401k To Gold Rollover Guide

401k To Gold Rollover Guide

It is fairly normal to carry out a 401(k) rollover when you are changing jobs or starting a traditional individual retirement account (IRA). If you are trying to diversify your income, you may want to invest some of your 401(k) plan in gold. Luckily, converting from a 401(k) plan to a gold IRA is fairly easy if you are working with the right company.

Why Should You Do a 401(k) Rollover to Gold?

Why Should You Do a 401(k) Rollover to Gold?

Each investor is unique. While I might want to invest in gold because of dollar devaluation, you might be interested in diversifying your portfolio. The following list includes the most common reasons why people decide to convert their 401(k) plans to gold.

  • Portfolio diversification: Diversification is important because it gives your portfolio an extra layer of protection. Even if the stock market declines, you can still depend on your investment in precious metals and bonds.
  • Peace of mind: When you invest in a single company, you can end up losing your entire investment if the company goes bankrupt. Unlike businesses and loans, gold is a tangible object with no real counterparts. Because of this, owning gold brings many investors significant peace of mind.
  • Inflation prevention: You cannot control whether the economy contracts or expands, but you can buy gold to hedge against inflation. Some investors think that precious metals are less likely to decline in value during periods of high inflation. Since many people start buying gold during times of uncertainty, your gold investment could even increase in value.
  • Value: For thousands of years, mankind has used gold and precious metals as currency. Today, an ounce of gold has the same value at any location in the world.
  • Dollar devaluation: If you live in the United States, dollar devaluation can cause services and goods to become more expensive. Normally, gold rises in value whenever the dollar declines. Because of this, gold is a good way to protect yourself against dollar devaluation.
  • Risk reduction: Stocks and bonds can become worthless if a company goes bankrupt or does not repay its bonds. Physical gold cannot go bankrupt, so your risks are lower.

How to Turn a 401(k) Plan Into Gold

If your 401(k) plan does not currently allow gold investments, you can convert your 401(k) plan into a gold IRA. In general, you should always consult an accountant or finance professional before you do a 401(k) rollover. Changing your 401(k) plan may have tax implications, so it is important to check with your accountant before you make any major adjustments.

1. Get a Self-Directed Account

Get a Self-Directed Account

If you have decided to move assets from your 401(k) plan to gold investments, you will need to set up a self-directed account. Most people start with a 401(k) plan from their employer, which is an issue. These plans are directed by your boss, so you do not have full control over how your funds are invested.

By getting a self-directed account, you can choose how you invest your money. To do this, you have to liquidate your current 401(k) plan. If you simply withdraw your funds, you may accidentally override the tax advantages of your 401(k).

Instead of just withdrawing your money, you should tell your current broker that you want to move your funds to a new provider. Depending on who you are working with, this process can take weeks or months to complete. Because of this, it is important to get started right away.

If you are lucky, your existing broker may already have self-directed accounts. You can always ask your broker about their plan options before you do a 401(k) rollover. Before you commit to any broker, you need to make sure that you are working with someone who lets you own physical precious metals.

Unfortunately, this kind of trading platform can be difficult to find. While most trading platforms offer self-directed accounts, only a handful of platforms will allow you to buy physical gold. To make your search a little easier, we added some of the best platforms for gold at the bottom of the article.

2. Set Up a Trustee

Set Up a Trustee

In order to buy precious metals legally, you need a broker who can also be a trustee on your account. IRA and 401(k) plans are required to have a trustee. Unfortunately, many trustees do not have the physical ability or infrastructure to help clients buy gold.

A trustee cannot be your friend or family member. They must be professionally licensed by the Internal Revenue Service (IRS). In addition, they must be employed by a company that is also licensed by the IRS.

You are investing a significant amount of money, so you need to ensure that your funds will be safe. Because of this, you should not merely reach out to a trustee online. Your trustee ought to be reachable by phone, or you need to work with someone else.

When you talk to your trustee in person or over the phone, you should verify that they have been licensed by the IRS. You can also check public records to see how long the trustee has been in business in the United States. When you are given any documents, you should make sure that all of the money transfers are sent in the name of the trustee.

A legitimate trustee will post their contact information on their website. They will also be reachable for in-person consultations and phone calls. Because IRA and 401(k) funds must legally be held in the United States, a legitimate trustee will never ask you to transfer money abroad.

