Physical gold has always been one of the best investment options for decades, alongside silver coins and other precious metals. As you may already know, physical precious metals have always been valuable, and they have been used as a currency, decorative items, and more.
One of the best ways to make the most out of physical gold and other precious metals is to include them in your retirement portfolios. Considering the stable value of physical precious metals, it’s no surprise why most people are considering this approach for their future savings.
If you already have a retirement account and want to get your funds into gold IRAs, then you need a rollover. In essence, a gold IRA rollover will allow you to transfer your funds into a gold-backed IRA, allowing you to have a safe and wide portfolio for the future.
The following gold IRA rollover guide by InvestorsCircle will cover everything you should know about this process, what its benefits are, and how you can start doing it.
What Is a Gold IRA?
First, let’s address what having gold IRAs entails. To make this as simple as possible, let’s say that a gold IRA is an Individual Retirement Account like the one you already have.
The main difference between your standard IRA and a gold IRA lies in the assets. gold IRAs only hold gold coins or bullion, although some may hold other precious metals too. On the other hand, your regular IRA will hold stocks, bonds, and other similar assets.
A gold IRA is also considered a type of self-directed IRA, which is a type of IRA or Roth IRA that you can use to save particular assets that are not allowed in regular IRAs, including real estate assets, cryptocurrencies, and precious metals. You will also be in control over what assets you get into your precious metals IRA.
Typically, you can set up gold IRAs in most financial institutions, so whether you’re doing it at a bank, credit union, or brokerage firm, the chances are that it’s possible.
A self-directed IRA is administered by a gold IRA company/custodian that will give you the necessary guidance with your gold investments.
What Is a Gold IRA Rollover?
A gold IRA rollover involves getting your funds into your new gold IRA account; it’s as simple as that. Most users consider a 401k to gold IRA transaction, which is the most common one.
Depending on the gold IRA company, you can complete the rollover process online or with a phone. It’s important to note that conversions are typically not allowed, so the only way to get your gold coins into your new precious metals IRA is to do a rollover.
Investing in a gold IRA means you will be investing in an asset with intrinsic value that doesn’t rely on the stock market’s performance, which is excellent news for those who want to ensure earnings during times of financial instability.
Once you start working with your new gold IRA custodian, you will quickly notice how simple it is to invest in physical gold or other precious metals and get it into your new self-directed IRA.
However, there are many gold IRA rollover companies out there, so choosing one may be complicated for those who haven’t done it once. Don’t worry; this gold IRA rollover guide will cover everything you need to get started.
You can currently do a rollover with most types of retirement accounts, including:
How Does a Gold IRA Rollover Work?
First, you will open your gold IRA account. Then, you will need to provide your account details to the manager of your former retirement account.
Depending on how you do it, you could take a few days or weeks to get the funds transferred from one account to another. It mostly depends on the type of account you already had.
Keep in mind that you may have to pay some taxes for this transaction, so make sure to check with a tax/financial professional before starting the process.
What Does a Gold IRA Custodian Do?
A precious metals custodian is a financial institution responsible for safekeeping your gold.
Depending on what you decide to choose, you can get your custodian to manage gold, silver, or even platinum. The most popular precious metals include:
Gold bullion coins
What Are the Benefits of a Gold IRA Rollover?
There are many reasons why a gold IRA rollover can be an excellent choice. We’ve already established that having a self-directed IRA is a great choice due to the liberty it gives investors regarding their assets, but are there any other benefits that come from doing a 401k to gold IRA transfer? Let’s find out!
Protection Against Volatility and Inflation
As mentioned before, physical gold has been considered a store of value for many centuries. If you want to protect your savings against inflation, then opening a gold IRA is one of the best things you can do.
Keep in mind that the gold market is less volatile than your average stock market, so you won’t have to deal with the stress of watching the value of your asset go down, as the price for precious metals like gold rarely goes down.
Protection Against Economic Instability
Gold doesn’t depend on the performance of any country, meaning you won’t have to worry about the price of gold dropping during troubled times in the world, including economic recessions.
In essence, doing a 401k to gold IRA transfer will give you peace of mind in the long run.
Opening a gold IRA rollover implies that you won’t pay taxes on any contributions or earnings until you withdraw them. Moreover, you will make those withdrawals at your retirement age.
This process is something similar to the Roth IRA, where you can make tax-free withdrawals after five years of making your initial contribution.
Some gold IRA accounts allow you to take out your money without having to pay any income tax, which is excellent news for everyone. Still, you would have to check with your gold IRA companies to see if this is possible.
