401k to Gold IRA Rollover – Physical Gold in Your IRA

401k to Gold IRA Rollover – Put Physical Gold in Your IRA in 2019

401k to gold IRA rolloverIn the current volatile economic landscape, more and more people are searching for different investment instruments.  A gold IRA, for instance, can help to protect your retirement savings.  In the last few years, a precious metals backed IRA has become increasingly popular. Do you currently have a traditional 401k retirement account or investment portfolio with paper assets like stocks, bonds, or cash?  Are you looking to convert a part of it to gold or precious metal bullion coins or bars?  If the answer is “yes”, you should consider a 401k to gold IRA rollover.

Historically, gold has moved in the opposite direction of mutual funds, stocks and bonds. The technical term is that gold is negatively correlated to stocks.  Today, gold plays a critical role in both industry and the financial marketplace.  It is sought after for many reasons.  Gold remains a symbol of wealth and prosperity because of its rarity, unique properties  and perceived value.  In a retirement account, gold bullion and coins can offer protection against inflation, currency debasement and economic uncertainty.  Gold has a reputation for offering protection against the various negative effects of unsound fiscal policies and government overspending.

Check with Your Employer First

401k-gold-ira-rolloverTraditional retirement accounts such as a 401k, can have slightly different rules for rollovers and transfers. If you have a retirement plan through your current employer, you might want to check with them first. Some employers do not allow gold investment as part of their 401k plan unless you quit your job. Before initiating a 401k to gold IRA rollover, make sure you understand your employer’s 401k plan. While there are ways around employer restrictions, it is helpful to know whether this will be an obstacle from the beginning of the process.

If your current 401k plan does not allow for gold and other precious metals, it will probably be necessary to roll your funds into a self-directed IRA. Keep in mind that some plans have roll-over penalties and others do not allow accrued dollars to be moved at all unless an exemption is cited – like leaving employment or financial hardship. The key is to get the funds released with no penalties.  Then you are free to set up a self directed IRA with the option to purchase precious metals.  A properly structured Gold IRA allows investors to place both physical gold, silver and other approved precious metals in their Individual Retirement Accounts (IRAs). Gold, silver and precious metals have become important options for hedging against inflation and economic uncertainty.

401k to Gold IRA Rollover vs Transfer

Rolling over a 401(k) plan into a traditional or Roth IRA is a fairly common practice. Individuals often do this when they’ve left an employer and want to keep their retirement savings all in one place. But when looking to diversify retirement savings with precious metals and non-paper assets, one needs to consider executing a 401k to gold IRA rollover.

gold-ira-accountA 401k to gold IRA rollover is for an investor who has a traditional retirement account with paper assets, but would like a more diversified retirement portfolio.  A Gold IRA offers protection in allowing for a variety of assets to be held rather than just stocks, bonds and cash.  There is a difference between a transfer and a rollover. The IRS has a very clear distinction between a transfer and a rollover – despite the common misconception that any movement of funds is a rollover.

  • Rollover – the funds first move to you and then you deposit them into another account.
  • Transfer – the funds move from one custodian to the other without you seeing the money.

What is a 401k or Traditional IRA Account?  

gold-and-silver-IRATo combat the rising cost of pensions during the 1980’s, the 401k account was established. It is named after a subsection of the Internal Revenue Code.  A 401k account is simply a savings plan that permits workers to invest a portion of their pay before taxes are taken out. In addition to salary and health benefits, these accounts have become an important part of almost every comprehensive employment package. In many cases employers will match a percentage of the employee’s contribution in an effort to hire and retain high-quality talent.

U.S. tax codes require an IRA to be a trust or a custodial account created or organized in the United States for the exclusive benefit of an individual or the individual’s beneficiaries. The account must be governed by written instructions and satisfy certain requirements related to contributions, distributions, holdings, and the identity of the trustee or custodian. These requirements and restrictions related to the custodian and an account’s permitted holdings give rise to a special type of IRA: a self-directed IRA (SDIRA).

What are the Main Benefits of a Traditional 401k Plan?

