How to rollover a 401(k) plan to a physical gold IRA?

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Written By Mark

Mark is the co-owner of Seninvest and has many years of experience in financial markets. 

Physical gold provides many benefits for retirement savings, including its long-standing stability in the market even when other financial assets are heavily affected.

Hence, many people are now looking into how to roll over their 401(k) plan to a physical gold IRA for the steadfast reliability it provides over traditional market investments.

And it’s also fairly easy to roll over a 401(k) into a gold IRA using the following steps.

Understand What a Physical Gold IRA Is

A physical gold IRA is a retirement account where you own gold coins and bars as part of your retirement plan; however, the gold is held by a gold or metals administrator or custodian instead of yourself, as required by the IRS to be eligible for an IRA.

You can also own silver, platinum, and pallidum as part of your gold IRA. However, the person or company that you choose as your account administrator or custodian must acquire and transfer the precious metals from a broker on your behalf.

And then, if at any time you want to sell your precious metals, the administrator or custodian will also do so on your behalf and keep records of all transactions for documentation to the IRS.

As per IRS guidelines, the administrator or custodian must also store the precious metals in a safe place and supervise their care to help preserve their integrity.

However, as an account holder, you also maintain personal control of the precious within the IRA, provided you choose a self-directed IRA.

Upon retirement, you can then take physical possession of your precious metals. Or you can sell them for cash, after which time the funds will be taxed as a distribution.

How a Gold IRA Differs From a Gold EFT?

A gold EFT provides investors with an alternative way to invest in gold without physically owning it, which also provides an efficient way to diversify their portfolios.

However, they cannot take physical possession of the gold because they only own small shares of it and not the gold itself. Likewise, they only receive a profit like equities.

Gold EFTs are also subject to high capital gains tax after just one year, which differs from physical gold in that you can hold it up to retirement and not be taxed until you liquidate it.

Investors are also subject to a lower share value of gold over time due to the fund manager’s ability to liquidate the gold to pay expenses.

Gold EFTs are also obtained like stocks through a brokerage as opposed to an actual gold dealer, so you have no control over the type of gold shares you own.

Determine if Your Account is Eligible for Roll Over to a Gold IRA

If your 401(k) is active, meaning you are still employed with the company that provided the 401(k) plan, you need to change employers to roll it over to a gold IRA without taxes and penalties.

However, provided you no longer work for the employer that provided the 401(k) account, you can roll it over to a Gold IRA tax and penalty-free, as long as this is the first time you have moved your retirement funds within the year.

You can also roll over funds from a 403(b), 457, SIMPLE IRA, traditional IRA, SEP IRA, Roth IRA, and federal Thrift Savings Plan.

Research Reputable Gold IRA Providers

There are many gold IRA companies to choose from; therefore, you will need to do your research to find the best company for you.

A good gold IRA company will stand out as an expert on the gold you will be purchasing with your account and also be able to answer any questions you may have.

The company will also gladly walk you through the account setup, including choosing a secure facility where you want your precious metals to be stored.

And then, once your account is open, the gold IRA company will also serve as a friendly aide for the life of the account.

Choose an Administrator or Custodian for Your Gold IRA Account

It is against IRS rules for you to actually hold the precious metals invested in your IRA yourself. Therefore, you are required to choose an administrator or custodian for your gold IRA account who will acquire, sell, and hold the gold on your behalf.

However, if you have a self-directed gold IRA, your chosen administrator or custodian will furnish your account with the precious metals you choose.

They will also provide the necessary documentation to the IRS in accordance with their guidelines.

Open Your Gold IRA Account

Depending on the gold IRA company you choose, you may be able to open your account with no investment minimum. However, you need to invest enough to make the account worth holding.

Once you have opened your account, the gold IRA company will work with you to determine the precious metals you want.

The gold provider will then work with your chosen administrator or custodian to make the transaction and get your bars or coins to a secure depository.

Your administrator or custodian will then also provide you with documentation showing the amount of gold you purchased for your IRA as well as where it is stored.

Fund Your Gold IRA With a Direct or Indirect 401(k) Rollover

To fund your gold IRA account using your 401(k), you need to decide if you want to transfer the funds via an indirect rollover or a direct rollover.

During an indirect rollover, the funds from your 401(k) are given directly to you with the belief that you will transfer them into your new gold IRA.

You also need to provide extensive paperwork to prove your transfer; hence, it is a bit more complex, so many people opt for a direct rollover.

