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How To Roll Your 401K Into A Gold IRA

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As you age, you may start looking into the many ways in which you can put money aside if facing retirement. If you have a 401(k) from an employer that is sitting idle, rolling over all or part of your 401(k) into a gold IRA may be a good option for attaining your financial goals.

To do that, you need to start by setting up a self-directed gold IRA. Moving your retirement funds into a self-directed IRA gives you the potential for more investment options like real estate, private bonds, private equity, and precious metals like gold.

Investing in precious metals is a popular option because they have been used as a time-tested means of storing wealth that can weather numerous economic changes, giving your portfolio diversity and stability. The price of precious metals often increases even in tough economic times, meaning that your portfolio has extra insurance against the woes of a financial crisis.

401k form on a clipboard

Make sure you know all the rules involved in rolling over your 401k so you can avoid penalties!

How To Move Your 401K To Gold Without Penalty

Like any 401(k) and other retirement plans, there are rules and regulations to be aware of. The last thing you want to do is decide to roll over your 401(k) and be hit with penalties because you don’t do things correctly. So, how do you move your 401(k) to gold bullion without penalty? This guide will help you understand what a 401(k) is, how it works, its benefits, and how to effectively roll over your 401K to gold without incurring penalties.

Section 401(k) of the Internal Revenue Code allows individuals to make contributions to a retirement account in a tax-deferred manner. This means that they will not be taxed on that contribution until they take a distribution when they retire (at age 59 ½ or later). The following guidelines are set forth by the Internal Revenue Service.

Elective salary deferrals are excluded from the employee’s taxable income. Employers can contribute to employee’s accounts through matching. Distributions, including earnings, are includible in taxable income at retirement. Employer matching is a valuable way for individuals to save additional money for retirement if an employer offers that plan, and some even refer to it as “free money.”

If you are contributing to a 401K fund, remember that the company managing the fund takes fees from your 401(k) even when you aren’t contributing to a new account. Over time, those fees can add up to a significant amount if you’re not continually contributing money. One way to help avoid those fees is through a 401(k) rollover, which transfers assets to an IRA to broaden your investment choices.

Like IRAs, 401(k)s are subject to required minimum distributions (RMDs), which require investors aged 72 and older to take a specific amount in distributions each year. Due to the global COVID-19 pandemic, the US Congress passed the CARES act, which waives RMDs for the remainder of 2020. Yet, it’s still important to know how to take RMDs to avoid penalties in the future.

What Are The Benefits Of A 401(K) Plan?

There are many more benefits to a 401(k) plan that include allowing employees to save money easier by automatically withdrawing from their paychecks into their retirement accounts. Current employer matching contributions to help employees build their nest egg for retirement. Tax-deferred contributions, meaning that the money they contribute to their 401(k) will not be taxed.

If you are making $45,000 a year and you contribute $5,000, you will be taxed on $40,000 rather than the full $45,000, meaning you pay lower taxes on your income. You will, however, need to pay the taxes when you take the withdrawal in retirement.

Potential for borrowing from your 401(k) to pay for: unforeseen medical emergencies, burial or funeral expenses for the family, education, purchase of a principal residence, to prevent eviction, and to repair damage to your principal residence after certain casualty losses. While this is an option, it may cause distributions to lose any market gains.

To add to these benefits, you can consider a gold IRA rollover as an account owner. Knowing how to roll over your 401(k) into a gold IRA means keeping all the great benefits of a tax-advantaged retirement account, plus the peace of mind of knowing that your investments can be secured in physical precious metals.

What Is A Gold Rollover?

A rollover IRA is a term for an individual retirement account (IRA) that is funded by moving funds from a 401(k), 403(b), TSP, or similar retirement account into an IRA. The main difference between a 401(k) and an IRA is that an IRA is normally opened by the individual rather than being offered by an employer.

With a rollover IRA, investors can use existing retirement funds to take advantage of a broader range of investments than are available through 401(k) investments alone. And by investing in a self-directed IRA, you have even more options for investments, such as a gold IRA rollover.

Rollover IRAs are most often created when changing jobs or retiring, as they allow employees to move their current 401(k) or other retirement account balances into an IRA account that will offer a better array of investments and superior performance.

