Are you ready to begin investing in gold and other precious metals? You might even consider converting your 401k to a gold IRA. You can initiate this process through a transfer or rollover. But there are certain restrictions that you must adhere to during this process.
Rollover/transfer restrictions: rolling over or transferring a 401k from your former employer is possible without any age restrictions. It’s against the rules to convert an existing active 401k unless you are 59 years of age or older.
Now that you’re aware of these restrictions, you can move forward with your gold IRA investments. Getting exposure to precious metals is certainly good for every future retiree. With all the economic and political upheaval, precious metals including gold, silver, platinum, and palladium are more valuable than ever.
With that said, we’ll provide a complete 401k to gold IRA rollover guide below. In it, we’ll explain the difference between rollovers and transfers. And we’ll share other pertinent details about this process including the major benefits involved. Keep reading to learn more about these processes.
The Biggest Benefits of a 401k to Gold IRA Rollover or Transfer
It shouldn’t surprise anyone to learn that there are major benefits to having a gold IRA account. Even though you’re aware that these benefits exist, it’s important for us to spell them out for you in plain English. The biggest benefits of having a precious metals IRA are as follows:
- The growth potential for precious metals has an incredibly large upside. Some investors fear that gold, silver and other precious metals have already gone too high up in value. But the truth is there’s still a lot of room for growth. In fact, this growth typically tends to take place during times of political or economic turmoil. The distress in the White House, the overbought stock market, and the coronavirus all lead toward troubled economic times. Investors need to position themselves properly to protect their portfolio once the bubble finally bursts. Holding gold in a precious metals IRA is the best way to capitalize on this turmoil.
- The ability to further diversify your retirement portfolio. Some people think they are fully diversified by owning stocks across many sectors. 2008 proved this strategy wrong because the entire market crashed and no sector was safe. Today, investors have finally wised up and recognize that different styles of investment means true portfolio diversification. Owning stocks and bonds are great, but they typically tend to lose value at the same time. Other investments like precious metals, real estate, cryptocurrency, and other alternatives provide real and lasting diversification for your retirement portfolio.
Even More Benefits of a 401k to Gold IRA Rollover or Transfer
Besides the benefits mentioned above, you can also expect to experience the following major advantages of investing in precious metals. They include:
- The tax advantages are worth their weight in gold. Just like a traditional IRA, you can experience the exciting tax benefits of a gold IRA. Any gold purchased as part of your IRA grows completely tax-free. You get to keep all of the proceeds of this investment because you paid your taxes ahead of time. Another excellent benefit is the potential tax-deductible contributions. Besides the tax-free growth, this is an added benefit that makes this investment even sweeter.
- The advantage of taking complete control of your investments. We know that no one takes your investments as serious as you. Even if you have a fund manager or trustee managing your investments, they aren’t going to care about your portfolio as much as you. They will work hard and do their job to the best of their ability. But they will not go out of their way to ensure maximum portfolio returns. Opening a gold IRA means taking the bull by the horns. You’ll manage your investment portfolio while controlling your financial future.
A Detailed Description of the Gold IRA Rollover Process
As part of our 401k to gold IRA rollover guide, we’d like to discuss the rollover process in greater detail. Did you know that a 401k to gold IRA rollover means you’re converting your 401k into a precious metals IRA? But this is only possible if you’re converting a 401k account from a previous employer.
It’s legal to convert the account of your existing employer. But you can only do it when you are 59 years old or older. Otherwise it’s completely against the rules, so keep that in mind.
There’s a lot to learn about the gold IRA rollover process. The main areas of importance to learn include the following:
- A rollover and a transfer are very different processes for one major reason. During a rollover, your current 401k custodian will send a distribution check directly to your home, office, or specified address. During the transfer process, the custodian transfers the account directly to the new custodian. We’ll go into greater detail about that below.
- Once you take possession of your distribution check, you can send the money to your new precious metals IRA custodian. Once the custodian receives the check, he or she can use these proceeds to fund the account.
- During the rollover process, the account holder is only allowed to take possession of their distribution funds for a set amount of time. If they possess the funds longer, they will suffer IRS penalties and have to pay their regular taxes. The timeframe is a 60 day grace period. You are given 60 days to deposit the funds with your new gold IRA custodian. If you fail to deposit the money during this grace period, you must deal with the consequences of your inaction.
- As mentioned, there are straightforward consequences for failing to deposit your distribution check within 60 days. If you miss this window, you will pay early withdrawal taxes and additional penalties. The reason being you aren’t allowed to possess this money before reaching retirement age and maintain the tax benefits.
- Account holders are allowed to roll over this money once during each 12-month timeframe. By sticking to these guidelines, you will successfully preserve your tax-deferred status.
A Detailed Description of the Gold IRA Transfer Process
The next section of our 401k to gold IRA rollover guide is all about initiating a transfer. During the process of converting a 401k to a precious metals IRA, a funds transfer is definitely possible. As mentioned, this is a different process from the rollover process. It mainly consists of the following:
- The transfer process will begin as soon as you contact your 401k custodian and tell them about your desire to make a transfer. The beauty of this method is you are kept out of the process entirely after making the initial request. Once you notify your current custodian, he or she begins the transfer process and sends funds to your new custodian.
- There are no limits or restrictions on when you can transfer your 401k account. Unlike the rollover process, which only takes place once per 12 months, a transfer can happen at any time. And it can happen as many times per year as you desire.
- The transfer process is very simple. You contact your current 401k custodian and tell them about your transfer request. They will make a direct transfer from your current 401k account to your new gold IRA account.
- The transfer process consists of your current custodian cutting a distribution check. They will send this check to the new trustee or custodian of your precious metals IRA.
- As mentioned, it’s possible to make transfers as often as you want. There are no restrictions on the amount of times you can transfer proceeds during the year.
Choosing the Best Gold IRA Company
You now know the difference between a rollover and a transfer, right? It’s time to choose the best gold IRA company for the job. Because choosing the first precious metals broker to come along isn’t the smartest way to invest your money. In fact, it could be disastrous if you choose a company with a bad reputation.
Instead, we’d like to help you find the top gold IRA company to meet your needs. So please take time to look for the following when choosing your gold broker:
- An excellent track record of success — some companies have survived in this industry for a long time. But after further investigation, you learn that many of these companies have experienced serious backlash and major complaints. It’s best to choose a company with a great reputation and a real track record of success. You can separate the wheat from the chaff by reading online reviews from trusted websites. Read reviews on websites that include the Better Business Bureau, the Business Consumer Alliance, and Trustlink.
- Choose a highly rated company in the industry — the best companies truly stand out above the crowd. They tend to be the highest rated companies in the gold buying/selling industry. Our three most trusted recommendations include Regal Assets, Gold Silver, and Birch Gold.
Bottom Line
It’s up to you whether you decide to initiate a rollover or transfer. Remember, these processes are only possible for 401k accounts of your former employer. You cannot rollover or transfer your existing 401k account with your current employer until 59 years of age or older.
With that said, always remember to choose a trustworthy gold broker at all times. Investing in precious metals can be scary and confusing. When you have a respected gold company helping you, it helps demystify the process and bring clarity to the darkness.