3. Send Money to Your Account

Send Money to Your Account

Once you have set up an account, you should be able to buy physical gold in a week or so. It can take time to set up the actual account, so the entire process can actually take several weeks to accomplish. Normally, the provider will need to receive and validate a range of documents before they are able to set up the new account.

After your account is ready, it can still take some time to transfer funds into your account. Normally, you have to liquidate the funds in your current 401(k) plan first. Once your plan is liquidated, you will be able to transfer your funds.

If you have a lot of different stocks and bonds in your account, it can take days to liquidate everything. Because of this, it is important to start closing your old account as soon as you decide to open a self-directed account. Your current broker has no incentive to liquidate your account quickly, so they may try to slow down the process or give you incentives to keep the account open.

Your existing broker may even try to make excuses about why they cannot transfer your funds right away. They may require you to provide a lot of documentation before they will let you get your funds out. Some brokers will even allow several days to pass between each step in your liquidation process.

While these measures may be legal, they are unethical and incredibly frustrating. The best thing you can do is begin setting up your new account as soon as possible. It may take several months to complete the entire process, so be patient.

4. Buy Gold

Buy Gold

If you have finally liquidated your old account, you are ready to acquire precious metals. While you can always buy gold bars and coins, you can also purchase platinum, silver and other metals. Because these accounts are heavily regulated, you may only have a limited range of options to choose from.

Before you pick a broker, you should look at the options they offer. You should also remember that the IRS does not allow investors to buy gold from a trustee. Instead, your purchases must be from a different broker.

Likewise, the IRS must approve any assets you buy. The approval must be for the individual asset and not the asset class. While these rules are difficult to remember, a good broker will handle the majority of this work for you.

You should be careful and only buy authorized assets. The following assets have already been approved by the IRS.

  • Coins minted in Canada.
  • Gold Maple Leaf coins.
  • Coins minted in China.
  • Coins minted in Austria.
  • Assets sold by the Perth Mint.
  • Coins minted in Britain.
  • American Gold Eagles.
  • Coins minted in Australia.

5. Your Gold Must Be Stored Legally

Your Gold Must Be Stored Legally

If you are purchasing gold through a self-directed account, you cannot physically store your gold on your own. This is illegal, so it can lead to criminal charges and the loss of your account's tax advantages. Because of these regulations, you need to find a trustee who will store the gold for you.

A good trustee will allow you to retain control over your gold, but they will store it for you. While some trustees delegate this job to other companies, it is generally better to hire a trustee who is also the person storing your gold. If your trustee is actually in charge of storing your gold, they can easily make changes without having to play phone tag with a third party.

Legally, your trustees have limited control over your self-directed account. Basically, a trustee can control certain parts of your account as long as those parts are relevant to the services they provide. They do not have the ability to transfer all of your funds whenever they want to.

There are protections in place to keep your gold safe. Before a trustee can make a large transfer, they have to get your approval. Banks also have safeguards in place to spot unusual activity.

To ensure the best possible experience, you should find a trustee who has experience working in the industry. A good trustee will also undergo auditing on a regular basis. This kind of auditing helps to reduce the risk of fraud.

When you make a purchase, you will get to choose where your gold is stored. A good trustee will generally allow you to pick from a list of different options. In general, you should pick an IRS-authorized site that is located in the United States.

Discover the Top Gold Providers

Before you pick a specific provider, it is important to do your research. Your trustee must be approved by the IRS, and they should have experience in the industry. To discover some of the best providers in the industry, read on.

Augusta Precious Metals

Augusta Precious Metals first opened up more than 50 years ago. This family-owned business offers competitive prices and outstanding customer service. Additionally, buyers can enjoy having a streamlined buying process.

In order to work with Augusta Precious Metals, you will need to deposit at least $50,000 into your account. Once you have completed your deposit, you can purchase precious metals. Currently, the company has insurance policies worth more than $1 billion, so your purchases are completely protected.

Your investment will be protected in a class III security vault in the United States. Even if a creditor tries to target your wealth, Augusta will block them unless they have a court order. From the moment your funds are deposited, Augusta will work to keep your wealth secure.

Pros
  • The company is extremely transparent.
  • Augusta Precious Metals offers lifetime customer service following your purchase.
  • Their customer reviews are excellent.
  • They have a price-match guarantee on gold coins and bullion.
  • The company has won a number of awards.
  • It is easy to open up an IRA.
Cons
  • You cannot buy palladium or platinum bullion. The company only offers gold and silver bullion.
  • This company will generally take two weeks to fund, execute and deliver your order.
Goldco Precious Metals

Located in California, Goldco Precious Metals has an excellent reputation and outstanding customer testimonials. Based in California, this company focuses on buying silver, gold, platinum and palladium. Because it is only a dealer, it is not legally allowed to store your gold.