Briefly, a 401 (k) plan is an employer-sponsored retirement plan that allows employees to contribute to this account in the form of automatic payroll deductions. With a Traditional 401 k plan, contributions may be made on a pre-tax basis.   Taxes are not paid until monies are withdrawn at retirement.  401 (k) plans are very popular.  Estimates suggest up to 50 million Americans have 401 (k) plans. Such plans benefit the employee in various ways:

Tax benefits

One of the biggest benefits for participating in a 401 (k) is the money you save on taxes. Your 401 (k) contributions will be deducted from your paycheck before taxes are calculated from your salary. This means that your gross income is reduced and you pay less income taxes. But, there is more. As your 401 (k) increases in value over time, you do not pay taxes on these gains.  Unlike a bank account or privately owned stock or mutual fund, you only pay taxes when you start withdrawing money at retirement age.  At that time, you will likely be in a lower tax bracket. Since you do not pay taxes on profits, your 401 (k) money can grow faster year over year than many other types of savings.

Automatic Savings

Let’s face it, most people find it hard to save money every month. However, this is provided by a 401 (k) with automatic savings. The money will automatically be transferred from your paycheck to your 401 (k) account before you can get it in your hands. With a 401 (k), you end up paying yourself – with money that would otherwise have been spent. That can lead to big savings in a few years time. The sooner you start, the bigger your 401 (k) can become naturally. If you receive a salary increase at work, it is a good idea to increase your 401 (k) contribution so that you can continue to save at the same rate.

Employer Matching Contributions

A 401 (k) is a defined contribution plan where the employee finances the plan with his own salary.  This is different from a defined benefit plan where the employer finances everything, such as a retirement plan. However, many employers offer to contribute to the 401 (k) of an employee.  More and more employees are thinking long-term about retirement. Therefore, an employer’s decision to make appropriate contributions to its 401 (k) plan can be a key factor in attracting and retaining talent. A study by the American Benefits Council showed that 92% of the surveyed companies offered corresponding contributions. If your employer offers a suitable contribution, this is free money for you. The more your employer contributes, the less you have to save yourself. Always participate in an employer’s matching program and contribute at least the amount they will match.

What is a Self Directed Gold IRA Account (SDIRA)?

A Gold IRA was made possible by the Taxpayer Relief Act of 1997.  It is a type of long-term retirement account in which a custodian holds precious metals for the account owner. Although Gold IRA is the most common name, that doesn’t mean you can only purchase gold with the plan. You can also hold certain types of silver, platinum and palladium. Gold IRA plans are typically self-directed IRAs, which allow more diverse investments than a traditional IRA.  Even though precious metals are allowed for, you can’t simply collect anything made of those four materials. The IRS has a list of specific fineness requirements all precious metals must satisfy before they can be held in a gold IRA.

A SDIRA is managed by the plan holder and can act as a very broad investment portfolio. Its portfolio options are much broader than basic securities offered by traditional and Roth IRA brokerages. Therefore, this requires a greater initiative and due diligence of the plan holder.

Self Directed Gold IRA

Investors seeking a SDIRA will not find it at traditional brokerage firms, which also serve as a custodian of basic investment portfolios. Because of the broader and more complex diversification of the SDIRAs, investors seeking them typically need to turn to companies that specialize in them. These companies are ready to act as custodians of the SDIRA assets. Some SDIRA companies still have restrictions on the Fund’s holdings. Therefore, it must be ensured that the account allows the preferred asset mix of the investor. Some SDIRAs may specialize in certain alternative assets such as Private Equity or Private Debt.

Self Directed IRA Tax Rules

It is the responsibility of the investor to comply with all requirements of the Internal Revenue Service (IRS). As SDIRA allows for such a broad portfolio, holdings are at greater risk of violating IRS rules.  Investors should be more cautious, especially in the types of precious metals selected. For SDIRA, the same funding and contribution rules apply to all IRAs.

Self Directed IRA Personal Use of Assets

Where SDIRAs must be careful is the personal use of the assets contained in the portfolio. The IRS does not allow IRA investments to be used for personal purposes before the scheduled withdrawal date. This also applies to real estate held in a portfolio and does not allow the investor to invest in real estate for personal use. The IRS also requires the IRA assets to be held by a qualified SDIRA trustee or custodian bank.

