Complete 401k to Physical Gold IRA Rollover Guide

401(k)'s historically get hit hard when markets take a turn. Is your Retirement safe from an event like this?

When it's time to retire and sail off into the sunset, no one wants to be worrying about the state of economy. It is common advice, that the closer you are to retirement, the less money you should have in high-risk assets like the stock market. Especially in the global climate that we are in today. A perfect storm that has led to retirees across the country to rolling over their 401k into Gold IRAs in record numbers.

You probably spent years contributing to your 401(k) account. In fact, you might have decades’ worth of savings and contributions in there. When the time comes to roll it over into something else, you’re likely to have multiple questions and concerns.

How do I preserve the value of the investment? Where should I put it all? How do I avoid losing any of it to taxes or fees?

A gold IRA rollover for your 401(k) can be a good idea for at least some of it. When done right, you do so without penalties, so you preserve your money. You can also enjoy the benefits of putting some of your savings into a gold IRA as a hedge against inflation and economic uncertainty.

Knowing how to do this means you need to be aware of the steps involved and who you might work with. We cover all of that today.

What Is a Physical Gold Backed IRA

Gold IRA accounts were made possible thanks to the 1997 Taxpayer Relief Act. As with 401(k) accounts and other IRA options, it’s intended to be a long-term retirement savings account. Investing money into one of these should let you take advantage of special tax breaks or deferments that help you save more money over the years.

While they are known as gold IRAs, you don’t have to restrict yourself to simply gold. A gold IRA is usually a self-directed IRA, so you have more diversity in your investment choices than with traditional IRA accounts. The common name for these accounts is gold IRA, but you can also include specific kinds of palladium, platinum, and even silver in your holdings.

While your gold IRA account is backed by physical precious metals, there are two things to take into account. First, you can’t buy anything made out of those metals. Second, you’ll need an IRS-approved depository to serve as the custodian where your IRA gold and precious metals are stored.

In regards to the metals themselves, numismatic coins aren’t permitted. Metals must be sourced from either a refiner the IRS approves of or an actual government mint. You can get approved bars, rounds, and coins, but they must be 99.5% in their purity level.

Custodians watch over your metals in approved storage vaults. These can be segregated storage or group storage. These custodians serve the same role as fund managers in traditional IRA accounts.

Table of Contents

Why Should I Rollover my 401k into a Gold IRA

Doing a 401(k) rollover into a gold IRA is only something you should do if it actually makes sense for you to do so. Everyone’s situation is different, so we urge you to know the upsides and potential disadvantages of doing it. Then, you can weigh each of them for a balanced decision about what is right for you.

The Benefits of a 401(k) Rollover

Putting your 401(k) into a gold IRA can provide you many potential advantages.

  • Inflation: Gold is historically a hedge against this
  • Staying Power: Stocks and bonds might go bankrupt but gold is permanent
  • Tax Haven: Your capital gains will be taxed as normal income rather than the 28% collectibles rate
  • Diversification: Precious metals help spread out your nest egg past just stocks and bonds
  • Distributions: Take them as gold or cash as you see fit

The Drawbacks of a 401(k) Rollover

For all the possible benefit, a 401(k) rollover into a gold IRA might also carry some downsides that deter you.

  • Penalties: If you don’t do the rollover right, you might be subject to a 10% early withdrawal penalty
  • Purchase Restrictions: Gold has to be bought inside the IRA account instead of moving in what you already own
  • Fees: There can be fees for buying, storing, and selling gold

Step by Step 401k to Gold IRA Rollover Instructions

If you want to convert the funds you have in a 401(k) into a gold IRA account, then you need to follow certain steps.

  1. Identify a Gold IRA Service Provider: You need an industry expert who will serve as a reliable source of information you can use in creating a gold IRA.
  2. Pick a Custodian: Even though your gold IRA will be a self-directed account, you’ll need someone to handle physical custody of your gold.
  3. Open Your Account: This formal step is necessary to buy precious metals to be stored securely in a facility.
  4. Process the Rollover: Finally, you’ll need to process the fund rollover from the previous 401(k) account into your newly created gold IRA account before your custodian and provider can go about acquiring the metals you will now own.

That’s a brief overview of the process, but we also think it’s worth looking further into each of these steps. The enormity of the decisions involved might be a bit overwhelming, especially if you have a lot of money involved with this. However, there are many resources you can turn to in order to learn your options and the potential consequences of all these decisions.

1

Finding Your Gold IRA Service Provider

Gold IRA accounts differ from conventional IRAs since they have precious metals. They are often physical coins and bars. This differs from a traditional IRA where the assets are more likely to be stocks and bonds.