When performing an IRA rollover, funds from existing tax-advantaged accounts can be rolled over into a new IRA tax-free via a brokerage. You can even roll over funds from multiple retirement accounts into a single self-directed IRA, making it easier for you to consolidate and manage your retirement savings.

With a gold IRA rollover depending on the price of gold, investors can minimize their tax exposure since distributions are normally subject to ordinary income tax rates. Particularly for those in lower-income tax brackets, that can result in gold held in an IRA being taxed at a lower rate than if it were not in an IRA. And for those investors in a Roth IRA, they won’t be taxed at all on the gains on their gold investments.

Can You Roll A Traditional IRA Into A Gold IRA?

It is possible to roll traditional IRA funds into a gold IRA, but there are guidelines to follow when investing in precious metals. The gold must have a fineness of .995, or 99.5% purity. Gold has to be held by a custodian. Pre-owned gold cannot be added to a gold IRA, but you can open a gold IRA and purchase gold to add.

Some of these rules are included in Section 408(m)(3) of the Internal Revenue Code, which sets guidelines and exceptions for investing in coins and bullion. Knowing these basic rules may help avoid common pitfalls when you’re preparing for a gold IRA transfer.

When you contribute to a gold IRA as part of your retirement portfolio, you’re purchasing actual physical gold as opposed to a gold ETF, which only certifies that you have a vested interest in gold, but not actual ownership. The benefits of investing in gold as part of your IRA custodian include defense against currency devaluations. Protection against the effects of inflation. Less susceptibility to government seizure. Diversification to help manage investment risks. Same tax benefits as conventional IRA.

What Are IRS Penalties For Retirement Accounts?

The IRS sets forth penalties for not following regulations on different types of retirement savings. The following are a few IRA investing rules to be mindful of so you know how to move a 401(k) to a gold IRA without any penalties. If you exceed the contribution limits, you may incur a penalty of 6%. For example: if you exceed the contribution limit by $500, you would be penalized $30 every year until the mistake is corrected.

If you have an IRA, you are not allowed to invest in collectibles, which include artwork, rugs, antiques, stamps, and other items as defined by IRS Section 408(m)(2). Tax penalties may result. This does not include qualified precious metals. Withdrawing any distributions before reaching the age of 59 ½ incurs a 10% penalty plus income tax.

Exceptions include death or disability of the IRA owner, withdrawals to pay certain medical bills, first-time home purchases, and higher education expenses. Additionally, the CARES Act allows for early withdrawal in 2021 for up to $100,000 if you are a “qualified individual”: you, a spouse, or dependent are diagnosed with COVID-19, you experience financial difficulties due to job loss, furlough, reduction in hours, or lack of childcare.

Steps For How To Transfer A Conventional IRA Into A Gold IRA

If you’re new to transferring an IRA or rolling over a 401(k), and more specifically, transferring or rolling over into a gold IRA, I’ve put together a simple 4-step process to get you started. Of course, always keep in mind the IRS guidelines for rollovers and distributions to ensure that you are complying with regulations.

Review investment options, as well as more information about investing in gold and other precious metals, to make sure you’re choosing the best option for your financial goals, and that you are eligible for the specific program you choose. Work with your gold IRA specialist to fill out the necessary forms to open your account.

Partner with your precious metals investment expert to help you transfer a portion of your retirement account into a self-directed IRA. This is an important step to help you avoid IRS penalties. Decide which type of metals you want to invest in. After purchase, they will be sent to a secure storage facility. As you start the process, remember that only IRA-approved gold is eligible. It may be helpful to contact a qualified gold IRA specialist who understands the nuances of self-directed IRAs and how to roll your 401(k) into a gold IRA.

What Are Contribution Limits For An IRA?

Once you’ve established a rollover IRA, you can contribute to it just like with a traditional IRA. If you establish a rollover IRA and begin making contributions to it, you may inhibit your ability to do a reverse rollover IRA (back to a 401(k)), so evaluate all your options before making any changes.

The IRS has contribution limits for IRAs, which must be followed in order to avoid penalties. The following guidelines will help you understand the contribution limits for gold IRAs. As with a traditional IRA, you’re limited to $6,000 in contributions per year ($7,000 if you’re over 50). Contributions are across all IRAs, so if you have multiple IRA accounts, you are limited to that $6,000 total across all your accounts.

Contributions are per person, not per account, so you can potentially contribute to multiple IRAs in the same year. If you are over 50 years old, you are allowed to make additional contributions to a 401(k). The catch-up contribution limit for 2021 is $6,500.

