, the money is then called a taxable withdrawal. You are sure to get the 10 percent early withdrawal penalty (for those under 59.5 years old.)
Those who withdraw from their traditional IRA or Roth IRA for a rollover into another don’t have the tax withholding issue. However, you’re only allowed one rollover each year, which includes precious metals and money.
Rules for a Gold IRA Transfer
A transfer is considered a custodian-to-custodian movement. You don’t get any money, and that simplifies the process immensely. Plus, you don’t have to worry about penalties. With a direct IRA transfer, the 60-day transfer rule never comes into play because you don’t get the money.
Typically, the transfer takes place via wire transfer between each IRA custodian. The original one can also write a check to the other custodian and mail it to them. Usually, when investing in gold, this is the easiest way to do so. When it’s done through the IRA, it’s handled quietly and in the background. Plus, precious metals are becoming more popular and can be highly beneficial.
401(k) to Gold IRA Rollovers
Typically, a 401(k) plan could have different rules for transfers and rollovers. If you have the 401(k) from your previous employer, there should be no issue. You should easily be able to handle a 401(k) to gold rollover and pick any custodian you want.
However, if the retirement savings account is through a current employer, you must check with your store manager or go further up the chain of command. Some employers don’t allow investments in gold as part of the 401(k) unless you first quit your job.
Before you focus on your retirement accounts and use precious-metal options, it’s best to understand what your employer offers in its 401(k). While there could be ways around the restrictions, it’s great to know if you might face an obstacle from the very beginning.
We realize that you might still be confused, so let us explain the rollover process a bit more to ensure that you understand.
After the Taxpayer Relief Act of 1997 was passed in the mid-1990s, Americans can hold precious metals, such as collectibles, coins, and other gold investments in their retirement accounts (tax-advantaged).
With that new privilege, it’s a shame for people not to use it efficiently. That way, you can have more of your wealth in a tax-deferred or tax-free account and still diversify your 401(k) with gold.
It’s best to call your employer to ask about the current 401(k) and whether or not it’s possible to roll over to a Gold IRA.
Typically, the Internal Revenue Code (Section 401(k)) lets people make contributions to their retirement account without being taxed on the contribution until they choose to retire. You also have to contend with the Internal Revenue Code (Section 408(m)(3)), which are the guidelines and exceptions for what coins and bullion you can invest in.
You can roll your traditional IRA funds into your Gold IRA, but here are the rules:
- The gold needs to have a 99.5 percent purity with a fineness of 0.995.
- Your custodian must hold the gold.
- There are contribution limits.
- Pre-owned gold isn’t allowed to be added to the gold IRA, though you can open an account and buy new gold to add.
Choose Your Gold IRA Rollover Strategy for Allocation
When conducting the Gold IRA rollover, you must understand how you plan to invest the funds and how your current investment strategy might affect your planning. We often get questions from retirees and investors who ask us what percent of their portfolio should include precious metals. In a sense, there’s no easy way to answer that question.
However, we do try to tackle the dilemma by asking experts of the subject and compiling their opinions. Since they are top financial investors, they know what they’re doing.
We’ve interviewed many financial advisors, and the opinions we’ve gotten about gold allocation differ. Some famous investors stick to the five to 10 percent rule, though others are more aggressive and put more precious metals in their retirement accounts.
The questions you ask yourself can help you determine your strategy for retirement. They should include:
- What is my outlook for the economy as a whole?
- What are my main objectives for investing in physical bullion? (diversification, protection, profit, etc.)
- How has my retirement portfolio been performing up until now?
Please note that we are not providing financial advice. It is important to discuss things with your financial advisor before you choose to invest in new asset classes or get an IRA. Your financial advisor understands your current situation better than we can.
Here are a few of the popular strategies we’ve come up with by looking at high-net-worth and celebrity portfolios and talking with professionals:
Diversification and Protection
Most people have a current portfolio that is biased and focused more on the stock market, such as mutual funds, bonds, and stocks. Therefore, if you have something similar for your retirement accounts and allocate five to 10 percent of the portfolio size to precious metals, it can help you efficiently diversity your portfolio and protect it.