Many retirement investors will be new to investing in such assets. Gold and silver service providers are professionals who can help educate them. If you’re not familiar with investing in precious metals, then a reputable provider can give you the information you can use to get comfortable and familiar with all of this.

They can also walk you through the steps of creating your new gold IRA account. That can include specific steps like choosing your particular custodian, picking your metals, and ascertaining which storage facility they will be stored in.

Precious metal providers have expertise in the four metals you can put in your account. The best professional in the industry will stay by your side through all the paperwork and selection of the metals. However, we believe you also deserve someone who sticks around after the initial transaction and serves you well for as long as you have your account, up until its finality and liquidation.

2

Choosing the Custodian for Your Self-Directed IRA

The next step is deciding who will administrate your gold IRA. Don’t even think about keeping the physical gold yourself. That’s actually against the law for precious metals involved with a gold IRA.

A gold IRA custodian is usually a company. They’ll maintain records of every transaction. They will offer services and documentation for both you and the IRS.

Their primary function is facilitating the buying and selling of any precious metals that you decide to invest in. They will do such transactions on your behalf. You never have to be physically present for the purchases or sales.

A lot of investment companies don’t involve physical assets with their IRA options. Many of them are Wall Street firms or financial advisors. They want you to put as much money as you can into stocks and bonds, and they want that because they often get commissions for you doing that.

If you decide on a gold IRA account, be sure that you invest with a firm specially created to handle the administration of self-directed IRA accounts. In such cases, account owners are personally in control of the assets in the IRA. They don’t count on another company’s services to make investment decisions.

Even though the account is self-directed, we’d like to remind you that you can still benefit from having a financial advisor or team supporting you. While a gold IRA doesn’t have a fund manager like a traditional IRA might in making the specific investment decisions, you can make your own personal investment decisions based on the advice of an industry professional. Someone familiar with investing in gold and precious metals is a great choice for this role.

3

Starting Your Gold IRA Account

Once you know who the gold IRA account administrator will be, you should open the actual account. Only then can your provider and custodian get going. They’ll work together in buying and selling precious metals that you decide to invest in.

Once your provider has helped you choose the specific items you would like to invest in, they’ll start working with your custodian. Together, they’ll broker the deal or deals necessary to procure the precious metals that you want. Then, they transfer the items to the designated secure facility dedicated to the storage of bars and coins made of gold, silver, palladium, and platinum.

Your custodian will make sure that the gold IRA account you create adheres to IRS rules. That will start with how the account is actually established and carry through to where the actual metals are physically stored. The custodian is responsible for recording the amount you bought for your account, and they’ll share this documentation with both you as the account owner and the IRS.

You should be able to open up a gold IRA with nearly any amount of money, but it might also matter who you are specifically working with. Many gold IRA businesses will have minimum investments just to be sure there’s enough to make it worth it for them to get involved. Various investment minimums might range from $5,000 up to $50,000.

4

Do the Actual Rollover

When you need to roll your money from the 401(k) retirement account into a freshly created gold IRA, you have two options. The first is a direct rollover. The second is an indirect rollover.

In the case of a direct rollover, your money is moved through a direct transfer of the dollars in your 401(k) account to your new IRA trustee or custodian. The gold IRA company you pick will assist you in making all the necessary preparations. They’ll also communicate what is necessary to your custodian to make sure everything happens right.

An indirect rollover is more complex. The 401(k) funds are actually given to you directly since you owned the account. It is then your personal responsibility to make sure the funds get transferred into the gold IRA account rather than keeping them as a distribution that would get taxed after a certain period of time.

An indirect rollover is certainly possible, but it involves a lot more paperwork on your part to prove to the IRS that it happened. Quite a few experts suggest that you use direct rollover methods whenever possible. We think you should do what works best for you, but we would also always point out that direct rollovers are much easier, less stressful, and don’t have nearly as much paperwork involved.

Whether you choose the direct or indirect rollover, you can transfer your 401(k) funds into a gold IRA account either way. Once they are deposited into such an account, there won’t be any permanent difference to your account once things are finalized. That’s assuming everything happens by the right deadlines, as you want to avoid early withdrawal penalties or taxes on an indirect rollover where the funds stayed in your hands longer than the IRS would approve of.

Avoiding Tax Penalties - How to Move 401k to Gold Without Penalty

If you want to avoid tax penalties when you move 401(k) funds into a gold IRA, then you need to do two things. First, you must create your self-directed IRA account with an appropriate precious metals trustee or custodian. Second, you need to arrange for a trustee-to-trustee transfer of your 401(k) funds into the gold IRA account.

This all has to happen within 60 days. If it takes longer than that, then the IRS is likely to deem it a 401(k) distribution of funds. You would then be held responsible for any taxes applicable to such a transfer.

