If You have been looking for ways on how to do a 401k to gold IRA rollover when you are in the right place. Today, I will take you through the basics of transferring your funds from a 401k gold IRA. Generally, rolling over 401(k) into either a traditional or Roth IRA is quite common in today’s world. You may have actually come across someone who has offered to assist you with this process. But if you suddenly decide that you want to diversify your retirement investment portfolio by investing in precious metals such as gold and silver, you may not get many people who have the technical know-how on how to achieve this. In fact, as you will discover, many people still put all their eggs in one basket by investing in traditional assets.
What is a gold IRA?
I think it is a good thing for us to start by defining what a gold IRA is all about ( in doing so we shall have defined what it is not). In 1997, the Taxpayer Relief Act made it possible for investors to include precious metals in their retirement investment portfolios. The Act stipulated that a long-term investor could, through a custodian, invest in precious metals in a special IRA known as a Gold IRA.
The fact that the name of the IRA is “Gold IRA” does not mean that the investor cannot hold other precious metals besides gold. As the Gold IRA owner, you can hold specific silver, platinum, and palladium coins and bars in your gold IRA, and still earn money like that of those who have gold coins and bars in their accounts.
Gold IRAs are usually self-directed, hence they typically prevent their owners with much more control over the distribution of their precious metal assets. In short, as a gold IRA owner, you have a say over what type of precious metal you want to hold in your IRA, and in what proportions, at any given time.
N.B: The fact that a gold IRA is meant to enable you as an investor to invest in gold and other precious precious metals does not mean that you start collecting any type of item made of the precious metals we’ve already listed. There is a list of requirements that every piece of precious metal that makes it into your IRA has to meet before you can get started with the process of investing in gold. These requirements are specified by the IRS, as a way of ensuring that only pure and high-value precious metals are used for investment ( and that scammers do not rob people of their money).
How does one open a Gold IRA?
The process of opening your very own gold IRA is quite straightforward, at least with most well-established companies. For starters, you should find a reliable custodian. It is, according to the law, illegal to store gold yourself, hence you need a custodian to hold the precious metals that you buy through your IRA. You can find a custodian by contacting:
- Your bank
- A reliable credit union
- Trust company
You should do your research comprehensively, to ascertain that the custodian you want to work with has an impressive track record, as far as investing in gold is concerned.
Another thing you will need to do is to find a broker or verified metal dealer to sell you the gold or silver that you place in your IRA. In most cases, your custodian will present a list of precious metal dealers that you can work with- this makes it relatively easier to shortlist a good number of companies as you start to do your research.
Upon finding a reliable broker and trustworthy precious metal dealer, you can then open your gold IRA, and buy the precious metal that you have established that is suitable for you. When you finally retire, you will have the option to collect the precious metals or even liquidate them into cash. The IRS will at this point tax either action you take as a distribution.
Ready to open your gold IRA? Here are the best performing gold IRA Companies you can consider as you get started ( Also recommended for the expert investors).
How to handle a 401(k) to Gold IRA Rollover
Upon opening your gold IRA, you can reach out to the company managing your current 401(k), to instruct them to commence the rollover process. For starters, you will have to decide whether you want to conduct a direct or indirect rollover.
With an indirect rollover, investors usually withdraw their 401(k) funds and then deposit them into the gold IRA. In a direct rollover, however, investors usually authorize the movement of funds directly from their 401(k) into their gold IRA. The direct rollover option is way straightforward, and it helps minimize the risk of facing getting penalized by the IRS.
With an indirect rollover, you are required to see to it that you make the transfer of funds from your 401(k) to your gold IRA within 60 days. If you do not complete the transaction within 60 days, then your funds become a taxable withdrawal. In the case of an early withdrawal, any investor who is 59.5 years or younger has to pay a 10% penalty.
With both options, you will also have to ensure that you have met all other special requirements that your 401(k) service provider has stipulated ( as agreed upon at the time you were creating your 401(k) account). Upon satisfying all the requirements, the 401(K) service provider will send a check with your funds to your gold IRA custodian, or you, so that you can begin purchasing your precious metals. At that point, you will have completed your 401(k) to gold IRA rollover.
Is it wise to do a 401(k) to gold IRA rollover?
Depends on how you look at it! If you are the kind of investor who wants to diversify your retirement savings, then I would recommend that you highly consider taking up this option. Generally, most retirement investment options you will find out here mirror the volatility of paper currency and the stock market. This means that whenever currencies and stocks are tanking, your investment is also following suit ( you can end up losing all your assets if you choose wrongly). In their physical form, Precious metals have been heralded for not losing their entire value, and most importantly for performing steadily well, even when the stock market is crashing.
Having a gold IRA offers you a safety net since the price of gold has been established to move in the opposite direction of the global stock market. If you, therefore, have securities that are performing poorly, your can channel some of your money into gold assets ( since gold prices are most likely on the rise). One thing to note, however, it is uncommon for investors to have an entire retirement investment portfolio comprising of gold or any other precious metal- most of them only have about 10% of their wealth in their gold IRAs.
More often than not, gold sellers will market gold IRAs by contrasting the prices of precious metals with that of major stocks and indices ( showing the effect of volatility). The one thing you should always remember, at all times is that no investment is without risk. The price of gold is also subject to rising and falling, and this may affect your position in the short term. In the long term, however, trends have proven that the net effect is positive, hence you are more likely to benefit from investing in gold, by doing a 401(k) to gold IRA rollover.
That will be all for this article on how to do a 401(k) to gold IRA rollover. I hope you found it resourceful, and that you now have sufficient information to get you started with the rollover process. Do not forget to do your research on which company is best suited to deliver the custodial and IRA services at the best rates. You can, of course, start by taking a look at my recommended IRAs to see if you’ll get a reliable company to partner with on your retirement investment journey.
I wish you well,
Eric, Investor and Team Member at Gold Retired!