Published On: Fri, Apr 8th, 2022

The Only Gold 401k Rollover Guide You’ll Ever Need

It is a relatively common practice to see people rolling over their 401 k plan into a traditional or Roth IRA. Individuals will often do this when they leave their former employer and want their retirement savings kept in an individual retirement account.

Other folks may also be looking to diversify their retirement account with asset preservation vehicles like an asset that is not closely attached to the economy. Gold is one of these assets and is perfect when there are times of economic uncertainties, increasing inflation, and rising fuel costs, among others.

The above is one of the primary reasons people may move a 401 k to a gold IRA company. A financial planning expert can help individuals create a retirement plan that aligns with their goals and required minimum distributions.

What Does a Gold IRA Company Do?

A Gold IRA is a type of long-term retirement account made possible by the Taxpayer Relief Act of 1997. This account allows a custodian to hold precious metals for the account owner and keep their investment safe.

It doesn’t mean that only gold can be purchased with the plan, even though a gold IRA is the most common name used for this sort of account. Investors can also hold specific types of palladium coins, platinum, and silver coins. Gold IRA plans offer more diverse investments than a traditional IRA or 401 k because they are typically self-directed IRAs.

One essential thing to remember is that the public cannot simply collect anything made of the above four metals. The IRS has a list of particular requirements that must be adhered to before precious metals are stored in a gold IRA.

How Does Someone Open a Gold IRA?

The easiest way is to visit GoldCo and start with a free gold rollover guide.  This will walk you through the benefits and explain the process.

It’s reasonably straightforward for a person to open one of these accounts. The first thing people should do is find their preferred custodian. Individuals need a custodian to hold the gold they purchase through their IRA because it is illegal to keep the gold by themselves.

One can be found by contacting a trust company, credit union, or nearby bank. It is crucial to do research and due diligence to find a company with a significant track record of well-performing gold IRAs.

Metals dealers or brokers also need to sell the gold to the IRA account owner. These companies often have a list of brokers that the custodian works with, which can serve as a starting point for someone’s account research.

Once people have found a broker and custodian they are satisfied with, they can open their accounts and buy gold, silver, platinum, and palladium. When it’s time for the person to retire, they choose to collect the metals or liquidate them into cash. The IRS will tax either act as a distribution.

Why Should People Invest in Gold and Precious Metals?

The intrinsic value of gold is one of the primary reasons people should invest in this precious metal. Many investors see gold as a hedge against other investments and the stock market’s volatility. Other people also invest in gold because they believe a time may come when other investment options and paper money lose their value because of some geopolitical catastrophe or natural disaster, making gold one of the only valuable investments remaining.

While the above statement is understandable, it generally isn’t the best idea to make gold the number one investment in a portfolio; instead, being part of a diversified portfolio makes sense.

How to Handle a 401 k to Gold IRA Rollover

Once a gold IRA has been opened, new account owners can contact the company managing their 401 k account to start the rollover process. First, they will have to decide between an indirect rollover or a direct rollover. With a direct rollover, the funds move directly from one account to another, while in an indirect rollover, people withdraw the funds from one account and deposit them in another.

If you want to change ira funds to gold without penality, then the most suitable choice is the direct option as it is generally simpler and has less risk involved when it comes to IRA penalties.

People have 60 days from the date they receive the funds to transfer the money directly to their gold IRA company or custodian with an indirect rollover. The funds become a taxable withdrawal if the transfer is not completed within 60 days.

If someone is 59.5 years old or younger, an early withdrawal penalty of 10% will apply. No matter what rollover options people choose, they will also have to ensure they are satisfied with any special circumstances or requirements many gold companies may have for rollovers.

Once the requirements have been met, the company will send a check with the funds to the gold IRA custodian or the account holder themselves. After completing this process, people would have finished their 401 k to gold IRA rollover.

Should Someone Do a 401 k to Gold IRA Rollover?

If someone is looking to diversify their retirement savings, there is no better way than that with a gold IRA rollover. It can give them retirement options that do not mirror the stock market’s volatility or paper currency. People should consider performing a 401 k to gold IRA rollover if they would like to receive both of the above benefits.

Gold investments and gold IRA plans can be exciting because the price of gold generally moves in the opposite direction of the stock market. If securities investments are performing badly, gold investment is most likely on the rise and vice versa.

Many investors hedge against other investments using gold as their primary driver. It is rare for investors to have a portfolio consisting entirely of gold or any single asset class.

By contrasting them with the volatility and risk of the stock market, gold sellers will often market gold IRAs. Moreover, gold is an asset that will always have some value. However, it’s vital to remember that no investment is risk-free, and things can change at any time.

