Should you consider doing a Gold IRA Rollover?
Rolling over a percentage of your retirement savings into gold through a tax-advantaged Gold IRA could be what prevents any economic instability from wiping out your accounts. Is it the right choice for your investment goals?
Gold has been a proven way to protect one’s wealth through the many economic cycles that have occurred throughout history. It is one of the few assets that has stood the test of time, time and time again. Making it a staple for savvy investors to hold, specifically, in tax-advantageous accounts that allow them to keep more of what they ear. If you’re here, you probably already know that.
The question is: how does one get started with gold?
You probably already have a retirement account of some sort, but how do you turn some of those funds into physical gold without making Uncle Sam angry?
Don’t worry I’ve got you covered. Let’s start with the basics…
What Is a Gold IRA Rollover
Educated investors already know how powerful it is to invest in gold and other precious metals. Then again, many investors don’t have enough cash to buy them directly. Even if you did have that much money in cash to get gold, silver, platinum, and palladium from a dealer, you’d be using after-tax money.
After-tax money is the net capital you have remaining after federal, state, and possibly even local taxes take a bite out of your budget. I don’t like it, and I’m guessing you don’t either. This is why precious metals rollovers have grown in popularity.
Many investors have saved up a lot of money in before-tax or tax-deferred shelters. These investment funds might sit in a 401(k), or they might be in another IRA. If you have a 401(k), then you can do a rollover into a gold IRA without paying any taxes.
Retirement accounts are usually filled with stocks and bonds. There might also be money-backed assets, including mortgage-backed securities or U.S. Treasury Bills. Now, you can diversify into physical gold, and you can enjoy its security in a legal IRA account that you fund from another IRA, a 401(k), or even a 403(b) account.
IRA Gold Rollover versus Transfer
Think any of this is complicated enough yet? I’ve got bad news for you. On top of everything else, you need to make sure that you’re doing an IRA rollover instead of a transfer.
What’s the difference between a transfer and a rollover? There are actually two primary differences that you should know about that separate these two things.
First, the starting and receiving accounts matter. In an IRA to gold rollover, the funds are moved from one kind of retirement account to a different kind. In a transfer, both the previous and new accounts are the same kind.
For example, a transfer could happen from an IRA with one financial institution to an IRA at a different one. Moving money from you 401(k) into a gold IRA would be a rollover since they’re different.
Second, you can do as many annual transfers as you want, in most cases. On the other hand, a rollover is something you only get to do once per tax year. That means you need to plan them out carefully and make the most of the opportunity in the limited occasions where you can actually do one per the IRS guidelines without taxes.
Retirement Accounts Eligible for Rollover
Five different kinds of retirement accounts are eligible for rollover into gold IRAs.
- IRAs: Rollover traditional, Roth, SEP, Simple, and Self-Directed IRA accounts to a precious metal IRA.
- 401(k): Inactive 401(k) accounts can be rolled over. If you are past 59.5 years of age and have an active 401(k), you might be able to do a partial rollover via an “in-service” distribution.
- 403(b): These retirement plans are offered to employees of tax-exempt organizations and public schools. Complete your rollover once employment is terminated. In some circumstances, a partial rollover can happen via “in-service” distribution after you are 59.5 years of age.
- 457(b): These retirement accounts are available to many local and state government employees, including first responders, law enforcement, and other civil servants. A rollover into gold is possible once employment is concluded, although exceptions might happen at age 70.5 for those still working.
- TSPs: Thrift Savings Plans are for federal employees, including military personnel and civil servants. Once your employment is finished, you can rollover a TSP plan into gold. Partial rollovers might be possible at age 59.5 via the same “in-service” distribution as 401(k) and 403(b) plans.
Instructions for Performing an IRA Rollover to Gold
Doing a gold rollover of a 401(k) plan, traditional IRA, or even a Roth IRA happens pretty frequently. You can do this if you leave a former employer and want to move your retirement savings. This is a good way not to keep it all in one single place.
It’s also useful for diversification into assets not tied as closely to the economy as stocks, bonds, and real estate. Your gold or precious metals IRA lets you invest in physical gold, silver, palladium, and platinum. Your gold IRA is technically self-directed, but you’ll need both a broker and custodian.