A 401(k) plan is eligible for rollover into a precious metals IRA free of taxes and penalties if it is an account from a prior employer. You can’t use 401(k) funds if the account is still active, because you can’t move those funds outside of the plan. If you’re interested in precious metals investing within an active 401(k) plan, then look for a precious metals mutual fund in the plan itself.

You can move retirement funds in this way once each tax year free of taxes or penalties. If you do it twice or more in the same year, then you might be subject to taxes and penalties for the second and subsequent transfers.

Gold IRA Eligible Physical Gold for your 401(k) Rollover

Your gold IRA can only hold certain kinds of gold. While there are restrictions, you can actually also put in silver, platinum, and palladium if you want to mix things up.

U.S. Code 408 for Individual Retirement Accounts is where the IRS specifies what’s acceptable, but we’ll go over some pointers here that you should know. For starters, bars, coins, and rounds need to be 99.5% pure for the most part. A 91.67% exception exists for the American Gold Eagle Coin.

Silver bars and coins need to be 99.9% pure. Palladium and platinum both must be 99.95% pure. All metal must come from a government mint or a refiner the IRS approves of.

Numismatic coins aren’t permitted. Coins in 1.0-, 0.5-, 0.25-, and 0.1-oz. sizes are permissible. Proof coins have to be encapsulated in original and complete mint packaging with their certificate of authenticity.

Specific examples of category help.

  • Acceptable Gold Products: American Eagle buillion/coins; Chinese Panda coins
  • Acceptable Silver Products: America the Beautiful coins; Mexican Libertad bullion coins
  • Acceptable Platinum Products: Isle of Man Noble bullion coins
  • Acceptable Palladium Products: Canadian Maple Leaf coins

Unacceptable precious metal examples include rare and collectible coins and many national currencies.

Best Gold IRA for 401k Rollover

There are many options for companies that will handle your 401(k) rollover into a gold IRA, but there are three in particular that seem to stand out above the rest.

Goldco operates as a gold IRA brokerage platform. This company is rated very highly for the customer service it delivers. Compared to many of its peers, Goldco does really good work in terms of managing documents and paperwork with storage facilities, IRA custodians, and various providers of retirement accounts.

Why it's the Best

Since Goldco works as a broker, it only deals with purchasing or selling precious metals for you. They won’t actually store any of the gold in their own company. They won’t be your custodian, but they will still help you deal with all the paperwork that an actual custodian company requires of you.

Goldco can assist you with the paperwork and transfer of a 401(k) rollover. The business will also help you manage acquiring coins and bullion the IRS approves of. That includes silver, platinum, and palladium.

At a Glance

  • Gold IRA Minimum Investment: $25,000
  • Preferred Custodians: Self Directed IRA Services & Equity Trust
  • Custodial Setup Fee: $50 + $30 Wire fee
  • Annual Custodial Fee: $100
  • Preferred Depository: Delaware Depository
  • Annual Storage Fee: $150 segregated/$100 non-segregated
  • Promotions: receive up to $10,000 in free silver

Standout Features: Goldco brings over 10 years of experience handling gold transactions for investors. Their staff is well equipped to help investors of all skill levels navigate even the most complicated processes. Learn more here.

PROS

  • Top-tier customer service
  • A+ rating from the Better Business Bureau
  • More than a decade of gold IRA experience
  • Reponsible for over $1 billion of retirement savings
  • More than a thousand 5-star ratings

CONS

  • Limited options for precious metals: gold and silver
  • No crypto products available
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When you leave a job or have another qualifying event where you can transfer the money you've saved up in your 401(k), then a precious metals IRA is one potential option for you. Even though it's called a gold IRA, you can also store silver, platinum, and palladium in it. The potential advantages include hedging your bets against inflation and economic uncertainty.

This self-directed account has rules you must follow. You'll have to choose a business as a service and a custodian to physically store any precious metals you buy. There are also specific stipulations about what categories of precious metals are acceptable and which ones aren't.

You can create this account through either a direct or indirect transfer. A direct transfer is simpler and safer if you want to avoid taxes and penalties. An indirect transfer is harder to pull off and might risk losing money.

Frequently Asked Questions

There are three ways you might do it if circumstances are right.

  1. Transfer your 401(k) into a gold IRA
  2. Buy a gold mutual fund in your 401(k) plan options
  3. Take out a 401(k) loan to buy physical gold

How much of your retirement portfolio you put into gold depends on your long-term goals and level of risk tolerance. A minimum of 5% is a common suggestion just to get diversification and exposure. Some investors go as high as 15% to try and capitalize on the growth in value of some precious metals.

It’s a historically effective hedge against inflation when part of a properly diversified investment portfolio that also contains stocks, bonds, and perhaps real estate.