The cost of gold is subject to its fall and rise. It is important to note that investing in gold also presents the possibility of theft, although most custodians will insure against that.

Gold IRA Transfer vs Gold IRA Rollover

An investor has two options for finding a gold IRA transfer request form or a rollover. If someone is looking for a more secure and risk-managed strategy for moving their assets between retirement savings accounts, transferring funds is the best solution.

There are many gold IRA rollover conditions and rules that investors must note. It is important to remember that if an investor breaks these rules, the account holder may be subject to costly IRS imposed penalties or fees. However, there are more rules for rollovers and fewer apply to the transfer.

Here are some core similarities and critical variants between gold IRA transfers and rollovers; these include but are not limited to:

Gold IRA Transfer Rules

  • It cannot be taxed
  • Do not keep withholding taxes
  • No early withdrawal penalties
  • Yearly withdrawal is not limited

Gold IRA Rollover Rules

  • IRA holders are strictly limited to one rollover per 365 days calendar year
  • There is no tax withholding; a rollover is made from a personal IRA to another IRA
  • The 60-day transfer rule applies in which the account holder must transfer the deposited funds from their account into the new gold IRA
  • Distributed funds are subject to a 10% early withdrawal penalty if the account holder is under the minimum withdrawal age of 59.5

Moving funds from custodian to custodian is called a gold IRA transfer (on occasion referred to as an (“IRA gold transfer”). Therefore, the account holder does not receive any money withdrawn from their account. It does not require the account holder’s involvement to transfer the funds directly between third parties, and it’s a no-touch simple process that the custodian handles wholly for the account holder.

The primary difference between transfers and rollovers is that the money distributed does not even reach the IRA holder’s bank account in the case of transferring funds.

With a margin for human error attached to a rollover, it is one of the primary reasons people prefer to perform an IRA gold transfer. In the event of a rollover, it’s possible to create challenges, for example, failing to abide by the imposed IRS time limit for depositing distributed funds.

If someone fails to do the above, they would be charged a significant financial penalty from the Internal Revenue Service. However, it is crucial to remember that this error is not possible with a gold IRA transfer because the transferring process is handled automatically by the person’s account custodian.

401 k to Gold IRA Rollover

Despite what some people believe, it is entirely possible to roll over or transfer funds from an existing employer-sponsored or self-directed 401 k to a gold IRA. However, this procedure is subject to various rules that differ slightly and must be understood before proceeding with the next steps.

When rolling over funds from a 401 k sponsored by a former employer into a new gold IRA, there shouldn’t be any issues. All investors need to choose a new gold IRA holder and have them initiate the 401k to IRA rollover on their side. However, a challenge may be presented if someone attempts to transfer a 401 k sponsored by their current employers to their new self-directed IRA.

If a person is rolling over from a 401 k sponsored by their current employer, it would be best for them to check the terms of the policy. In some cases, employer-sponsored 401 ks do not allow gold investment while the individual is still employed with the company.

It would be best for the person to call their employer and inquire about the rules of their current 401 k and whether they are permitted to transfer or rollover a gold IRA. People can rest easy knowing that it is wholly possible to rollover a current employer 401 k to a new gold IRA. It would be best to check out the gold IRA rules and regulations for a more detailed description of the process.

Deciding on a Precious Metals or Gold IRA Rollover Strategy

When investing in precious metals or gold IRAs, it’s crucial to remember that there is no one-size-fits-all approach. Their future financial plans typically determine the type of rollover strategy people select. A common question is asked, “What percentage of someone’s portfolio should be allocated to precious metals?” In order to answer this question, there is no straight answer.

Depending on the person’s risk tolerance and proximity to retirement generally shape the level of funding dedicated to precious metals like silver, platinum, palladium, or gold.

Investors who do not want to take that much risk and are within 10 years of their target retirement age may be better off dedicating more of their portfolio to precious metals. It may be best to speak to a certified financial planner who can advise the person of an IRS-approved depository with reasonable custodian and storage fees.

In any case, supplementing someone’s investment portfolio with alternative assets, such as cryptocurrencies, silver, or gold, can help provide a more outstanding hedge against market instability. It would be best to look at the recent stock market instability met by the multi-year highs and the spot prices of palladium, silver, and gold, plus the extensive bull runs in both Ethereum and Bitcoin.

An increasing number of investors are diversifying with unassociated assets such as gold due to the vast economic uncertainty that has cast doubt on the traditional financial markets.

