How To Move 401k To Gold Without Penalty

How To Buy Gold With Your 401

Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit find her on LinkedIn and Facebook.

For many investors, the allure of precious metals is hard to resist most notably, gold. It is one of the most sought-after and popular investments in the world because it can offer lucrative returns in any investment portfolio. Gold is generally considered to be a safe investment and a hedge against inflation because the price of the metal goes up when the U.S. dollar goes down.

One thing investors need to consider is that most 401 retirement plans do not allow for the direct ownership of physical gold or gold derivatives such as futures or options contracts. However, there are some indirect ways to get your hands on some gold in your 401.

S For How To Transfer Or Convert A Conventional Ira Into A Gold Ira

If youre new to transferring an IRA or rolling over a 401, and more specifically, transferring or rolling over into a gold IRA, weve put together a simple 4-step process to get you started. Of course, always keep in mind the IRS guidelines for rollovers and distributions to ensure that you are complying with regulations.

• Review investment options, as well as more information about investing in gold and other precious metals, to make sure youre choosing the best option for your financial goals, and that you are eligible for the specific program you choose.
• Work with your gold IRA specialist to fill out the necessary forms to open your account.
• Partner with your precious metals investment expert to help you transfer a portion of your retirement account into a self-directed IRA. This is an important step to help you avoid IRS penalties.

As you start the process, remember that only IRA-approved gold is eligible. It may be helpful to contact a qualified gold IRA specialist who understands the nuances of self-directed IRAs and how to roll your 401 into a gold IRA.

What Happens If A Check From My Former Employer Plan Is Made To Me

The distribution will be subject to mandatory tax withholding of 20%, even if you intend to roll it over later. This withholding can be credited to your income tax liability when you file your federal tax return if you roll over the full amount of any eligible distribution you receive within 60 days.

If you are not able to make up for the 20% withheld, the IRS will consider the 20% a taxable distribution it will be subject to regular income tax and, if you are under age 59½, an additional 10% early-withdrawal penalty.

Recommended Reading: Can You Move An Ira To A 401k

Indirect Vs Direct 401 Rollover

To begin your rollover, youll need to choose between the direct or indirect method. In an indirect method, you manually deposit your withdrawn funds into another account. Whereas, for the direct method, the funds get automatically deposited to another account.

The direct method is easier, less time-consuming, and has a lower possibility of IRA penalties. Whereas, with the indirect method, you get a 60 days time limit to withdraw and deposit your funds to your gold IRA company tax-free.

The funds become taxable if you dont complete this process within this time period.

What Are The Benefits Of A 401 Plan

There are many more benefits to a 401 plan that include:

• Allowing employees to save money easier by automatically withdrawing from their paychecks into their retirement accounts.
• Employer matching contributions to help employees build their nest egg for retirement.
• Tax-deferred contributions, meaning that the money they contribute to their 401 will not be taxed. If you are making $45,000 a year and you contribute $5,000, you will be taxed on $40,000 of rather than the full $45,000, meaning you pay lower taxes on your income. You will, however, need to pay the taxes when you take the withdrawal in retirement.
• Potential for borrowing from your 401 to pay for: unforeseen medical emergencies, burial or funeral expenses for the family, education, purchase of a principal residence, to prevent eviction, and to repair damage to your principal residence after certain casualty losses. While this is an option, it may cause distributions to lose any market gains.

To add to these benefits, you can consider a gold IRA rollover. Knowing how to roll over your 401 into a gold IRA means keeping all the great benefits of a tax-advantaged retirement account, plus the peace of mind of knowing that your investments can be secured in precious metals.

Read Also: How To Withdraw Fidelity 401k

Why Should You Make A 401 To Gold Ira Rollover

Keep in mind that a 401 is a retirement/savings account, which uses the stock market to invest your money. The goal of this account is to make your funds grow as the stock market grows. Many people use the 401 to make investments, although it comes with many risks you must be aware of.

Overall, if the stock market rises, your funds are likely to increase in price too. However, if the stock market falls, youre going to lose a bit of your money in the process. This is especially dangerous in cases where the market is unstable.

On the contrary, if you go for a Gold IRA, youre investing in a universal asset, making it more difficult for you to lose your investment in the future.