SDIRA investors have much wider investment options for investing in SDIRAs. SDIRAs can include almost any type of investment. They can offer placements for private investors, private securities, real estate, limited partnerships, precious metals, commodities, crowdfunding investments and much more. A life insurance is not allowed in a SDIRA.

401k to Gold IRA Rollover: Self-Managed vs. Self-Directed

In any IRA account, owners can choose from investment options allowed by the IRA trust agreement.  The custodian can buy and sell those investments at the account owner’s discretion, so long as the sale proceeds remain in the account. The constraint arises because IRA custodians are allowed to determine the types of assets they will handle within the boundaries established by tax regulations. Most traditional IRA custodians only allow investments in highly liquid, easily valued paper based assets.  These include products such as approved stocks, bonds, mutual funds, ETFs and Certificates of Deposit.

However, certain custodians are willing to administer accounts holding alternate investments.   They also provide the account owner with significant control to determine or “self-direct” those investments.  Of course, all transactions are subject to prohibitions established by tax regulations. The list of alternative investments is quite large.  It is limited only by a handful of IRS prohibitions against illiquid or illegal activities and the willingness of a custodian to administer the holding.

self-directed Individual Retirement Account allows alternative investments for retirement savings. Some examples of these alternative investments include real estate, mortgages, private company stock, oil and gas limited partnerships, precious metals, horses, and intellectual property.  Regulations require that a qualified trustee, or custodian, hold IRA assets on behalf of the IRA owner. The account owner chooses among the investment options allowed by the IRA custodian.  With a self-directed IRA, the term “self-directed” refers to the significantly broader range of alternative investments available including gold, silver and other precious metal bullion and coins.

401k to Gold IRA Rollover Guide

Step 1: Choose a Custodian For Your New Gold IRA

Choosing a gold IRA custodian should be based upon the company’s reputation.  You should specifically research the company’s history in securely holding precious metal assets and offering fast liquidations. Pick a gold IRA provider that is fully insured, is on the IRS approved list and offers strong safeguards to manage physical assets.

Careful research into the background and business practices of any potential Gold IRA company is very important for two reasons:

  1. First, you want to be certain your retirement savings are being handled by a certified and trustworthy company.
  2. Second, Internal Revenue Service (IRS) guidelines only allow for one tax-free rollover of IRA funds each year.  This rollover must occur within 60 days of removing the funds from your current IRA custodian’s care to avoid penalty. If you choose a custodian and you want to change later, you will have to wait the full 12 months or face tax penalties on the money you are moving.

The reputable Gold IRA custodian you chose will be able to furnish you with all of the necessary paperwork and contact information needed to arrange your IRA rollover. Having this paperwork handled prior to the rollover date ensures that the money will be successfully transferred to the Gold IRA account within the IRS’s required 60 day period. In some cases, your existing IRA custodian may choose to issue you a check for the full amount of your IRA and then you will have to arrange deposit of the full amount of these funds with the new Gold IRA custodian. There may be fees associated with the rollover of your current IRA and these should be discussed with your IRA custodian prior to making any decisions.

Step 2:  Complete the Paperwork

You will need to fill out detailed paperwork about your existing account (401(k), 403(b), etc.).  You will also need to fill out forms that allow the custodian to create the new rollover IRA account. The actual process of setting up the new IRA is fairly simple.  Remember, it’s vital to pick a trusted gold IRA partner who can handle the transfer of existing funds into physical gold.

Step 3:  Decide On Your Gold Investment Strategy

When considering a 401k to gold IRA rollover, it’s important to understand how you want to invest your funds and how your investment strategy affects your planning needs. What is your main reason for investing in physical bullion?

  1. Diversification – If your current portfolio is biased towards stocks, bonds or mutual funds, allocating 5 to 10% of your entire portfolio size to precious metals can help you effectively diversify and protect your portfolio.
  2. Appreciation – If you strongly believe that the price of gold will rise significantly, then allocating more than 20% of your portfolio could generate substantial, tax deferred profits.

