Is it easy to do a gold IRA or 401(k) rollover? Is there any point in doing one anyway? If you are here because you are concerned with the ease of doing a gold IRA rollover, then you are in the right place because, in this article, I will present you with an answer and sufficient information to help you get started with the process (if need be). If that sounds good to you then let’s get right into it.
What is a gold IRA?
I think that a good point to begin from would be to define what a gold IRA is so that you can actually get to know whether it is worth relying on. A gold IRA is a special type of IRA through which a custodian usually holds precious metals such as gold and silver for the owner of the account. As much as the name you will always come across in the market is “gold IRA”, this doesn’t mean that one can only buy gold with their plan. They can actually hold other types of metals, the common ones being:
A gold IRA is a self-directed IRA, which means that you can hold more diverse investments, and have the freedom to make more investment decisions.
What does a gold IRA Rollover entail?
A gold IRA rollover is simply the conversion of a retirement account such as a Roth IRA, SEP IRA, 401k, into physical gold coins or bullion that are held by a custodian. During the rollover process, the funds are usually withdrawn from a customer’s existing account and can be held for no more than 60 days before being deposited into a new IRA that’s under a different custodian (or IRA administrator).
There are many rules and regulations that surround the Gold IRA Rollover process, that must be upheld, otherwise, the customer will be liable for facing penalties. Some common rules include:
- The 60-day transfer rule – an account holder must ensure that they deposit funds from their previous IRA or account into a newly created gold IRA within 60 days.
- There’s a 10% early withdrawal penalty that applies to those who make withdrawals before 59.5 years.
- Upon violating the 60-day rule, the distributed are usually treated as taxable ordinary income.
- All IRA holders cannot do more than one rollover per a 1-year period.
- There’s usually no tax withholding if the rollover is done from a customer’s personal IRA to a newly created IRA (or another IRA).
A 401(k) to Gold IRA Rollover
Despite what some investors believe, it is possible to rollover funds from any type of 401(k) (employer-sponsored or self-directed). There are, however, some different rules that must be upheld in each case.
If you decide to roll over funds from a 401(k) that is employer-sponsored (your former employer) into your new gold IRA, you should not have a lot of trouble doing that. All you need to do is choose the right Gold IRA custodian, and have them start the 401(k) to gold IRA rollover. With a current employer-sponsored 401(k), the process is a bit complicated but is manageable. You will have to check the terms of the policy since some employers do not permit investments such as gold while one is still employed. It is, therefore, essential for you to contact your employer and inquire about the rules of your 401(k), and whether you are allowed to do a 401(k) to Gold IRA rollover.
Creating a Gold IRA Rollover strategy
There is no one-size-fits-all approach when it comes to investing in Gold IRAs. Your retirement financial plan will shape the direction things take, as you also choose your preferred funding method. One of the questions I have heard a lot of people ask is “what is the right percentage to allocate to precious metals?”. There’s no clear-cut answer to this question, the reason being we all have different goals. You will, however, need to ensure that you only invest a portion of your wealth in a single asset, so that if things go south, you will not have a hard time trying to get back on your feet financially.
The level of funding of your gold IRA is heavily dependent on your risk aversion, and the number of years you have left to retirement. Investors who cannot stomach huge risks, more so those who are within ten years of their retirement age, may do themselves a lot of good by dedicating a larger portion of their retirement savings to a gold IRA (any percentage between 15 to 20%).
Why gold IRAs?
Having a portion of your precious metals invested in a Gold IRA will present you with several benefits, that you would otherwise not access by holding on to assets in a regular IRA ( one that holds paper assets only). Some of the main reasons gold IRAs are becoming popular, and why they’re worth considering, include:
- Diversification – as an investor, you can invest in precious metals in a bid to protect your portfolio from overexposure to market forces. If you already have stocks, bonds, and traditional assets in your IRA, then having a decent percentage of precious metals in your portfolio will limit your losses in the event of a recessionary event or if the stock market takes a dive.
- Protection from inflation – gold has for long been considered a great and strategic hedge against inflation. Doing a gold IRA rollover will help you protect your wealth from the ever-declining U.S. dollar. Having about 10% to 20% of your portfolio funds allocated to gold or silver will shield you from inflation.
- Protection from systemic collapse – if you’ve always been concerned about the state of the economy, and have through your research established that things are not headed in the right direction, you should consider dedicating more of your funds to gold and silver. With the ongoing global disasters, it has become more clear to us that gold and silver are at the top of the list of suitable disaster hedges.
If at this juncture, you need to talk to an expert who can give you more information about gold IRAs, then below are some top recommended gold IRAs you can have a look at as you get started.
Is it easy to do a gold IRA rollover? well, I hope you now have a personal answer, depending on your retirement investment objectives. If you’d like to get started, then the above recommendation will be a good place to start. Let me know if you have any more questions about today’s article.
I wish you success,
Eric, investor and team member at Gold Retired.