Fortunately, Goldco partners with a number of different trustees. Because of this, they can give you advice about how to deposit gold with a reputable trustee. Since the company is approved by the IRS, it can help you get precious metals for your investment account.

Goldco Precious Metals was originally opened in 2006. Since then, it has quickly built a positive reputation in the industry. If you are looking for an honest, experienced dealer, Goldco is the place to go.

Pros
  • Goldco offers low yearly fees.
  • Clients can enjoy having outstanding customer service.
  • The company will store non-IRA precious metals for free.
  • Goldco has a track record of positive testimonials.
  • New customers can enjoy getting special offers.
  • This provider has the Better Business Bureau's top rating.
Cons
  • You must make a minimum deposit of $25,000 to open up your IRA.
  • Goldco does not let clients set up their accounts online.
Birch Gold Group

Birch Gold Group is known for offering excellent customer service. If you need help or just want to learn more about your investments, you can call the company anytime you want. The company's website also includes a section devoted to educational topics like how to create a gold IRA.

If you plan on transferring more than $50,000, this is one of the best companies to work with. During your first year, they do not charge any fees as long as you transfer at least $50,000 to your new account. After your first year, you may be charged an annual fee.

Birch Gold Group specializes in helping customers buy gold coins that have already been approved by the IRS. Plus, the organization has the highest rating possible from the Better Business Bureau. Whether you want to access online articles about gold investments or enjoy low fees, Birch Gold Group is definitely worth checking out.

Pros
  • Like other top-rated companies, Birch Gold Group offers an excellent level of customer service.
  • As long as you transfer more than $50,000, you do not have to pay any fees during the first year.
  • Investment professionals and consumer groups rate this company highly.
  • Birch Gold Group offers a lot of educational resources, so you can learn more about your investments.
  • The company is great at communicating with customers.
Cons
  • While the website talks about annual fees and setup charges, it does not disclose the actual cost of these charges.

What Are the IRS Rules About Owning Gold?

What Are the IRS Rules About Owning Gold?

For gold investments, you must follow IRS rules. Otherwise, you could end up paying penalties and interest on your investments. If your investments are held in a retirement account, the IRS can also take away your tax-advantaged status as well.

Because of this, it is important to learn all of the rules for gold investments. The majority of these rules can be found in Internal Revenue Code Section 408(m). From storage locations to trustees, these rules cover a variety of topics.

For example, the IRS specifically discusses where your gold can be stored. All metal deliveries and physical control of the metal must be regulated through a securities contract. This means you are unable to store your gold at home, and the location must be controlled by your designated trustee.

Gold assets must be approved by the IRS if you want to include them in your IRA. This rule applies to domestic and foreign providers, so it is important to check into the gold's source before you buy anything. In general, you are allowed to buy gold coins as long as they are issued by monetary authorities.

Why Do You Need a Specific IRA for Buying Gold?

The allure of gold is hard to resist. Humans have possessed gold for thousands of years, and it has been used as a currency by many cultures. While buying a gold necklace may be fairly straightforward, investing in gold is a little more complicated.

Unfortunately, most 401(k) plans do not allow you to directly own gold or gold derivatives. If you want to buy gold futures, physical gold or options contracts, your current 401(k) plan probably will not let you. Fortunately, there are ways you can rollover your 401(k) plan to an IRA account that lets you buy gold directly.

At the moment, there are only a handful of companies that allow you to invest directly in gold. In order to do so, you have to do a 401(k) rollover. This process allows you to transfer funds from your current 401(k) account to a new account.

Your current 401(k) plan is considered a tax-advantaged account, which means that it is not taxed until you withdraw your money in the future. To avoid paying taxes right now, you need to transfer your funds to another tax-advantaged account. A gold IRA is one option you can choose.

Once you have completed your 401(k) rollover, you can begin enjoying a number of benefits. Many investors are drawn to gold because it helps them avoid dollar devaluation and inflation risks. Gold also provides investors with peace of mind because gold cannot go bankrupt or default on bond payments.

No matter what your reason is, there are a number of ways you can start investing in gold. The three companies mentioned in the article can help you transform your retirement account. Once your 401(k) rollover is complete, you can officially start investing in gold.