Investing in gold is a popular choice with individuals
looking to diversify their retirement investment portfolio and to protect it
from inflation. Unlike corporations, gold never goes bankrupt (!), meaning they
are much better shielded from market instability than all our so-called ‘paper
money.’ If the economy collapses, your gold coins and bullions will always be
there.
Top Companies To Convert Your 401(k) Into Gold
Several companies will help you to invest in gold and other
precious metals through your IRA and/or 401(k). However, the fees and terms
vary widely from one to the next. So, do your research and read all the fine
print in detail before you open your new account with one of these companies.
According to our own research, below are the three best companies at current
that can assist you with investing in gold.
Goldco
– Our Top Pick
An IRA brokerage company, Goldco will assist you with many
different processes associated with investing in gold as well as in other
precious metals like silver. These include buying and selling your gold;
completing all the paperwork during a 401(k) rollover and facilitating a smooth
and hassle-free transfer; handling all paperwork related to custodians, storage
facilities and more.
PROS
• A+ rating with BBB (Better Business Bureau)
• 10+ years experience
• Top-notch customer service
CONS
• Annual fee of $175 for any account worth below $100,000
• Don’t offer custodian services
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2. Augusta Precious Metals
You can buy gold coins, bullions, rounds and bars as well as
collector sets and commemorative coins through Augusta’s recommended custodians
(Kingdom Trust, Goldstar Trust, Equity Trust and more) or through any custodian
of your choice. The company is also popular with the investors for its various
promotional offers as also for its special price protection program. To know
more about these, visit their official website here.
PROS
• Simple and fast setup process
• Competitive prices
• Lucrative promotional offers
• Excellent customer support
CONS
• All new accounts must deposit at least $50,000
3. Birch Gold Group
Another brokerage service, the Birch Gold Group of
California will help you buy gold, as well as other precious metals, including
palladium, silver and platinum. And this applies to tangible gold, but also to
gold ETFs, mining stocks and gold futures and options. The company can help you
find a reliable custodian or will work with the custodian of your choice to buy
and store your gold. They also offer free shipping of your gold to approved
depositories such as Brink’s Global Service and Delaware Depository.
However, what we like most about the company is their
genuine dedication in educating investors regarding precious metals investments
and risks accompanying therewith. This helps their clients make more informed
decisions vis-à-vis their gold investments.
PROS
• Excellent service at all levels
• Highly positive review from consumer organizations and
industry professionals
• Highly helpful educational materials
• Free service for the first year to all clients depositing
$50,000 or more into their new accounts
CONS
• Setup costs and annual fees are not clearly disclosed in
the company website
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Once you decide to invest in gold, you’ll need to have a
plan as to how to go about it. The simplest option is to do a 401(k) or an IRA
rollover. Typical 401(k) plans offered by employers come with high fees and
limited investment options and rarely will you enjoy the option to invest in
gold or other precious metals with these plans.
As such, you must find a new 401(k) or IRA that are cheaper
in terms of fees and offer diverse investment options, including direct
investment in gold. A rollover (to a new IRA or 401K) is simple enough. You
just need to transfer the funds from your old plan to a new one of your choice.
However, IRS rules dictate that the funds transfer is completed within 60 days.
Failing this, you’ll have to pay penalties and taxes for the transfer/rollover
(since it will then be interpreted as a standard withdrawal).
If you purchase gold through a gold IRA or 401(k), it comes
with same tax benefits as with any traditional IRA.
STEPS TO FOLLOW When Converting Your Present 401(k) to a
Gold IRA or 401(k)
1. Select Your Account Type
When doing a rollover, you are allowed to choose from any of
the standard retirement accounts or plans, such as a Traditional IRA, a
Traditional 401(k) or a Roth IRA. With the first two, you need not pay any
taxes for the transfer of funds, again as long as the funds are transferred
within the stipulated 60-day window. For a Roth IRA rollover, you will have to
pay taxes on the money you transfer, just as you need to pay taxes on all your
Roth IRA contributions. All withdrawals and investment gains are tax-free with
Roth IRAs.
The government allows you to own several 401Ks and IRAs at
the same time, meaning you can open separate solo 401(k)s or self-directed IRAs
(both essentially the same thing, with the only difference being that you can
contribute more every year through a solo 401k) for investing in precious
metals.
2. Set Up a New Account
You can open a new account through a bank, an online broker
or through robo-advisors. However,
online brokers are a preferred choice for people who want to enjoy more direct
control over their investment decisions. Commissions and fees of online brokers
however vary considerably from one broker to the next. Make sure to find a
provider offering easier fees and equally importantly, someone who specializes
in gold.
3. Communicate Your Plans to Perform a Direct Rollover to
Your Current 401(k) Provider
Typically, there is some paperwork involved and you’ll need
to fill up a couple of forms. After that is done, your present provider will
transfer the funds to your new account via check or wire transfer.
Now, TAKE NOTE that you must be on your toes all the time
from the initiation of the process to its completion. The transferred money
must reflect in your new gold IRA or 401(k) account within 60 days. Otherwise,
most providers will withhold as tax payment as much as 20% of the total
withdrawal/transfer amount. This means that your current providers have good
reasons to drag their feet when it comes to completing the rollover process.
So, always stay on top of it and don’t let them do that.
Finally, communicate in no ambiguous terms that you want a
DIRECT and not an INDIRECT rollover. The latter involves the provider sending
the money to your bank account which you will then have to transfer
individually to your new account. This only complicates the process and takes
up more time to transfer the funds.
4. Choose Your New Investments
Although most individuals interested in investing in gold go
for tangible gold, there are certain drawbacks associated with physical gold
investments. These include paying regular broker commissions, gold storage
fees, custodian fees, etc. This is why most industry experts recommend that you
diversify your gold portfolio and adequately explore other methods of investing
in gold such as:
• Gold mining stocks
• Gold futures and options
• Gold ETFs (exchange-traded funds)
How To Move A 401K To Gold Without A Penalty
As already mentioned, IRS terms make it clear that you’ll
have to pay a penalty unless the rollover process is completed within 60 days.
Other than that, early withdrawals (before age 59 ½) invite a 10% penalty plus
a tax bill. And if you’re required to pay state tax in addition, as much as 45%
of your funds can get eaten up by penalties and taxes.
However, you can avoid all those penalties and taxes as long
as you finish the transfer process within the stipulated 60-day window. Again,
in case of indirect rollover, you can only sidestep the penalties if you are
age 59 ½ or older and if the new IRA or 401k account is a tax-deferred plan.
FAQ’s
Am I Allowed to Invest My Current 401K in Gold?
Very few 401(k) plans allow investing in gold and precious
metals. If yours doesn’t, you will need to perform a 401k rollover to a reputed
gold IRA (or solo or self-directed 401k) in order to invest in gold.
Does An IRA Rollover Need Me to Pay Taxes?
When done correctly, the money retains its tax-deferred
status during an IRA rollover from an old 401(k) and the process doesn’t
trigger any early withdrawal penalties or taxes.
Can I Buy Tangible Gold in My 401(k)?
Yes, you can. However, according to IRS terms, all physical
gold bought through a 401(k) can only be held by a third party depository,
meaning you cannot store the metals yourself. Also, your IRA cannot
simultaneously be the seller and the holder of the gold.
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This content was originally published here.