Many top financial experts have adopted this strategy, such as Ray Dalio, Tony Robbins, and Kevin O’Leary.
Though some analysts suggest that people dedicate a smaller percentage of their portfolios to precious metals, most risk-conscious investors put more of the portfolio value to gold and silver to hedge against the risks of the market.
As a rule, though, the closer to retirement you are, the more you should consider investing into precious metals than other options.
Loss of Trust for the US Dollar
Ultimately, most Americans have lost their trust in the American dollar (and many other paper currencies). It’s to be expected with all the confusion and upset in the world. Therefore, some people choose to allocate anywhere from 10 to 20 percent of their assets into precious metals.
For centuries, gold and silver, as well as other hard assets, have become great hedges against economic problems and currency devaluation. If the inflated US dollar kills the value of the greenback, it’s important to have wealth stored in other things to protect your retirement savings. It just makes good sense to do this, but we know how it might be worrisome or scary to some individuals.
Complete Loss of Confidence for the Financial System
If you fully believe that the financial system is likely to collapse, you probably also think that the price for gold is sure to be higher. Therefore, you might consider allocating 20 to 30 percent of your portfolio into precious metals.
Be warned, though, that this is risky because the price of gold is highly speculative. Experts that we’ve interviewed agree that those new to saving for retirement should play it safe and choose a lower allocation of gold and silver. You can always adjust it each year based on the economic landscape and your results.
In fact, you should not take this content solely on its own. While it is here to offer information, it is not financial advice. Please discuss your concerns with a financial advisor before making investment decisions.
You should also remember that when you invest through an IRA, you must use bullion coins and bars that are IRS-approved. If you choose to invest in unapproved gold coinage or bullion, you could owe tax on the holdings, which defeats the purpose of having an IRA or 401(k).
Some IRA and 401(k) custodians allow investors to use Gold ETFs and gold mining stocks. Though these investment types don’t require storage facilities like physical bullion, you should understand that a Gold ETF is an investment for paper gold and not physical gold. There are differences between these two assets.
Having precious metals, such as gold, in your retirement savings can be crucial. However, it comes with its own rules and considerations.
Paper Gold vs. a Physical Gold IRA Rollover – The Differences
There is a large difference between physical gold and paper-backed gold, such as ETFs and stocks. It’s hard to argue that paper gold and silver offer more benefits over real gold, other than liquidity. If you hope to gain outside-the-system exposure for gold or silver, you should look to precious metals. During a systemic collapse, gold ETFs and securities are just worth the paper they were printed on.
However, there are various benefits for holding physical gold & silver bullion for your retirement. Owning physical precious metals instead of securities-based versions has many advantages. We’ve outlined a few of them below:
- Portable – Physical gold can easily be withdrawn from the IRA and held in a private residence or vault. This is like having many thousands of dollars on you at all times.
- No Counterparty Risk – You don’t have to ensure that the third party follows through on their part of the deal (such as with mining companies), and you do with stocks and ETFs. Instead, you can cut out the middleman completely and handle your assets without another person filing bankruptcy or stealing from you.
- Emergency Store of Value – If there’s a systemic collapse or economic disaster, paper gold isn’t likely to help. However, physical gold bullion bars and coins can be used as a way to exchange for goods during periods of instability or crisis.
- Ownership – When you have physical gold, you own this metal and can do whatever you want with it. Still, there is a downside because it’s an illiquid asset that takes more time to sell and buy on exchanges, such as COMEX.
If you’re hoping to open a 401(k) or gold IRA while primarily investing in gold ETFs, it’s important to understand how to do so correctly.
While they do offer tangible exposure to the gold market, paper gold doesn’t give you the same benefits as physical gold. Therefore, you should understand the risks and benefits for both options before you move forward with an IRA or 401(k) rollover. While it’s all your money, you need to ensure that it is working for you until you retire.
We understand that you might still be confused about the advantages or differences between the two. Therefore, you can always talk to your financial advisor to get answers to your specific questions. Since it is your money, we want you to be thoroughly educated and understand what options you have and what might be best for you.
