It’s not all that uncommon for a vested employee to roll over some or all of their 401(k) plan into a traditional or Roth IRA. It is a relatively common practice when a former employee moves on and wants to keep their retirement savings in the market.
However, this isn’t always the case. There are times when some individuals want to diversify their retirement savings into assets which aren’t so closely linked to the trends of the sometimes-volatile stock market. If this sounds like you, then you might be interested in learning more about how to roll over some or all of your 401(k) into a gold IRA.
What Is A Precious Metals IRA?
Gold and other precious metal IRAs are possible thanks in large part to the 1997 Taxpayer Relief Act. It is a special type of long-term retirement account where there is a custodian who secures and holds precious metals for the account owner.
Gold IRAs are the most common type of precious metal IRA. Though silver, platinum, and palladium IRAs do exist and have some merit. Gold just tends to be the most stable of all the precious metals and precious metal IRAs. If you are new investing in precious metals, it is likely the best place to start.
A Gold IRA is typically self-directed IRAs. It also allows you to build a more diverse range of investments than a traditional IRA. Just bear in mind that you don’t physically hold the precious metal. The Internal Revenue Service has a specific list of requirements that must be met before any individual can physically hold a precious metal.
How Do I Open A Gold IRA?
It’s a relative process to open a gold or other precious metals IRA. The first step is to secure a custodian to hold the gold you purchase when you do rollover funds from your 401(k) to a gold IRA. Most banks, credit unions and trust companies can provide you with a list of entities. Just take your time to do your research. You want to look for a precious metals IRA company that has a long track record of well-performing gold IRAs.
The next thing you will need to secure is a broker or precious metals dealer who can sell you the gold. Most effective custodian companies will have a list of brokers that they have worked with in the past. If they don’t have that information, it might be a strong sign that you need a different custodian!
Once you have dialed in a custodian and a broker that you feel confident with, you can open your own account to start purchasing your precious metals. When it’s time for you to retire, you can choose to either collect the precious metals, assuming you meet the IRS requirements or liquidate them into cash. Just keep in mind that the IRS will tax either choice as they would any other type of distribution.
What Do I Need To Do To Roll Over My 401(k) Into Gold IRA?
Once you have all the mechanics in place and you have an account to use for gold IRA, you should contact the company that has been managing your 401(k) to notify them that you want to perform a rollover. At that point, you will need to choose between a direct and indirect rollover.
With an indirect rollover, you will withdraw the funds from your 401(k) account to have them deposited into another. In the case of a direct IRA rollover, the stipulated funds will be moved directly from one account to another, without the withdrawal step in the process. The direct option is often the preferred choice as there is less risk of inuring IRS penalties or fees.
If you choose an indirect rollover, you will have 60 days to transfer the money to the custodian company or gold IRA company. if you don’t complete the transfer in the 60-day period, they will become taxable, and there might also be other penalties associated with it. Especially if you are under 59 and a half years old.
Of course, you also need to make sure that you have satisfied any special requirements the 401(k) Management company may have in place for rollovers. After you have met the requirements, they will send a check either to you or your chosen gold IRA custodian. This will complete the 401(k) to gold IRA rollover.
What Are Some Of The Benefits Of A 401(k) to Gold IRA Rollover?
Many people who are interested in rolling over some or a portion of their 401(k) to a gold IRA do so because they are interested in diversifying their retirement savings. It is very popular for the fact that it doesn’t mirror the volatility of paper, or fiat currency which is tied to the economy or the stock market.
In general gold, investments are appealing since the price of gold typically moves in the opposite of how the stock market move. If your securities investments are performing poorly, or you suspect they are about to perform poorly, a potential gold investment likely seems increasingly attractive. Indeed, many savvy investors use gold investments to hedge against the potential volatility of other investments. Just bear in mind that these investors rarely sink all their portfolio into gold or other precious metals.
Gold sellers will often promote the benefits of gold IRAs by comparing them to the inherent volatility and risk of the stock market. Especially if the stock market is performing poorly or erratically at that time. At the same time, gold always has a knack for maintaining a strong degree of value. Still, as strong as it is, you still need to keep in mind that there is no such thing as a risk-free investment.
Are There Other Options For Increasing My Gold Exposure?
A gold IRA isn’t the only way to increase your gold exposure. There are some other options to consider. Each has its own merits. This includes things like purchasing physical gold coins and bars. At the same time, you might want to also consider buying stock in gold companies or gold mining companies. Gold ETF’s or Exchange Traded Funds can also help increase your gold exposure in your investment portfolio.
These choices and investment strategies typically aren’t the kind of thing you want to go it alone one. It’s best to seek out the services of a qualified investment professional or advisor. Particularly one who has an established track record for success in gold and other precious metals.