When you transfer your 401(k) using a direct rollover, the funds from the account are transferred right to the new IRA account with the help of your administrator or custodian, so there is less work on your behalf.

Make Your 401(k) Rollover Within Less Than 60 Days

To avoid penalties when making a 401(k) rollover to a gold IRA, you need to transfer the funds from your original retirement account into your new gold IRA in less than 60 days.

Otherwise, if you take longer than 60 days to make the transfer, the funds will be considered a distribution from the 401(k), and you will be liable for taxes on the transfer.

This is another reason many people opt for a direct rollover because once they open a self-directed IRA, their custodian can simply have the trustee of the original 401(k) transfer the funds to the new gold IRA account with no risk of penalties.

If you are 59 and a half or younger, you may also be hit with an early withdrawal fee of 10%.

Choose the Right Gold

There are lots of gold options to choose from; however, the IRS will only accept certain ones to fulfill their requirements for an IRA.

In fact, to meet their guidelines, American Gold Eagle coins must be at least 91.67% pure, and all other gold options must be at least 99.5% pure.

On the other hand, if you choose to get silver bars and coins for your IRA, they must be at least 99.9% pure to qualify.

Therefore, again, it is crucial to choose a gold IRA provider and administrator or custodian that are highly knowledgeable in precious metals and can help you choose the best ones for you and that are IRS compliant.

They will also help you pick the right storage facility based on IRA standards for greater peace of mind. Just be sure the provider gives you documentation with all the details of your acquisition as an official confirmation of your transaction.

Some providers also insure your gold during transport, so be sure to also inquire about it and insurance options to ensure your gold arrives at the depository safely.

Wait For Your 401(k) Rollover to Complete

Once you have successfully transferred your 401(k) funds to your new gold IRA, it can take up to just under 60 days to complete. However, it should take no longer than this, or it will cause you to incur taxes and penalties.

A good administrator or custodian will know this and ensure your transfer is completed in a timely manner.

Your administrator should also make it easy to monitor your account’s performance anytime you want online, such as via a dashboard.

Enjoy the Benefits of Your New Gold IRA

More Stability Than Stocks

Owning gold is a secret weapon the financially savvy have been using for years to build wealth. Hence, investing in a gold IRA gives you the same power to diversify and hedge against inflation, market plunges, and more for a more secure future.

In fact, gold has repeatedly shown to provide more stability during equity market crashes and more when the value of equities and the value of fiat currency have completely plummeted.

This means that if you have a 401(k) filled with securities, when the equity market takes a hard hit, so will the money you have invested in it until the market bounces back, which can take years you may not have if you are close to retirement.

Enjoy the Same IRA Tax Advantages

When you open a gold IRA, you also enjoy the same advantages and rules as any other IRA. Just be sure to consult your tax advisor to ensure you are following the rules.

In the meantime, if the funds are being transferred from a Roth IRA, you can also have the gold IRA set up as a Roth IRA. This way, you can still enjoy all the tax-free growth benefits of a Roth IRA, provided it meets the requirements.

Freedom to Choose Your Own Investments

A gold IRA also gives you more freedom to choose your investments as opposed to a 401(k), where you rely on the company to make these decisions for you, which can leave you feeling less than confident about your investments.

With a gold IRA, you also have more control over fees because the investment in physical assets typically doesn’t come with the high commissions of equities and bonds. Many precious metal companies also do not charge a fee to roll over your 401(k) into a gold IRA.

However, you will be responsible for custodial management fees, storage fees, and insurance, but gold’s long-term value can be enough to justify the costs.

In the end, to roll over a 401(k) to a gold IRA is straightforward, provided you choose the right gold company and custodian who will walk you through the process to help make it easier.

Some gold companies can also provide you with a list of custodians they work with to help take the guesswork out of finding your own.

In the meantime, no matter which gold provider or custodian you choose, be sure they are experts in the field and can help you make investment and storage decisions you are confident with and can maintain peace of mind about until retirement.

You should also be sure your custodian provides you with accurate documentation regarding all your transactions and is available to answer any questions when you need them.

Lastly, when choosing your precious metals for your IRA, remember they must meet IRS standards to qualify, so double-check with your custodian to be sure you are purchasing the right assets before you acquire them.

You may also consider working with a tax professional to benefit from any tax advantages your new gold IRA provides.

To start your research into how to roll over a 401(k) into a gold IRA, make sure to check out our top-rated gold IRA company guide.

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