Choose the Best Gold IRA Custodian to Manage Your Gold IRA Rollover
Your retirement is important to you, and you must choose the right gold IRA rollover company to help you rollover or transfer some of your wealth. Therefore, you should perform careful research about the business practices and background of any company you consider. Ultimately, you can choose various assets for your retirement IRA rollover, such as gold, silver, platinum, and palladium. Here are the two primary reasons to choose your custodian carefully:
- You must be sure that your retirement savings are being handled by a trustworthy and certified company. Some profit-hungry dealers and scammers try to push numismatic coins. While they do have high-profit margins, they have a low gold purity content. Remember, you must use IRA-approved precious metals and know what gold & silver coins are appropriate for your IRA.
- With that, the Internal Revenue Service only allows you to get a tax-free rollover of your IRA funds once a year. This rollover of the full fund amount should occur within 60 days after removing the funds from the current custodian’s care. That way, you avoid any annual fees and tax penalties. After all, you want to keep more of the money you made and put into the IRA, so the rollover must be done correctly.
The Gold IRA custodian you choose must provide you with the appropriate contact information and paperwork to arrange the IRA rollover. If you do all that before the rollover date, you can ensure that your money is successfully transferred to your IRA account for your retirement savings needs. You only have 60 days. Sometimes, the IRA custodian issues you the check for the full IRA amount, and you must arrange the deposit to the new custodian. There could be fees associated with the rollover of the IRA, and you should talk about that before making any decisions.
Though having gold or silver as part of your retirement fund is crucial, you must do it properly.
A Word about Restrictions for Gold Bullion Bars and Coins
The IRS has laid out some strict rules that focus on what gold coins and bars you can invest in with your IRA. The coins must be minted with a purity level of at least 99.9 percent or better. This does include the American Gold & Silver Buffalo, Austrian Philharmonic, Canadian Gold Maple Leaf, American Gold & Silver Eagle, and other coins. With that, certain gold bars are included, such as the gold bar from Credit Suisse.
Usually, there are a few considerations involved when switching from Roth IRAs and traditional IRAs to the gold IRA. However, the advantages of adding gold and silver to the investment profile are often worth it. Still, you must understand the steps needed to complete the IRA rollover to ensure that it’s stress-free and simple from the tax standpoint.
You may only use IRA-approved gold or silver collectibles and coins for your gold IRA rollover or a gold IRA in general. Therefore, you should ensure that you’re investing in gold that is approved by the IRS and your IRA. While there are various precious metals items that you can find at pawn shops and elsewhere, they are likely not compliant with the IRS regulations. Therefore, you could suffer severe tax complications that might trigger an audit.
Remember, investing in precious metals for your IRA is so much different than what you do for a traditional IRA. While you can still put in some of your own gold or money, you must ensure that the gold you use is appropriate. Otherwise, it can screw with your retirement and cause many other issues.
FAQs about Your Gold IRA Rollover
We realize that you want the best for your retirement account, and most people want to invest in gold or silver. If gold is your main goal, then you should consider a gold IRA. However, you still have concerns, and we are here to help.
This guide is here to give you all of the information you need. Therefore, if we haven’t answered your questions, consider the FAQ list below.
A gold IRA rollover lets you convert some of your current retirement account or investment portfolio into bullion bars and coins. That way, you can hedge against inflation and other economic uncertainties.
Many times, you can move funds from your 403(b) or 401(k). A 403(b) is a tax-sheltered annuity plan. It is often used by ministers, tax-exempt organization employees, and those working in public schools. If you have a 403(b), you can still use the gold IRA rollover, but you should discuss your options with a financial advisor first.
Sometimes, the movement of funds from a retirement account to another one is called a rollover. However, the Internal Revenue Service does have clear rules as to what dictates and transfer or a rollover.
With a rollover, the money to be moved is first paid to you. Then, you must deposit those funds into the other account. During a transfer, the original custodian of your IRA transfers the funds to the new IRA custodian directly. In a sense, you personally don’t see the money at all.
Typically, the custodian-to-custodian transfer is a common way to establish self-directed IRAs like the gold IRA with your existing and qualified funds. You establish a new account with your IRS-approved custodian. With your consent, he or she requests the transfer of your IRA assets from the existing retirement account. That way, the custodian can accept the money from your 401(k) and invest your assets according to your needs and preferences.
