401 (k) plans are very popular with employers who like to use their available benefit programs to attract and retain valuable employees. There are several different variations and ways that you can make the most out of a 401 (k) plan. So, it’s best to read the fine print to understand your options.
There are some 4011 (k) plans that offer you very little control or direction over where your vested capital is being assigned. Many of these plans avoid or place little investment in the precious metals market. However, there are some 401 (k) plans that come with something called a “Brokerage Account.”
This, somewhat rare feature allows you to invest a small portion of your 401 (k) funds as you see fit. In a scenario like this, you can use this controllable portion to do things like improving your exposure to gold and other precious metals like silver and platinum.
Can I Use My 401 (k) To Purchase Gold?
401 (k) plans don’t really allow you to hold collectibles such as art, rare books, antiques, rare stamps or precious metals like gold. Yet there are some forms of gold, silver, platinum that you can invest in. However, there are some standards and regulations involved.
To do this you will need to seek out a trustee who can arrange the details of purchasing, transporting, and storing gold. This type precious metals dealer or broker may offer self-directed 401(k) accounts or the option to roll over a portion into a gold-based IRA.
Can I Buy Into Gold Substitutes?
If your self-directed 401 (k) comes with a brokerage account, you will likely be allowed to invest in various stocks, and bonds as well as precious metal mutual funds or exchange-traded funds. Many of these options can be used to increase your gold exposure.
A physical gold ETF like GLD or IAU allows you a way to own the value of a specified amount of physical gold. Each share you purchase provides you with direct exposure to the current price of gold. However, the gold you purchase in your share is secured away in a depository, and you do not technically get physical access to it. If you ever choose to liquidate the gold ETF, you will receive a cash value equivalent, you will not be able to redeem it as physical gold.
A futures or options contract derives its value from futures and options on gold. It allows you to trade the future funds on a commodity exchange based on strict specifications. While contract prices follow the price of gold, the relationship is not perfect, and there can be delays in rapidly moving market conditions.
Gold-mining stocks are another intriguing option to consider. They allow you to buy shares in major minim corporations that are the primary source of introducing new amounts of gold to the market every year. They can be included in a wide range of rebalancing and diversification strategies.
Can I Roll Over My 401 (k) Into A Gold IRA?
Some 401 (k) plans allow you to roll some or all of your vested capital into an IRA, which includes a gold-based IRA. To do this you will first want to read all the stipulations in your program. If your 401 (k) is provided through your employer, they might have rules or time frame requirements.
Some of these 401 (k) plan to limit how much of your money is considered “Vested.” This means you might not be able to withdraw or rollover the employer contribution until you have been with the company for a preset number of years.
Some of these plans increase the amount that you are vested very few years until you are considered “Fully Vested.” At that point, you will have access to 100% of the asset, which includes your portion as well as your employer’s contribution. Some of these stipulations won’t allow you to rollover your 401 (k) until you are fully vested.
What Are The Permitted Forms Of Gold?
The Internal Revenue Service and other United States regulations like U.S. Code 408 limit the types of gold you can hold through a self-directed 401(k) or an IRA. This limits your options to the following types of gold, silver, platinum or palladium bullion to forms such as coins, rounds, and bars.
Numismatic coins are not allowed under Code 408. However, gold coins in one, one-half, one-quarter, and one-tenth ounce sizes that are minted in the United States are permitted.
There are also a few foreign coins that have a minimum of 99.5% gold content that are also eligible.
It’s also worth noting that gold rounds and bars must conform to established purity standards that are laid out in the gold contract in such a way that they can be traded on a commodity exchange. Also, the original source of the gold must be a National Government mint an exchange-approved refiner.
Are There Other Rules Governing Rules For Using A 401 (k) To Hold Gold?
The standards for gold purity and size are just the tip of the iceberg. There are other governing rules that can apply for holding gold through a 401(k) brokerage account, or a gold IRA. Specifically, there must be a licensed trustee to serve as the physical custodian of the gold. The gold must also be kept in a secure depository with the appropriate level of insurance.
The IRS specifically refuses to let allow investors to physically hold their own gold through a 401 (k) gold IRA or a gold ETF. This is related to the problems that could occur when it comes to monitoring things like undisclosed distribution which could impact an individual’s taxable income.
What Are The Benefits Of Increased Gold Exposure?
Being able to use your 401 (k) brokerage account or rolling it over into an IRA to increase your gold exposure can be very attractive. Precious metals, especially gold, have the ability to retain their value even in uncertain economic times. Gold even has a historical precedent for increasing in value during times of inflation, which can even turn it into a stream for improving and insulating your wealth.
If your brokerage account doesn’t come with advisory services, you should consider seeking out experienced counsel in the gold investment niche. They can help you better determine how much of your vested interest should be allocated into gold, and the triggering circumstances for making future changes.