How A Self-Directed Gold IRA Works

One of the main questions people ask when saving for retirement is how to maximize their investment growth. For many investors, relying on stocks, bonds, mutual funds, and CDs has been their go-to investment source, particularly through a 401(k) or IRA. These traditional assets may not offer as much diversity or long-term security, which is where a self-directed IRA can be useful.

Investing in a variety of assets allows investors to hedge their losses, maintain their gains during tough economic times, and keep their assets secure during market volatility. Thankfully, you don’t have to be rich or at retirement age to start taking advantage of alternative investments.

A self-directed IRA (SDIRA) allows you to invest in alternative assets that aren’t found in most traditional IRAs. Self-directed IRAs require the use of a custodian or trustee who administers the account, but you (the account holder) actually get to manage the account directly. Alternative investments allowed in a self-directed IRA include:

Real estate, promissory notes, gold, silver, and other precious metals, cryptocurrency, mineral rights, water rights, and oil and gas. A gold IRA is simply a type of self-directed IRA that focuses on investing in precious metals such as gold coins and bullion (bars and ingots).

What Are The Advantages Of A Gold IRA?

Gold IRAs can offer many advantages to investors, whether nearing retirement, or earlier in their careers. Investors do not need to pour all their assets into a gold IRA, but simply moving small percentages of investments into precious metals can reap long-term benefits.

A few advantages of self-directed gold IRAs include: mitigate investment risks, diversify an investment portfolio, weather market fluctuations, and receive tax advantages like those for traditional IRAs. Some investors may wonder if a 401(k) or self-directed IRA is a better investment.

Very often they wonder this after they’ve left an employer and still have 401(k) assets held in their old retirement plan. If you leave your employer, you have the option to rollover your retirement savings into an IRA, which may be a good opportunity to explore a self-directed gold IRA, which offers investment diversity and assets that are more stable through economic downturns.

A gold IRA is a type of self-directed IRA that allows investors to invest in precious metals, like gold. But what does IRA-eligible gold mean? Gold and other precious metals need to meet specific IRS standards according to Section 408(m)(3) of the Internal Revenue Code.

These standards address gold coins and bars and set their level of fineness and purity, in addition to other contributions and storage rules. These rules include: The gold must have a fineness of .995, 0r 99.5% purity. The gold has to be held by a custodian. Standard IRA contribution limits apply. The gold you already own cannot be added to a gold IRA, but you can open a gold IRA and purchase new gold to add.

Small gold nuggets being checked for weight old style in an antique measuring scale

Due diligence is a must before you approach a professional gold dealer.

How To Place Physical Gold In An IRA

The type of self-directed gold IRA you set up will be dependent on how you want to fund your IRA. Most investors will choose to open a traditional gold IRA so that they can invest with pre-tax dollars or rollover funds from existing retirement accounts. Investors transferring or rolling over funds from a Roth account will need to choose a Roth gold IRA. You can also open a Roth gold IRA if you want to do a Roth conversion.

When funding your gold IRA, you can use cash or rollover funds from a 401(k), 403(b), 457(b), or TSP plan. Be sure to check with your tax advisor before making any changes to see if there are tax implications and confirm that your current retirement accounts allow transfers or rollovers.

Gold IRA assets need to be stored with a custodian per IRS regulations. Working with precious metals investment experts will help you find a custodian experienced with gold IRA investing to make sure your investments are made properly. Now that your self-directed IRA is funded, it’s time to choose which gold coins or bars you want to invest in.

Remember to check if your gold is eligible based on the IRS codes. Collectibles like coins, stamps, antiques, and artwork are not eligible, with some exceptions for gold IRA coins. Choose gold dealers that have at least 5 years of industry experience to avoid counterfeit products. Every mint keeps records of the coins they produce, which will help prevent you from purchasing a counterfeit product.


By setting up a self-directed gold IRA, you can rest easy knowing your assets are safe and secure from stock market fluctuations, inflation, or defaulting bonds. There’s no better time than today to invest in gold. With the economy being up in the air and stock market fluctuations in full swing, a gold IRA may be just the solution to protecting your investments. And setting up a self-directed gold IRA is easy. Check daily gold prices, ask questions, and learn about investing in gold to protect your portfolio.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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