Your broker will sell you IRS-approved gold and precious metals. The brokers listed below are good places to start, but you can also get recommendations from your custodian based on who they have working relationships with. You can select a custodian based on the advice of banks, credit unions, and trust companies.
Once you are satisfied with your broker and custodian, open an account and buy the precious metals you are interested in. Once you are ready to retire, you can either collect your metals or just liquidate them into actual cash. The IRS taxes either of these actions as a distribution.
Once you open an account, contact the company responsible for your 401(k) management to start the rollover process. I usually suggest a direct rollover for its simplicity and safer way to avoid taxes. However, you can do an indirect transfer so long as it finalizes within 60 days.
Avoiding Tax Penalties
While doing a rollover can be done completely free of taxes, there are certain things that have to happen for this to take place. I would strongly encourage you to make sure your rollover happens this way. You want to preserve all of your wealth without taxation if you can possibly do it.
The trick is to keep the rollover event what the IRS considers a nontaxable event. In the case of a direct rollover, the trustee or custodian of the previous account must send the funds to the next custodian or your gold broker within 60 days. Even in an indirect rollover, where you are a temporary stop for the funds, you must still get them to the next custodian within 60 days.
Failing to do so might not stop the rollover, but it could make it a taxable event. That usually starts with a 10% penalty. Normal taxes might be applied at the federal level, and your state might tax the early distribution as income, too.
Another advantage of a direct rollover applies to employer-sponsored retirement plans. Indirect rollovers might be required to have 20% of the sum subject to withholding for a stretch of time.
Self-Directed IRA Eligible Physical Gold
The IRS permits certain kinds of bullion and coins from gold, silver, platinum, and palladium for a precious metals IRA. Some foreign coins are acceptable, as are U.S. Treasury Department 1-oz. silver coins. You can also get U.S. gold coins in the sizes of 1, 0.5, 0.25, and 0.1 ounces.
Each precious metal must meet a minimum fineness requirement, which is 99.5% purity for gold. Silver needs to be 99.9% pure. Both palladium and platinum must be 99.5% pure.
Coins, rounds, and bars have to be produced by a manufacture, assayer, or refiner with certain certifications or accreditations. A federal government mint usually qualifies. You can also look for anyone listed as meeting the requirements of ISO 9000, TOCOM, LPPM, LBMA, LME, NYSE/Liffe, COMEX, or NYMEX.
Commonly acceptable gold products include American Eagle bullion or proof coins and U.S. Buffalo bullion coins. Acceptable silver products might include American the Beautiful coins or Mexican Libertad bullion coins. Canadian Maple Leaf coins are acceptable examples of both palladium and platinum.
Some precious metal products are not acceptable, even if they meet the fineness minimum requirements. Rare and collectible coins do not qualify by law. Also, many foreign currencies don’t make the cut.
Frequently Asked Questions
You can do a IRA rollover to gold by ‘rolling’ an existing retirement plan into an IRA. You can move funds into any kind of IRA, including gold and precious metals. Qualifying accounts might include 401(k) and 403(b) plans. This might be an option when a triggering event occurs.
- You leave your job.
- The employer-sponsored retirement plan changes.
- The employer-sponsored retirement plan has a change in custodian.
That’s the entire point of a precious metals IRA. You create a self-directed IRA. Then, you choose a broker, or IRA gold business, who will buy the gold and precious metals for you. You would also need a custodian who administrates the account and stores your physical bullion. The IRS lists appropriate depositories who store the precious metals. You shouldn’t keep them at home, and in some cases, you simply can’t.
You can convert conventional or traditional IRAs into self-directed gold-backed IRAs via transfer or rollover.
I have gone over some of the most trusted gold brokers that handle rollovers above. At the top of that list right now is Goldco due to their sheer expertise handling these transactions. But any of the picks in this article will be able to easily, and efficiently walk you through the rollover process.
If you already have a self-directed IRA with precious metals like gold in it and want to transfer it to another institution, then you will follow much of the same process as if you were rolling over from a traditional retirement account. Open the new account with the desired broker and have them contact your old broker to start the process. From there, just follow the instructions of your broker and you’ll be ready to go in no time.