As mentioned before, when it comes to a gold IRA/Roth IRA, you can invest in many more assets than with a regular IRA. Moreover, gold is often seen as a safe investment, allowing you to protect all your other assets against stock market volatility.
Are There Any Disadvantages of Making a 401k to Gold IRA Transfer?
All retirement accounts have their advantages and disadvantages, so let’s cover some of the cons that come from doing gold IRA rollovers:
Storing gold bullion and working with a gold IRA custodian will likely involve some expenses. Most of these expenses with gold IRA companies include:
One-time initiation fees
Annual custodian fees
You may also get additional fees depending on the company you choose. Still, a regular retirement account has the first two fees already, so there’s nothing too different here.
Gold, as well as several precious metals, don’t pay interest, yields, or dividends.
If you don’t choose a reputable company to handle your retirement account, you run the risk of the company stealing from you. You must always hire a gold IRA rollover company that has proper insurance and documentation to back up its claims.
Do You Need a Gold IRA?
Many people are turning to a gold IRA because they’re having trouble accessing a 401(k) or want to protect their savings.
In essence, anyone who may need a safer place to spend their money or earn tax-free withdrawals should get a gold IRA. If you have a regular Roth IRA, for example, you could also benefit from this gold IRA rollover guide.
The IRS allows anyone to contribute to a new gold IRA as long as they have earned income.
Investing in gold can be rather appealing due to all the benefits we just mentioned. If you’re currently investing in several assets, but they’re performing poorly, you can still rely on the performance of your gold investments.
Keep in mind that investors don’t typically have a portfolio of entirely gold. If you want to avoid as many risks as possible, you should have many asset classes so that you can fight against inflation or volatile market changes.
One of the primary selling points of most gold sellers is precisely how volatile the stock market is. In any case, gold will still hold some value, but remember that it doesn’t mean that gold is a 100% risk-free investment. You could also experience some risks like theft if you’re not careful.
On the other hand, if you currently feel comfortable with your current savings in paper assets, stocks, or bonds, then you don’t necessarily have to go through the process of opening a gold IRA account. We recommend this option for those who are willing to invest in such valuable assets and keep them safe until they’re old enough to retire.
Steps to Follow for a Gold IRA Rollover
Keep in mind that, before you make your precious metals IRA rollover, you must first determine if your current account is eligible for this process.
The eligible accounts for a precious metals rollover include:
Now, let’s address the steps you must follow before investing in your favorite precious metals:
Find Your Gold IRA Type
Remember you can choose from traditional gold IRAs and Roth gold IRAs depending on your investing preferences. Traditional IRAs use pre-tax income, whereas Roth IRAs work with post-tax income.
Get Your IRA Custodian
This is the “hardest” step of the process because it involves looking for a reliable institution that will safekeep your precious metals.
Remember that each custodian has different fees, services, and storage options. In essence, look for a custodian that can offer an IRA for precious metals. Then, consider the services that this custodian offers.
Keep in mind that the IRS doesn’t allow people to keep real gold in their homes, which is why you need the help of a custodian. Overall, you must ensure that your custodian has full rights to all the depositories where you’re planning on storing your assets.
Open an Account
Once you found the right custodian for your new Individual Retirement Account, it’s time to open it! First, you will need to provide the paperwork requested by both your 401(k)-plan provider and your new gold IRA provider. Depending on what you chose, you can either transfer your assets online or by check.
Start the Rollover Process
Once you’re finished with everything, you can start the rollover process. Your “dealer” will send an invoice to your custodian. When the payment gets done, you will get your precious metal shipped to the selected storage facility.
Make sure that you receive the right documentation and receipts for each precious metal so that you don’t have any issues dealing with ownership.
Now, how do retirements work? It’s fairly simple. Once you’re ready to retire your assets, you can either sell them to supplement your income or take possession of them; whichever feels more appropriate for you.
Purchase Gold or Precious Metals in General
You can use your 401(k) funds to purchase assets once your new IRA completes the rollover process. Overall, you can start purchasing assets.
We suggest you ensure that the purity of your gold is over 95%. Keep in mind that the IRS has purity requirements for gold bullion. In essence, each piece you purchase must have a minimum of 99.9% in purity; if it doesn’t, then you may not be able to save them in your new retirement account.
Moreover, there are some precious metal items that the IRS doesn’t approve, including:
Gold coins that aren’t “investment grade” assets
The reason why the IRS doesn’t allow people to store numismatic coins in an IRA is that it classifies them as collectibles, and since it doesn’t know how to value collectibles correctly, it would have issues taxing you on them.