Often, the self-directed IRA is the best way to go. However, if you choose a rollover, you should consider the direct rollover because it’s seen as the best choice. An indirect rollover usually has withholding requirements, and you could incur penalties for early distribution. Ultimately, the choice is yours, and it’s a good idea to talk with your financial advisor before making any decisions.
The IRS has very strict regulations and rules for gold IRA accounts. The most important of them pertain to the self-directed IRA, such as a gold IRA, which is often different from a 401(k). Federal law states that you require an approved IRA custodian for this type of retirement fund. Though it gives you more purchasing power, it can be slightly riskier than other options.
It’s crucial to note that you don’t personally buy precious metals like gold with your IRA account. The IRS requires that the IRA account administrator handles the transactions for you. In a sense, you just tell the custodian what to do, and they can start buying precious metals. They make the arrangements for insurance and shipping at the conclusion of the transaction. While you have purchasing power, it’s not like you go to the pawn shop and choose the precious metals for yourself.
Once the gold is purchased, the custodian must store it according to the IRS rules for the precious metals IRA, such as Gold IRAs. The custodian of the new IRA receives the precious metals and immediately hands them to a third-party, IRS-sanctioned, off-site depository. You can choose the depository it uses or can use one that the account administrator is already familiar with.
It safeguards and inventories your precious metals holdings until you tell the account administrator to sell or distribute the gold for you. There are often no required minimum distributions for your IRA account. However, you can make them if you want for your retirement.
Since it is usually self-directed, you can get distributions sent to your address with insured delivery. These can be used for whatever you want, and some people put them in a savings account to bulk up their retirement funds even more.
Again, the IRS has strict rules that pertain to an IRA rollover. If you chose to do a gold IRA rollover, you have 60 days from the day you get the funds to deposit that money into your account from the gold IRA company or the custodian you choose. If you don’t get the transaction completed during that time frame, the money is now a taxable withdrawal. You also face a 10 percent early withdrawal penalty as you do with a regular 401(k) if you are less than 59.5 years old. Those who withdraw from a personal IRA to roll over to another don’t have to deal with tax withholding issues. Just remember that you’re only allowed on rollover each year.
With a direct custodian-to-custodian transfer, you don’t have to deal with the 60-day transfer rule because you don’t actually receive any money. The transfer is done through a wire transfer directly between the custodians. The original custodian can also issue a check to the new custodian and mail it to them. These are the easiest ways to invest in gold and other precious metals because it’s all done by someone else. With that, the self-directed IRA is often the best choice. Though you can have that with Roth IRAs and traditional IRAs, your Roth IRA or your 401(K) doesn’t allow gold to be used.
There aren’t any government-sanctioned transfer or rollover fees to move an existing traditional IRA or 401(k) into a precious metals IRA account. With that said, though, there could be some account application fees to contend with. Sanctioned administrators and custodians of the precious metals IRA usually charge a processing fee to open the account for self-directed IRA options. Therefore, different administrators can charge different amounts, but the average is roughly $50. There could be fees involved for moving money from a 401(k) to a gold IRA.
If you’ve got a 401(k) account, you may roll it into an Individual Retirement Account (IRA) or other qualified plans without facing any income tax penalties. Here is a basic overview of some of the 401(k) rollover rules:
- When you receive the funds from the 401(k) for the rollover, you only have 60 days to complete this process. If you don’t do it within that time frame, the IRS treats the money as a taxable distribution. With that, if you’re not 59.5 years old yet, the IRS imposes a 10 percent penalty from the withdrawal along with normal income tax concerns.
- You can only perform one 401(k) rollover each year from a 401(k) to the IRA. That one-year period starts on the date when you receive the 401(k) distribution. This applies to each IRA you own separately.
- You can’t use the money from the distribution to buy investments in that period between receiving the 401(k) distribution and establishing the IRA.
It is best to choose the option to do the direct rollover for your 401(k) to gold IRA. With this option, you don’t get a check for the 401(k) funds. Instead, the 401(k) plan provider transfers the money into the new plan directly.