K Rollover To Physical Gold

Details, details

Like all investments, Gold IRAs have important details and characteristics. When you are planning your 401K rollover to physical Gold here are a few points to keep in mind.Beneficiaries, Representatives, and Interested Parties for the Gold IRA

Like all retirement accounts, you will need to designate beneficiaries, representatives, and interested parties for the Gold IRA.

After specifying a primary beneficiary and contingent beneficiaries , you will have the opportunity to designate one or more representatives and interested parties.

A Representative for the Gold IRA would have full access to the account and the ability to execute transactions at their sole discretion. This is equivalent to granting the person a Power of Attorney.

During the process of setting up a Gold IRA it should never be necessary to give someone a Power of Attorney. If you are asked to sign a Power of Attorney designating someone or some entity as a Representative, dont walk, run away.

Designating an Interested Party for your Gold IRA may make sense if you are working with an Investment advisor or Financial planner. By specifying these people as Interested Parties the account Trustee and Custodian will be able to speak with them without you being on the line.

Keep in mind that there are three parties involved in a Gold IRA: the Investor, the Trustee, and the Custodian.

In most cases the Trustee will be a Precious metals Broker-dealer.

• Citadel Global Depository
• A-M Global Logistics

Read Also: Can You Do A Partial 401k Rollover

Why Invest In A Gold

If you want to lean into an alternative investment, gold IRA accounts make an excellent choice. Though the price of gold varies from day to day based on different economic factors, the value tends to trend upward during times of uncertainty or upheaval. This can certainly provide peace of mind when youre thinking about retirement planning.

Like the stock market or any investment, gold IRAs do have risks attached, though gold investing is historically more dependable. The greatest advantage to a gold IRA is the ability to bring some diversity to your retirement portfolio. You wont earn dividends with a gold investment as you would with stocks, but gold IRAs provide some protection in the face of inflation and recession. As paper values go down, gold tends to go up.

Some industry experts sneer at the idea of gold IRAs or precious metals IRAs because of their more complex nature, stringent IRS regulations, and larger fees. Plus, they suggest, if you want to own physical gold or other precious metals, simply purchase silver or gold bars. When you do not hold these assets in an IRA, you dont need to bother with complicated rules and depository needs.

Your financial advisor can help you decide if the gold road will get you where you want to go before you reach out to a specialized gold IRA company to take the next steps to make gold purchases.

Can You Roll Over A 401 To Gold Without Penalty

You can carry out a 401 rollover to precious metals without penalty, as long as you are careful about the details of the transaction.

There are three main scenarios that can arise when youre moving funds from a 401:

Recommended Reading: Can You Move 401k To Ira

How To Open A Gold Ira

The process of opening one of these accounts is fairly straightforward. First things first, youll need to find a custodian. Because its illegal for you to keep the gold yourself, you need a custodian to hold the gold you purchase through your IRA. You can find one by contacting a nearby bank, credit union or trust company. Make sure to do your research and find a company that has a strong track record of well-performing gold IRAs.

Youll also need a broker or metal dealer to sell you the gold. Often, the custodian will have a list of brokers its worked with that can serve as a starting place for your research.

When youve found a custodian and a broker youre satisfied with, you can open your account and purchase your precious metals. Once its time for you to retire, you have the option either to collect the metals or liquidate them into cash. The IRS will tax either action as a distribution.

What Are The Primary Benefits Of A 401 Plan

A 401 plan comes with numerous potential benefits. Some of these benefits may include:

• Automated savings
• Ability to borrow from account under specific circumstances
• Various investment options
• Convenience

While investment choices within a 401 plan may be limited, many plans offer numerous ways to invest money within the account. Some of these products may include mutual funds, money market funds, stable value accounts, bond funds and company stock. Given multiple choices within a fund, one may be able to diversify their 401 holdings. In addition, account holders can move money between funds as time passes or market conditions change.

A company match on contributions can be a huge perk for many employees. Many companies no longer offer pensions for their employees, but now rather offer some type of company match on funds the employee contributes. These matching funds can add up quickly, and can help one reach their retirement objectives faster. Company matches on funds can vary, as well as the amount of time before those funds are considered vested.

Don’t Miss: How To Get A Loan From My 401k

Should You Buy Gold Bullion Or Gold Coins

The Internal Revenue Service imposes strict regulations on the precious metals you can choose for your gold IRA. To remain in compliance, any gold needs to be 99.5% pure. Silver requirements are even more stringent, requiring 99.9% purity. Platinum and palladium purity standards rise to 99.95%.

