If you have been looking for a 401k to Gold Rollover Guide, then this article is a good place to get started. Herein, I will present to you the essentials of getting started with the 401k to gold rollover process, so that you can do it right, without losing any of your money to the taxman. Read on to the very end of this article to establish what it is that you need to do, to kick start your investment journey safely.
If you are currently relying on a 401(k) to save for your retirement years, then you may be inclined to believe that you have the most ideal account. Unfortunately, however, the assets held in most 401(k) accounts are in one way or another tied to the stock market. While the excellent performance of the stock market may translate to impressive numbers in your 401(k), the occurrence of any market dips may jeopardize your retirement savings, and compromise your expected retirement date.
It is possible to mitigate such issues by putting some of your retirement savings into a gold IRA. To achieve this, you are required to follow a 401(k) to gold rollover process that is quite simple and straightforward, but also one that can have you paying taxes and penalties to the IRS if you are not careful.
What you should know about Gold IRAs
Gold IRAs are special individual retirement accounts that present you with the ability to invest in gold and other IRS-approved precious metals, including silver, platinum, and palladium. If you have any thoughts about investing in a gold IRA, you should know that you will be investing in the physical metals in their coin and bullion form.
Also note that if you opt to do the 401(k) to gold rollover, the gold IRA will be held and run separately from your standard retirement account. Unless you plan on investing in precious metal stocks, the physical gold that you buy will need to be held in a secure depository, which is the main difference between a gold IRA and other types of IRA accounts. Also, investing in gold through precious metal mutual funds and exchange-traded funds will lead to you paying higher fees in comparison to those you would otherwise pay when investing in physical gold.
The IRS guidelines for investing in Gold IRAs
Before proceeding to do the 401(k) to gold rollover, you should be well-conversant with the special requirements that the IRS has outlined for gold IRA account holders.
For starters, you cannot create your gold IRA with the help of a regular broker or the traditional retirement account custodian. It is instead required of you that you roll over the funds in your 401(k) to a gold IRA through a company such as Augusta Precious Metals or Goldco, or any other of their competitors who have the necessary documentation to prove that they will maintain your gold IRA account.
As much as the assets held in the gold IRA that you will open with a gold IRA custodian will differ from those that you would hold through a standard 401(k), the rules of the gold IRA are in one way or another similar to those of other types of IRAs. For 2021, for instance, the contribution limits for the accounts are set at $6,000. Those aged over 50 years are required to invest an extra $1000 into their gold IRA, each year.
Upon reaching 59.5 years, one can start withdrawing their money from their gold IRA, without worrying about penalties. Trying to make withdrawals before this age, however, can lead to a 10% penalty. While the gold coins or bullion that you purchase should and must be held in a facility approved by the IRS, the facility cannot be your home. Holding the gold at your home would result in the transaction being viewed as a withdrawal, for which you would be required to pay taxes.
What does a 401(k) to Gold rollover entail?
If you are about to lose your job, or you have found a new job, then you have a couple of options to take with regard to your 401(k) account. Most employees chose to cash out the assets in their 401(k) despite them knowing that they are required to pay some extra fees to obtain their retirement savings (or the assets the savings are tied to). While this might seem like the most logical thing to do, one should note that the taxes on such transactions can be very high if one is on the tax bracket that’s above 12%.
The second alternative is to have the 401(k) remain intact even after terminating your employment contract. This option’s downside is that one is tasked with paying the maintenance fees on two accounts concurrently if they open a new retirement plan with their new employer. This is why some people take up the third option which is to merge their old 401(k) account with their new 401(k).
The final (and recommended option) is one in which you consider completing a 401(k) to gold rollover so that you can move the funds in your 401(k) account into a new IRA account. Depending on the company that you choose to open the new account with, your investment options will end up being significantly better and you will pay lower fees. This option is also a great one for those who can afford to pay wealth managers to help them maximize the returns from a wider variety of assets.
Direct and Indirect Rollovers
Before getting started with the process, however, you should remember that there are two types of account rollovers, which are a direct rollover and an indirect rollover. If you decide to do an indirect rollover, your 401(k) provider will send a check with your retirement savings, which you can then deposit into your preferred bank account. Upon depositing the check into your bank account you have 60 days to ensure that the funds make their way into a new IRA, which in our case is a gold IRA.
If you miss the stipulated 60-day deadline during the indirect rollover, the rollover is usually treated as a withdrawal, and the IRS usually taxes you. It is, as such, a good idea to do a direct rollover, with the help of a well-established gold IRA service provider.
Regardless of the company that you decide to invest with, sending the funds in your current 401(k) to your gold IRA through a direct rollover process will involve a check being issued by the former custodian to the new custodian. That check can be sent to you so that you can deliver it to the custodian, or can be sent directly to the custodian. Most gold IRA companies today can initiate the rollover process by making a phone call.
- Those whose 401(k) is sponsored by the government are also required to complete extra paperwork. The rollover process then takes about half a month to one and a half months to be finalized.
- Only one rollover is permitted for any 401(k) per year.
- Unlimited custodian-to-custodian transfers can happen annually.
Are you ready to explore the opportunities that come with a gold IRA? You can get started by taking a quick look at our review of the top-rated gold IRA service providers, as you choose the company that’s best-placed to serve you as you head into your retirement years.
That will be all for today’s 401k to gold IRA rollover guide. I hope that you found it beneficial and that you are now better equipped to get started with a 401(k) to gold rollover. Let me know if you have more questions on how to proceed with the rollover, as well as the best companies you can partner with.
I wish you well,
Eric, Investor and Team Member at Gold Retired!