Choosing the Best Gold IRA Allocation

Having a retirement portfolio with gold and precious metals making up five to 10 % of it is recommended by accomplished investors worldwide, including Ray Dalio, Tony Robbins, and Kevin O’Leary.

However, some risk-averse investors suggest going far beyond that point. There are multiple questions people should ask to guide their decision-making process. These include but are not limited to:

  • How close are they to their target retirement date?
  • What is their true purpose for investing in precious physical metals (e.g., profit, risk management, diversification, etc.)?
  • Has their portfolio been performing as expected over the past five or so years?
  • What is their outlook on the economy over the next five to 10 years?

Posing particular interest is the second question, which prompts people to search within themselves for their true intentions. In most cases, people can fit into three broad orientations that describe the investor’s motives for opening a gold IRA.

Below are listed the three top things to look for when joining a gold IRA company.

Diversification Orientation

Diversification orientation describes those who want to invest in precious metals to protect their retirement account from overexposure to traditional assets, bonds, and stocks. Many risk-conscious people diversify with gold to disrupt potential losses in a recession event or stock market downturn.

A five to 10 % allocation is perfect for this type of orientation. In other words, investors should consider adding roughly the above amount of their portfolio’s total value to precious metals holdings, including platinum, silver, and gold. Committing more than this percentage to these assets will likely be too conservative for investors with higher risk tolerance.

Inflation and Debasement Orientation

Investors concerned with widespread inflation and currency debasement may consider dedicating more of their portfolio to silver, gold, or other precious metals. A gold IRA rollover can help investors protect their wealth from an ever declining United States dollar since gold has long been considered a strategic hedge against inflation.

Currently, the United States faces severe inflation threats, with the highest yearly CPI rise since September 2008. During the 1970s notorious era of inflation, the cost of gold rose over 600% because institutes took their capital out of the unstable dollar.

Investors should consider increasing their exposure to precious metals if they seek a haven from inflation. Something in the range of 10 to 20% gold or silver may be a suitable option for investors who are bearish on the United States dollars. Those holding precious metals will likely fare better than those who don’t if the dollar continues to backslide.

Systemic Collapse Orientation

People concerned about the overall state of the economy and whether it can even be sustained in the future are better off dedicating more of their funds to precious metals. Gold and silver are generally considered disaster hedges because they tend to rise in value when instability occurs in the global or geopolitical environment.

In other words, when trouble strikes the market, gold tends to increase in value. A great example of this is the March 2020 OPEC+ oil crisis. During the above times, gold hit a seven high, record-breaking.

The January 2022 US Iran airstrike saw a stock market sell-off, whereas gold prices jumped 1.4% overnight.

Investors who want systemic protections against the war or economic uncertainties should consider investing even more of their wealth in precious metals. This orientation calls for about 20 to 30 % in gold assets at the top of the recommended allocation scale.

Gold IRA Rollover: Choose IRA Approved Precious Metals

A tax-advantaged retirement account can only hold particular gold bullion and gold assets approved by the strict standards maintained by the IRS. These include but are not limited to the following gold assets:

  • Johnson Matthey Gold Bars
  • Credit Suisse Gold Bars
  • Valcambi Gold Combi Bar
  • Canadian Gold Maple Leaf Coins
  • American Eagle Gold Coins

In all cases, memorabilia are prohibited from any 401 k or IRA per IRS regulations. Rare coins or any other type of precious metal classified as a collectible under the IRC Section 401(a) is strictly disallowed from an IRA of any variety. A good rule of thumb is that gold bars are never classified as collectibles. Regarding coinage, three expectations allow for investing in gold via a gold IRA rollover:

  • Coins or bullion kept in possession of a non-bank trustee or bank
  • Certain coins described under 31 USC Section 5112
  • Coins minted and issued under the laws of any sovereign state

A person receives penalties and fines if they invest in unapproved assets. In order to play it safe, it helps to simply invest in gold bullion instead of rare coinage. If someone insists on investing in gold coins, they should ensure they thoroughly review the gold IRA company’s approved gold coins and bars.

Paper Gold Rollover vs Physical Gold IRA Rollover

There are two primary forms of exposure to gold. Initially, there was physical gold bullion, and this describes hard cold metal bars kept in a vault that the third party trust custodians secure. The second is referred to as paper gold and describes any gold-based security such as an ETF or gold mining stock.

It would be difficult to argue the benefits of real metal bullions over paper gold aside from perhaps convenience. This is a tricky situation since increased liquidity makes it easier to sell and buy the asset quickly, although some investors praise gold stocks for their added liquidity. Therefore, physical metal commodities are known to be less volatile than paper gold.