Only purchase IRS approved precious metals, coins and bullion  IRS-approved bullion coins or bars are necessary.  Some IRA and 401k custodians also allow investors to utilize Gold ETF’s, gold mining stocks or mutual funds. This type of investment doesn’t require the storage facilities needed by physical bullion.  Regardless, it should be understood that a Gold ETF is an investment in “paper gold” and not actual Physical Gold.

          Step 4:  Find a Reputable Gold Dealership

The final, and perhaps most important, step in rolling over your IRA into a Gold IRA is locating a reputable Gold dealership. You need to find one with a good reputation, a competitive pricing structure and Gold IRA-approved products. You could go to your local gold retailer, or find one online that gives to give you more diversity and potential to save. Most Gold IRA custodians make it possible for the account holder to choose the precious metal dealer whom the coins/bars will be purchased from.  Look for companies that have a “buy-back program” and offshore storage facilities. Stable Asian countries such as Singapore and Hong Kong are solid options.

Choosing Gold Investment Companies

self directed iraBelow are 5 very important things to consider when choosing gold investment companies to handle your 401k to gold IRA rollover requirements:

#1. Trust and Reputation

Even the simplest financial transaction, where both parties are present and the object in question is visible, requires trust as an essential element.  Trust is the glue where both parties can feel confident that the other will hold up their end of the agreement, even if unexpected losses arise for either or both parties. The gold investment companies you are considering for your Gold IRA must be able to deliver good results and have a flawless track record of delivering exactly what they promise. The situation in the market should not determine your investment outcome. Customer service must be a primary concern since you want the company to guide you when taking your existing 401K and making financial decisions. Clearly, you should check and verify that other clients are satisfied with the company’s service and performance.

As a minimum requirement, The company should also be established and accredited by various market watchdogs like Business Consumer Alliance (BCA), Trustlink, Ripoffreport.com, and the Better Business Bureau (BBB).

#2. Fees and Policies

At the end of the day, your retirement plan is about having enough money to live on in your later years. If your nest egg is eaten up by high fees or questionable charges, how is that in your best interest?  When researching gold investment companies, you should be aware of any policies and fees that will be applied to your account in advance. You must understand what you are being offered. Does the investment strategy suit your specific needs? Does the company charge any unnecessary fees? In the beginning, this may seem a bit confusing. Potential gold IRA companies should make the investment process easier by having people available to guide you through the rollover process and provide you with exceptional customer service.

#3. Flexibility and History

Not all gold investment companies are a credible choice. There are very strict regulations that IRAs must follow with regard to how they store and transfer precious metals. Most retirement experts have recommended that 5-15% of your total portfolio be in precious metals, with some even suggesting up to 20%. Whether you choose to put that allocation into gold alone — or mix it up with silver, platinum or palladium – investment firms must follow the rules to protect your wealth. Following these guidelines will help you make wise purchases.

Top Gold IRA companies should provide you with various investment options and their policies must suit your specific needs and situation. You want to work with a company with market experience that is known for steady and smart investments that grow. This is especially important if you are not an experienced investor. Initiating a 401k to gold IRA rollover is a good investment strategy as gold offers long-term stability and it serves as a hedge against inflation for your retirement savings.

#4. Buyback Program

You need a company that can ship your actual gold (or a cash equivalent) without extra fees or shipping charges – guaranteed.  The best gold IRA companies stand out as giving premium service and benefits to their customers at no extra charge.

When you’re ready to liquidate your gold or other precious metals, you must have someone available to buy them back fast and easy. You don’t want to miss out on potential gains. These gains can be lost if you have to wait several days to liquidate your assets. The company should offer a buyback program allowing you to resell metals at the current metal spot price.

#5. Storage Safety

It’s important to know if your metals will be stored with the metals of other investors. While many Gold IRA companies do offer you the ability to keep your gold in a separate storage, beware of Gold Investment Companies that offer investors the option to store it in their own home. This is not an IRS-approved method of IRA investment, and will result in potential tax penalties. Avoid companies that offer “checkbook IRAs,” “collectibles” or the possibility of “home storage” in a safe or bank deposit box.

