You’ll be surprised with what you can do with your 401(k) plan. As you have the liberty to choose where to invest your 401(k), there are some pretty decent options out there that you can try, including turning it into a gold 401(k).
You can do a 401(k) rollover without any penalties or taxes. If your plan doesn’t include investing in metals, you can transfer your funds to a self-directed IRA. In doing so, you’ll be able to invest in various precious metals, including gold, as a secure post-retirement funding source.
Although the limited options of transferring 401(k) stand as a barrier in getting your gold IRA, the non-taxable ways are actually pretty easy to navigate through. Here’s how to do it right.
What is a Gold IRA?
It is a form of a retirement plan that lets civilians own precious metals. Typically, gold IRA plans are self-directed which makes it a good investment option.
Hence, once you retire, you’ll get the liberty to either cash out the metals or collect the metal itself. However, the IRS will tax either option for this step.
Although the name of this plan is Gold IRA, you can actually buy among limited precious metals with this plan.
There’s a list of fineness requirements by the IRS that the precious metals must fill for them to be eligible for investing.
3 Reasons to Transfer Your 401(K) Into Gold IRA
There are many benefits of depositing your retirement plan into a gold 401(k). Although the sole purpose is security, some other reasons include:
- Doing a 401(k) rollover into a gold IRA is a good way to keep your retirement savings all in one place.
- You can expand your retirement plan by owning assets that are not heavily dependent on today’s economy. After all, when the typical value of the US dollar goes down, the price of this metal will go up due to inflation.
- Apart from being a safe investment, doing a 401(k) rollover is a beneficial choice as it will give your investment portfolio a profitable yield.
These coins are tested to have a fineness of 99.9% or more. Anything with a fineness below that will not be allowed, no matter how popular or in-demand the coin is.
Types of Coins You Can Own with Your Gold IRA
Few examples of the coins you can own in an IRA are:
Depending on the fineness standard, you can own certain types of gold and other precious metals like silver or platinum coins with your Gold IRA, in compliance with the Internal Revenue Code.
- American gold Eagle coins
- American Silver Eagle coins
- American Platinum Eagle coin
- Canadian gold maple leaf coin
These coins are tested to have a fineness of 99.9% or more. Anything with a fineness below that will not be allowed, no matter how popular or in-demand the coin is.
401(k) Rollover to Gold IRA
The first step in obtaining a gold 401(k) is to roll over your funds from the companies you were previously employed in into a traditional self-directed IRA. All you need to begin your rollover process is to contact your account-managing company.
You can then use these deposited funds to buy gold or other precious metals.
Even if you’re currently employed under a company that hosts your 401(k) account, there is still a possibility of you freeing up the funds for a 401(k) rollover with a gold-backed IRA into physical gold.
This option is called “In-Service Distribution”- which is not a loan, but rather a distribution of funds that can be transferred to a self-directed IRA.
You can do this whole rollover tax-free if you do it within 2 months (60 days). The best option is to ask your 401(k) provider if your plan provides such an action. If yes, then your provider can walk you through the whole transfer process.
How to Open a Gold IRA?
To open a gold IRA, you’ll need to find a custodian first. After you purchase gold through the IRA, the custodian will be the one in possession of your gold legally. You’re not going to be in possession of the coins or bullions, you’ll only get to cash them or use them post-retirement.
A well-fit custodian should have a clean record of handling gold IRAs and know a good deal of brokers to buy gold from.
For starters, you can look into the banks, credit unions, or trust companies in your area to find a suitable custodian. Then, you can work closely with them to find a suitable gold dealer.
Once you’ve done that, you can proceed with your purchase.
Indirect vs. Direct 401(k) Rollover
To begin your rollover, you’ll 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 don’t complete this process within this time period.
Some Advice On Owning a Gold IRA
The tax rules on IRAs are the same for both the traditional and Roth IRA. Basically, if you want your existing assets from your IRA to be shifted to gold, it can be done easily.
But, if you choose to take custody of your gold, then that arrangement will also count as a distribution.
So, to steer clear of IRS penalties, you’ll just need to store your gold in a depository. The depository will keep your possession safe and will give you easy access. You’ll also be able to take out your precious metals later from there.
Last but not the least, you have to know that no investment is free of risk. Although gold IRA plans are generally a safe option as they move opposite the flow of the stock market, they might still have their own times of downfall.
So, be smart in your investments and form a diverse portfolio of investment assets instead.
FAQ’s
Can You Own Gold In 401(K)?
Although the direct investment plans are a bit limited in your 401(k) plan, you actually can own gold in a 401(k) rollover. However, the gold, or any precious metal, you own won’t belong to you. It will be in the hands of your IRA custodian.
What Can I Roll My 401(K) Into Without Penalty?
You can rollover your 401(k) into a Gold IRA without any penalties. However, you’ll need to transfer all your funds within two months for the transactions to proceed without any penalty. You should also note that there are still going to be tax deductions if you choose to do a traditional 401(k) rollover into a Roth IRA.
How Can I Transfer My 401(K) To Gold Without Penalty?
You can do so by opening a self-directed IRA. You’ll have to transfer your funds to form a gold 401(k) plan. Then, you can take ownership of certain precious metals, including gold, without penalty and keep them in your custodian’s possession till retirement. For starters, you can ask your 401(k) provider if you can distribute your funds into a self-directed IRA. If yes, then you can work with them to do your 401(k) rollover without any penalty.
Final Thoughts
If a gold 401(k) aligns with the plans you have for your retirement funds, then consider 401(k) rollover into a gold IRA right away.
If you have any further questions regarding investing and depositing your funds, we suggest you consider reaching out to a financial advisor for guidance. Thanks for stopping by.
We hope this article made transferring your 401(k) to gold a bit less confusing.