People need to look into a physical gold IRA rollover if they want actual exposure to the benefits of investing in gold. In the event of outright economic collapse or runaway inflation, the gold stocks someone owns may be worth a little more than the printed paper.

Below are listed some of the most significant advantages of investing in physical gold compared to securities-based gold exposure:

Transferable and movable: Gold bars can be withdrawn from an IRA and are portable, meaning people can move the cash into their hands or a vault in the form of distribution.

Physical ownership: Gold IRAs allow people to own precious metal bars, which makes them far more challenging to confiscate or seize than electronic asset preservation vehicles.

Safe haven store of value: In economic uncertainties, paper assets and cash are rendered worthless, and physical gold bullion act as a last resort store of value.

Counterparty risk: A gold bar cannot declare bankruptcy or fail to honor its contractual obligations, unlike a publicly-traded stock. Physical gold investors are free from the same counterparty risk as paper gold investors.

Finding the Best Gold IRA Company

When someone opens a Roth IRA or traditional IRA, they drive to their local Fidelity or Vanguard Investments branch and apply for it right there. However, if a person wants to perform a gold or self-directed IRA rollover, it may become more complex.

Traditional brokerages such as Charles Shwab and Fidelity don’t support gold investments or IRAs. In order to open a gold IRA, people need to research and choose a gold IRA custodian. This company will; facilitate an intuitive gold IRA rollover with the person’s existing 401 k or IRA provider.

A reputable custodian will work with people to ensure their holdings are safely vaulted while remaining in line with IRS regulations and protocols.

People can trust reliable gold IRA companies to assist with the rollover process from start to finish. These gold IRA companies provide investors with all the paperwork and documents necessary to complete the rollover upfront and are fully transparent.

If someone needs a place to start checking out the best gold IRA companies that can help convert their retirement savings into a self-directed IRA gold investment, it is essential to keep the following basic ground rules in mind when researching for a gold IRA custodian:

Prestige and Reputation

It should go without saying that a company with a customer satisfaction profile and a rock-solid reputation is essential when looking for a business to hold gold bullion—unfortunately, unscrupulous gold investing companies with malicious intent prey on inexperienced customers.

People need to avoid any precious metals or alternative investments company that does not have exceptional reviews online. Customer-generated reviews on the Better Business Bureau, Reddit, Trustpilot, Google My Business, and YouTube are great places to search for authentic customer testimonials.

The operative word is “trustworthy.” Unfortunately, some companies pay for reviews on their social media profiles, so be aware of that. It should raise a red flag that the reviews are inauthentic if all the reviews are similar in length and provide little substantive information that differentiates one from the other.

Please note that only IRS-approved gold companies can operate a precious metals vault. People should move to another option if the custodian does not mention being IRS-approved.

Rollover Limitations

Investors should remember that the IRS only allows one penalty-free rollover per year. Therefore, if someone completed a rollover on June 1, 2021, they won’t be able to initiate another rollover tax-free until June 1, 2022. With the above in mind, a person should choose their custodian meticulously. If they decide to change custodians before the 12 month period has elapsed, they will incur an early distribution cost if they roll the funds over again.

Eligible Account Types for a Gold IRA Rollover

In order to finish a precious metals IRA rollover, a person must transfer from any existing tax-advantaged retirement account. Below are the following accounts some can transfer from:

  • Retirement accounts
  • Traditional or Roth IRA
  • Employer-sponsored 401 k
  • TSP
  • 457(b)
  • 403(b)
  • SEP IRA

Retirement Savings Tips

Hiring a financial advisor can help people create a retirement plan for their requirements and goals. A financial planner can recommend the best gold IRA companies for the persons’ investment purposes.

Suppose someone has an existing traditional IRA or 401 k account it may be a good idea to purchase precious metals to hedge against inflation. It is vital to remember that taxes will apply when someone withdraws their funds from a traditional IRA, and with a Roth IRA, surcharges will apply before someone invests their money.

Building retirement accounts is more straightforward than people think, especially once they know how much they need to save. Precious metals retirement plans and a retirement calculator can be used to determine the funds someone will need to maintain their lifestyle after they retire.

Conclusion

Opening a precious metals IRA is one of the best things people can do, especially if they want to protect themselves against inflation in the future. Retirement funds can grow significantly by performing indirect rollovers or direct gold IRA rollovers.

Precious metals IRAs are a great way to boost a person’s existing retirement account through gold holdings. It may be time to open a new account, buy gold, and render investment advice from an approved financial advisor.

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