When you choose a firm that provides gold IRA services, your account representative will use subject expertise to help you decide on your purchase.

Many investors select the U.S. Mints American Eagle bullion coins. Other popular IRS-approved choices include Australian Koala bullion coins and Canadian Maple Leaf coins. However, the IRS will not allow you to fund your precious metals IRA with German Marks, British Sovereigns, Swiss Francs, rare coins, or collectibles.

Coins have a few benefits over bars. They are easier to sell and transport. Coins are cheaper to deliver since theyre lighter and dont call for as much security. Theyre also tougher to counterfeit.

One significant advantage of bullion: It more accurately reflects the markets price for precious metals at the precise moment.

Your chosen gold IRA firm earns a bigger commission on bullion than coins. Any reputable gold IRA company, including those on this list, will not push customers into an unwanted purchase to make more money. If you feel like youre getting the hard sell, you may want to think twice about your agent or firm.

When Does The Irs Charge A Penalty On 401 Rollovers

According to the IRS, you must complete your 401 rollover within 60 days. If you withdraw money from your previous 401 and do not deposit it in your new account within 60 days, you will be required to pay a penalty on those funds. The best way to avoid this is by doing a direct rollover, so your funds are instantly transferred from one account to the other.

If you withdraw your funds before you are 59.5 years old, you will have to pay a 10 percent penalty. You will also be required to pay your normal income tax rate on early withdrawals. If you have to pay state income tax as well, you could easily spend 45 percent of your withdrawal on taxes and penalties.

You May Like: How Do I Find Out Where My Old 401k Is

The Role Of The Trustee

The trustee of your 401 or IRA enforces the rules concerning assets you can purchase in your account. The rules for retirement accounts are set forth in federal regulations and in the plan documents drawn up by the sponsor. Generally, workplace plans offer limited investment options, such as selected stock and bond funds, CDs and money market accounts. Self-directed workplace 401s are sometimes available, giving the account holder more leeway in choosing investment vehicles. However, those choices seldom include physical gold, because few trustees are set up to buy and sell gold you need a trustee who is also a gold broker or dealer to handle these transactions.

How Can You Find The Best Gold Ira Custodian

It may be hard to choose a good IRA custodian considering how many of them are currently on the market. Overall, there are a few things you can keep in mind if you want to make the right call when the time comes. Keep in mind that you must always go for a company that is fully transparent and provides you with all the paperwork you need to keep everything as legal as possible.

First, you may check some user reviews online to find what Gold IRA companies are good enough for you. Some of the best websites include the Better Business Bureau , Trustpilot, Google My Business, and more. Keep in mind that the only institutions allowed to operate a storage vault are IRS-approved nonbank trustees, so if your current option isnt approved by the IRS, you may look somewhere else.

Another thing to keep in mind is that the IRS only allows you a penalty-free rollover per year, so make sure you choose a company you trust since youre not going to be able to change custodians until the 12-month period has passed.

Thankfully, there are several reputable Gold IRA companies on the market today, such as Augusta Precious Metals and Goldco. Regardless of what decision you make, you must ensure youre doing proper research before investing your money.

Recommended Reading: How Much Money Do I Have In My 401k

What Is A Rollover Ira

A rollover IRA is an individual retirement account often used by those who have changed jobs or retired. A rollover IRA allows individuals to move their employer-sponsored retirement accounts without incurring tax penalties and remain invested tax-deferred. Consolidating multiple employer-sponsored retirement accounts can make it easier to monitor your retirement savings.

*Note: If you have an existing rollover or traditional IRA at Prudential, you can roll your assets into that account.

Keep Reading Until The End Of This Article And Discover How To Effortlessly Secure Your Ira/401 With Gold Without Outrageous Feesand Taxes From The Irs

Here, well explore different retirement plans investing in gold:

But first, take time to do your research and consider if investing in gold fits with your strategy.

You should also consult with your tax advisor or a tax expert and be aware of any tax implications in rolling over your 401k to gold, so that you are following the law and do not incur any unnecessary charges from penalties.

Recommended Reading: Can I Take Money Out Of My Fidelity 401k