Since you are on a time crunch (60 days) and can’t buy any other assets with that money, it’s often best not to tempt yourself. Though some people choose to pay off debt or buy assets and replace the money spent, this is a very risky thing to do. If you don’t get all the funds back into the account in two months, you risk severe penalties and must pay taxes on it the following year. Yes, it is lucrative, but the risks far outweigh the benefits.
The IRS has very strict regulations about the types of precious metals and gold allowed in a self-directed IRA. The investor may hold gold bullion, bars, and gold coins as long as the assets meet two standards.
The gold has to be an official currency of any recognized public entity. With that, it has to meet the purity standard. For the United States, the purity level of physical gold must be 0.995. That standard varies for different countries. Therefore, research is required to find out the exact purity level that’s needed.
The types of physical gold you may hold in your self-directed IRA (gold IRA) can include:
- Swiss PAMP Gold Bars
- Credit Suisse Gold Bars
- Certain Gold Bullion Bars
- Gold Kilo Bars
- American Gold Buffalo Coin
- Canadian Gold Maple Leaf Coin
- American Gold Eagle Coin
- Austrian Philharmonic Gold Coin
A gold IRA company specializes in setting up gold IRAs from start to finish. This includes the rollover or transfer. Other components that such companies can handle include account setup, purchasing IRS-approved precious metals, storing them through an accredited and IRS-approved depository, and more.
Typically, reputable gold IRA companies should handle the full process for you. However, you are bound to have questions, and a representative should be available to answer questions during any part of the situation. Typically, these companies form alliances with accredited depositors, traditional IRA custodians, and metal dealers (wholesale).
It’s important to choose the best gold IRA company, which depends on the factors that are significant to you. It could be customer support, ratings, physical location, storage options, and the availability of other asset options. Once you know what is essential for you, make a list of a couple of companies that meet those criteria. Request a free gold kit from the website or call them to learn about the products and company.
Usually, gold IRAs are not handled by the same people who offer a 401(k). However, some specialize in both. It might be wise to contact your financial advisor and tell them what you want to achieve, which is to take some funds from your current 401(k) and create a gold IRA.
Likewise, you must do your research by calling a few gold IRA companies before making the decision to invest with one of them. Each one has different fees and options, so you be thoroughly educated about what you need before you do anything else.
Through the Taxpayer Relief Act in 1997, some gold, silver, platinum, and palladium bars and coins are permitted in traditional 401(k) retirement accounts. This includes 1/2 ounce, 1 ounce, 1/10 ounce, and 1/4 ounce coins that are minted by the United States Treasury Department. Likewise, select rounds, bars, and foreign coins of the right purity are allowed.
- Palladium and platinum must be 99.95 percent pure, silver must be 99.9 percent, and gold has to be 99.5 percent pure.
- Proof coins need to be in their original Mint packaging, have a Certificate of Authenticity, and be in flawless condition.
- Bullion coins need to be in Brilliant Uncirculated condition.
- Bars, rounds, and coins not made by the US Mint have to be accredited by an assayer, manufacturer, or refiner and meet appropriate purity requirements.
Here is a list of some of the palladium, platinum, and silver coins allowed:
- American Eagle Palladium Coins
- Canadian Palladium Maple Leaf
- Australian Platinum Koala Coins
- American Eagle Platinum Proof/Bullion Coins
- Canadian Silver Orca
- Canadian Silver Snow Falcon
- Canadian Silver Polar Bear
- Chinese Silver Panda
- British Silver Britannia
- Australian Silver Kookaburra
- Austrian Silver Vienna Philharmonic
- Many others
If you want to invest in gold and silver, you need something more than your regular 401(k) account. It is possible to take out some of the money from your 401(k) and invest in precious metals. Your retirement portfolio is sure to thank you.
Typically, these are considered self-directed IRA options because you can use alternative investments to save for retirement. However, when using a self-directed IRA, you should be aware that the other rules still apply, and there are strict regulations in place about the type of gold and other metals you can use.
We know how challenging it can be to figure out how to save for your retirement. Therefore, before you make any changes to your 401(k) or IRA, you should talk to a financial advisor. That way, you are armed with the right information and don’t get in trouble with the IRS.
Ultimately, we hope that you have enjoyed this free gold IRA guide to help you understand how to roll it over and do it correctly.