Storage safety is often a factor that is overlooked when choosing IRA Custodians or gold investment companies.  You want to be sure that the company offers several storage locations, nationally and overseas. The company of your choice should offer segregated storage options. Segregated storage means you get a section in the vault for your precious metals. That means your metals will not be combined with other people’s metals. That means you can get easy access when you need to liquidate your precious metals quickly. Don’t overlook storage safety and quick access, when choosing a gold investment company.

Does a 401k to Gold IRA Rollover Make Sense?

Are you looking to diversify and protect your retirement savings? Do you want a retirement option that doesn’t mirror the volatility of paper currency or the stock market? If either is the case, you should consider a 401k to gold IRA rollover.

Gold IRA plans, or gold investments in general, can be appealing since the price of gold typically moves in the opposite direction of the stock market. Typically, if securities investments are performing poorly, gold investments are probably on the rise, and vice versa. Many investors use gold investments to hedge their other investments. It’s uncommon for investors to have a portfolio of entirely gold, or any one asset class for that matter.

Gold sellers will often market gold IRAs by contrasting them with the volatility and risk of the stock market. However, it’s important to remember that there’s no such thing as a risk-free investment. The price of gold is subject to its own economic rise and fall.

401k to gold IRA Rollover – Risks to Consider

The benefits are pretty well established. However, it is important to consider the significant risks:

Prohibited Transactions

Tax deductions disappear if you fail to comply with the rules of a self directed IRA.  You could also have to pay fines and interest as well. One potential mistake is neglecting the “no self-handling” rule.  This prohibits you from borrowing money from your IRA, selling real estate to it, and other interactions. Suppose you invest in a rental property through your IRA and then the unit’s kitchen faucet breaks. You think you can fix it yourself and save money. But, now you have broken the rules because you have provided the IRA “services rendered” that the IRS prohibits. When the IRS finds out, the entire account is considered distributed to you and thus taxable. You also owe a fine for trying to save some money. To avoid violating the self-handling rule, imagine that your IRA owns and operates the assets it contains. In other words, your IRA does not have to pay you, but another person for it. Another rule prohibits doing business with specific relatives, including parents, children and others. See this IRS page for more information on prohibited transactions.

Due Diligence

It’s up to you to understand the investments and the rules in a self-directed IRA. The Custodian and the Administrators may not give any financial advice. Often, they will say so explicitly, but investors don’t always listen well. It is very important that the individual investor does all the homework himself.  At the end of the day, it is a Self Directed IRA after all.  Even if the administrators do give some helpful advice, you are ultimately responsible, not the administrators.

Lack of Liquidity

Self-directed IRAs allow you to invest in a variety of assets. However, depending on the type of asset, many are often illiquid. This means that in an unexpected emergency, you may find it difficult to get money out of your IRA. You have to find a buyer for the investment where not many buyers may be available. This can also be a problem for owners come disbursement time.  There are required minimum distributions beginning at age 70 ½.

Lack of Transparency 

Make certain you completely understand your investments.  Also be aware of how much they are really worth. The Securities and Exchange Commission warns investors that promoters sometimes rate the purchase price or purchase price plus expected return as a valuation. However, this number does not always match the actual amount you receive for the asset. Investors should be aware that none of these valuations necessarily reflect the price at which the investment could be sold, if at all.  This is according to the SEC’s investor warning.


Be aware of opportunities for fraud or misrepresentation.  Questionable investments have been exposed where self-directed IRAs add legitimacy to the schemes. IRA Custodians have sometimes recommended investments claiming the SEC has investigated and approved them.  Because they are Self Directed, custodians generally do not rate the quality or legitimacy of an investment – that is not their function.  Let the buyer beware.

