401k to Gold IRA Rollover Guide

how to rollover a 401k to an ira

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Why invest in Gold?

Gold is not just shiny yellow metal. Historically it has been the most beloved investment vehicle. Then why gold has been so popular among people? That is because it is rare. By the law of supply and demand, when supply is limited, the price goes up. The amount of gold buried under the ground is limited and the amount of gold produced each year is limited too. The limited supply of gold is the reason why gold is so popular.

Also, whereas currency loses its value as time goes by, gold tends to maintain the same value over time. As gold can preserve its value against inflation or geopolitical turmoil, many successful investment advisors recommend gold as a hedge against that economic hardship.

But how can we invest in gold in the smart way especially when you already own a 401k retirement plan? Let’s dive in!


Different types of Gold investment

Holding Paper Gold

If you have a 401k retirement plan or IRA account or even a regular stock brokerage account, you can easily invest in paper gold. By investing in stock or ETF, you can have some exposure to gold and make a profit by navigating the ups and downs of the market. Most 401k retirement plan allows this kind of gold exposure, but do not allow actual holding of physical gold. You can have some exposure to gold by holding gold mining stock or gold ETF, but the downside of this is it can be affected by market downturn regardless of the value of gold itself. In the case of a bank run (when everybody wants to liquidate their stock at once), it can be hard to preserve the value of your asset.

Holding Physical Gold

This is a kind of primitive but classic way to invest in gold. You can buy a gold bar or coins and hold them under your mattress. The good thing about this method is your asset is 100% under your control. Whenever you want it, you can grab it and liquidate it. In case of a market crash, you can conveniently reach out your hand under the mattress and exchange a 20 oz gold coin for cash.
Then what is so bad about this method? Well, it is at your own risk. If somebody breaks into your house, you can lose all your gold at once.

So what is the best method to maximize all the advantages of holding gold and minimize the risk of being negatively affected by the market? The answer is investing in Gold IRA(Individual Retirement Account).

Gold IRA Rollover without penalty

The good news is you can roll over your money to self-directed gold IRA if you have a 401k or traditional ira account. But there is a certain rule to follow to avoid penalty. Let’s take a look at the rollover process step by step and how we can do that without the penalty.

How to roll over 401k to gold IRA step by step

Step 1: Choose a Gold IRA provider

A gold IRA is different from a traditional IRA. Through a gold IRA, you can actually invest in physical gold, whereas you can only indirectly invest in gold with a traditional IRA such as a stock and gold ETF. You can have some exposure to gold with a traditional IRA, but gold stock or ETF is still the same asset class as stock. To diversify your portfolio, investing in physical gold is one of the good ways to diversify your retirement investment portfolio.
This is the most important step of all, as a gold IRA provider will walk you through from opening an account to investing in physical gold. Read more about our full review on trustworthy gold IRA companies like Goldco and Augusta Precious Metals.

Step 2: Find a self-directed custodian

The next step is finding a custodian of the gold IRA. IRS does not want you to hold your gold yourself. To avoid the penalties, you need a custodian who will keep your transaction records and documents on your behalf of yourself. Also, make sure the company you choose provides a “self-directed” IRA option to avoid penalties.

Step 3: Open an account and roll over your fund

Finally, it is time for you to roll over your retirement fund to a gold IRA. Types of IRA eligible for rollover are 401k, 403b, 457, Pensions, and TSP accounts. You can transfer your fund either directly or indirectly. If you choose to transfer your fund indirectly, make sure to put your fund within 60 days to avoid any penalties.

Step 4: Start investing in Gold with a gold IRA

Now it is time to invest in physical gold with your retirement fund. But note that not all gold is suitable for gold IRA. IRS requires certain purity for your gold bar or coin. So be sure to consult with a gold IRA company before you purchase gold. Once you purchase your gold, it will be sent to a safe depository. Once you reach 59.5 years old, you can get your physical gold delivered to you or get the cash instead.

What are the pros and cons of rolling 401k to IRA

Advantage
Hedge against market tumble or inflation by investing in gold: This is the most important advantage of all. Preserve your asset from currency value depreciation. You can rest assured regardless of market up and down or political issues.

Disadvantage
Late distribution age: 401k plan can be accessed as soon as you reach 55 years old, but you need to be 59.5 years old to access your Gold IRA account. If you withdraw earlier, then you need to pay 10% of penalty.

IRS accepts certain forms of gold and silver (purity standard)

Not all gold coins are eligible for investment through a gold IRA. IRS requires minimum purity of 0.995. So it is always a good idea to check with experts before you invest in any gold coins.

Why gold IRA is a good investment

You need to protect your retirement asset from market turbulence and currency devaluation. If you are almost at the age of retirement, and the stock is in a bull market. Then everything is fine. You get enough return from your investment. But what if the market crashes badly when you are almost 60 years old? Who knows? You might need another 5-10 years to only recover your retirement fund.
To avoid that kind of situation, portfolio diversification is crucial. One of the best hedges to a market crash or currency devaluation is buying gold. So there you have it. By rolling over part of your retirement to a gold IRA, you can successfully manage your risk from various unpredictable factors. Below you will find our top recommendations to help your decision. For happy retirement!

Top Recommendation for Gold IRA Rollover

Goldco
  • Experts in Gold IRA rollover
  • Non-pushy advisors and excellent customer service
  • Buyback guarantee at the highest price

2nd Best Recommendation for Gold IRA Rollover

Augusta
  • Only focus on gold and silver IRA
  • No hidden fees and complete transparency
  • No minimum investment

3rd Best Recommendation for Gold IRA Rollover

birch gold group
  • Solid reputation over 20 years
  • Free shipping for certain amount of investment
  • First year fee waive for certain amount of investment
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