Can you roll over your 401(k) to gold? What’s the best way to avoid penalties? Read on to learn everything you need to know.
You might want gold in your 401(k) for several reasons.
These reasons may lead you to wonder how to roll over an existing 401(k) to invest in gold.
Fortunately, the answer is: that it’s not that hard.
In this in-depth guide, you’ll learn everything you need to know to roll over your 401(k) to gold without penalty.
Investing in Gold with a 401(k)
Before detailing the process of rolling over your 401(k) to gold, you may be interested to know if you can invest in gold with a 401(k).
Well, you likely can’t invest in gold directly with your 401(k), but there are ways to do it indirectly.
There are several limits imposed on investing through a 401(k). One of those limits is what you can invest in.
Typically, 401(k)s are managed by someone else, meaning you can’t just invest in gold. However, you may be able to invest in gold-related mutual funds and ETFs, if you’re interested in doing so.
A gold mutual fund allows you to invest in the gold industry without investing in gold itself. This is sometimes referred to as investing in “paper gold.”
Essentially, you’re investing in companies whose value is directly tied to the value of gold, such as gold mining, prospecting, and production companies.
If your 401(k) allows for brokerage investing, you may be able to invest in gold through a gold ETF, such as the SPDR Gold Shares ETF or the iShares Gold Trust ETF.
Or you may even invest directly in some of the businesses related to gold production that you might find in a gold mutual fund.
All that said, if you are set on investing in physical gold coins and bullion, a gold IRA may be what you’re looking for.
According to the IRS, the contribution limit for a 401(k) in 2021 was $19,500. In 2022, it increased to $20,500. For those 50 or older, it’s possible to contribute an additional $6,500.[1]
Rollover 401(k) to Gold
If you’re not satisfied with the investment options offered by your employer’s 401(k), you can roll it over into an individual retirement account, or IRA.
Compared to 401(k)s, IRAs offer greater freedom regarding what you can and can’t invest in. As a self-directed retirement account, you can take a more active role in allocating your retirement savings.
While rollovers are frequently done upon retirement or when changing jobs, initiating a rollover from your existing 401(k) is generally possible by talking to your employer.
This is what’s called an in-service withdrawal. Typically, it isn’t considered a taxable event by the IRS, though you are required to reinvest the funds you’ve withdrawn in an eligible retirement account within 60 days.[2]
Now when it comes to investing in gold, you still need to keep a number of limitations in mind.
The IRA’s custodian determines the assets available for investment in an IRA, and many of them don’t support gold.
That means you’ll need to find one that does: often called a Gold or Precious Metals IRA.
Once you’ve chosen your preferred IRA provider, you can initiate the rollover by talking to them and your employer.
Next, we’ll look at some popular Gold IRA providers so you know your options.
Yes, gold is a taxable investment. It is classified by the IRS as a “collectible,” like antiques or art.[3] The current tax rate on profits from investing in gold is 28%.[4] However, you can mitigate those taxes by investing through a retirement account such as a gold IRA.
Learn how to diversify your retirement savings with a gold IRA.
Choosing a Gold IRA Provider
A Gold or Precious Metals IRA is a self-directed individual retirement account that allows you to invest in gold and other precious metals, usually silver, platinum, and palladium.[5]
They come in several types, including Traditional and Roth IRAs and SIMPLE and SEP accounts, and offer tax-advantaged investing for retirement.
Most physical Gold IRA providers have a lot in common, but may vary in a number of areas such as:
While we recommend doing further research before deciding on a provider, here’s a brief overview of some of the most popular Gold IRAs on the market.
Other Gold IRA providers you might consider include:
These providers will help you when it comes time to roll over your existing retirement account, and many of them go out of their way to provide excellent, personalized customer service and support.
Should I move my IRA to gold?
If you’re wondering whether or not you should roll over your existing retirement savings to gold, the truth is that there are arguments both for and against it.
On the one hand, gold is seen by some experts as a strong investment because it trades counter to the stock market and can hedge against the volatility of a purely stock-based portfolio. Some also see it as a hedge against inflation.
However, other experts argue that gold itself is volatile, and has experienced large price drops in the past.
It’s important to remember that no investment is without risk, and diversification is one of the best ways to protect yourself against risk.
If you have an existing 401(k) and are interested in investing in gold for your retirement, there are several ways to go about it.
You can invest in gold indirectly through some 401(k)s by investing in gold mutual funds and ETFs.
Or you can roll your 401(k) over into a gold or precious metals IRA.
Gold IRAs allow the tax-advantaged investing in gold coins, bullion, and other precious metals. If you’re interested in rolling over your 401(k) without penalty, you can either do it when changing jobs or retiring, or by discussing it with your employer.
This content was originally published here.