Gold IRA Costs and Fees

You should fully understand the costs and other fees associated with any investments you make. For a self directed precious metal IRA, you need to be aware of the multiple costs associated. These accounts have tax deferred status, but that comes at a cost.  You must retain them with an IRS approved administrator or caregiver and with a third party custodian.  You can expect the following types of costs and fees:

Gold IRA Setup and Administration Fees

First – the good news.  There are no government-required rollover or transfer fees to convert an existing 401k to gold IRA rollover account. This does not mean that there are no account application fees. The sanctioned custodians and managers of precious metal IRAs often charge a processing fee to begin opening accounts for self directed IRAs. Each administrator will have a different amount, but the average is around $ 50 for that particular category.

Commissions and Markups on Coins

There are several commissions involved in buying precious metals for a self directed IRA account.  You can expect transaction fees whenever you buy or sell coins or bars in your account. Typical fees are valued per transaction. The more you buy and sell, the more fees you will have to pay. Regardless of which administrator you choose, you cannot avoid the commission fees.  These fees vary for each administrator, but a good estimate is $ 40 for each transaction.

Transaction fees should not be confused with the markup on the spot price that coin dealers will also charge. In addition to the value of gold or silver within the coins or bars you purchase, you will be charged a premium.  This is an addition to the spot price of the precious metals. The actual premium depends on the nature of the product, the amount of demand for the product and the premium that the merchant charges to your account administrator.

Yearly Maintenance Fees

Your account administrator will not be working indefinitely for just one application and one startup fee for your precious metals IRA. You will also be charged an annual account maintenance fee.  This is to cover managing the account, periodically processing and distributing bank statements, and keeping your various positions. Typical account management fees range from around US $ 75 per year to several hundred US dollars per year. When you receive your free information pack or account set-up, be sure to check the annual fees. They should be clearly stated in the relevant documentation. Some administrators offer a reduced annual fee for the first year, or even an annual discount on the fee, depending on how large your balance is.

Storage Fees

The vault storage facility also has storage and maintenance fees to physically inventory and protect your precious metal stock. Any gold, silver, platinum or palladium held in such accounts must be kept in third party storage.  This is to maintain tax-deferred status for IRS approved deposits. Depositories as Brinks and Delaware Depository charge an annual fee to cover these costs. Your administrator will simply pass it on to you. The fees themselves depend on the actual deposit you choose in the end. Typically, these companies charge about half a percent to one percent each year.  This is based solely on the dollar value of the precious metals concerned. There may also be different schedules of fees, depending on whether you store your metals in the collective deposit as a collective storage or whether you insist on a separate and individualized separate storage.

Miscellaneous Fees

There are also some other fees that are typically unavoidable, such as bank transfer fees. The vast majority of IRA custodians will charge you fees for any funds that you need to transfer.  This includes funds to you or funds that you need to transfer to a bullion dealer, custodian or storage vault. These transfer fees are usually about $ 25 for each outbound transfer they send on your behalf. The list of these fees should also be included in the documents provided opening the account.  They must be clearly stated somewhere.

Bottom Line

Investing in gold can be a good way to diversify your retirement plan across asset classes. If you’re looking for a new destination for the funds in your 401(k) and you want something that doesn’t closely follow the stock market or the economy, then a 401k to gold IRA rollover could be a good option.  It is always important to diversify your investments. Make sure your retirement strategy includes several different asset classes. That will help protect you from risk on all sides.

Gold IRA Rollover – More Information…

For more information on 401k to Gold IRA Rollover click here for Setting Up a Self Directed IRA

Gold IRAs are “self-directed IRAs”. This gives you the ability to choose other approved investments besides physical gold coins, gold bars, and precious metals. If properly structured, you can include businesses, real estate, franchises, and other types of investments that just are not possible to include in a traditional IRA or 401k plan.  However, there are some other things to consider…

Gold Stocks that Pay Dividends

Buying physical gold is a proven way to hold and store wealth.  However, gold bullion does not generate income.  Owning Gold stocks is a way to enjoy increases in the price of gold with growth potential if the stock itself appreciates in value.  Wouldn’t it be great to have the security of owning gold AND the growth potential of stock appreciation AND a steady stream of income in the form of regular dividend payouts?  It’s possible!

Check out Gold Stocks that Pay Dividends – Best Gold Dividend Stocks for 2019