Including numismatic coins in your precious metal retirement account could get you considerable tax penalties, so we suggest you get financial advice before doing this.
What Is an Indirect Rollover?
The most common type of rollover is the direct one due to how fast and simple it is, but there’s a second type of rollover you can consider. In the indirect rollover, you will have 60 days after the date you receive your funds to transfer them to your custodian.
In case you don’t complete this transaction in time, you risk the funds becoming taxable once you try to withdraw them. Moreover, if you’re under 59.5 years old, you could have a 10% early withdrawal penalty.
You can check with your current IRA company to determine which options suit your needs the best, but we will always recommend the direct rollover, as it’s simpler and doesn’t involve as many risks as the indirect one.
How Can You Avoid Getting Scammed?
As mentioned before, there’s a chance you could get scammed with your existing retirement account if you’re not careful. There are many gold and precious metal dealers out there that will try to take advantage of you if you don’t have enough knowledge about a self-directed IRA account or gold investments.
Thankfully, there are signs that can tell you if you’re dealing with a potential scammer, and those include the following:
They could quote you higher prices than the current market price for gold.
They could sell you gold with an improper purity level.
They could charge you unrealistic storage fees.
As long as you pay attention to all those small details, you will be able to purchase your precious metals without any problems down the road. Still, you can hire an advisor who can help you identify bad investment opportunities.
What Are Some Eligible Precious Metals for a Self-directed or Roth Gold IRA?
Regarding gold, there are many precious metals you can consider for your investment, and those include:
American Gold Eagle Coin
Valcambi Gold Bar
American Gold Buffalo Coin
Canadian Gold Wildlife Portrait Series
Canadian Maple Leaf Coin
Chinese Gold Panda
Austrian Philharmonic Coin
However, remember that you may be able to invest in precious metals besides gold. If you’re interested, you can also invest in the following IRA-eligible silver assets:
American Silver Eagle Coin/Bullion Coin
Chinese Silver Panda Coin
British Britannia (2013 or newer)
Canadian Polar Bear and Cub
Finally, if you want to extend your portfolio with platinum and palladium, you can invest in the following:
American Eagle Platinum Proof Coin
Canadian Maple Leaf
What Is a Home-storage Gold IRA?
While you technically can’t hold physical gold in your IRA, there may be some guidelines that could allow you to keep your bullion at home. However, it won’t be cheap.
The first problem is security. Having a custodian will give you peace of mind, as you won’t have to worry about unauthorized personnel getting their hands into your assets and stealing them. On the other hand, holding your gold at home will not ensure you have protection from thieves.
Holding your gold at home would remove any tax coverage if your gold got stolen or damaged. Finally, if you keep your gold at home, the IRS will consider it taxable property, meaning that if you sell it, you will have to pay for income tax. Additionally, you can get fined with a 10% penalty if you’re under 59.5 years old.
Overall, you should avoid any companies that try to promote home delivery for your gold IRA. Remember that, while you technically can have gold at your home, you can’t have it on your IRA, which means zero tax benefits.
Your best option will always be to work with a third-party custodian approved by the IRS, who will keep your assets in a secure depository location under your name.
It’s vital to note that the gold IRA market in the US is not regulated. There are no laws that determine how you can or cannot advertise your gold IRA company, which greatly increases your chances of getting scammed.
How Can Gold IRA Companies Help You with Your Rollover?
While you may be willing to invest in any company for your gold IRA, keep in mind that this is your savings we’re talking about. You should always choose a reputable company that can adhere to your needs.
First, working with the right company will ensure that you purchase assets that go according to the IRS standards, which is rather important. Moreover, hiring a company with the right documentation and licenses will give you peace of mind when it comes to storing your assets.
You don’t have to go for the most popular or most expensive gold IRA company on the planet. If you want to ensure a safe investing experience, then all you have to do is do your research until you find an institution that can offer what you’re looking for with affordable fees.
Bottom Line - Work with a Reputable Gold IRA Company for Further Advice
When it comes to rolling over your funds from a traditional IRA to a gold one, you should ensure that you don’t make any mistakes during the process so that you protect all your assets.
The right company will give you the best advice possible on what you should invest in, where you should store your assets, and other important things. Even if you don’t have a retirement plan yet, the right advisor will help you draft something according to your needs and goals.
If you need help deciding which type of IRA you need, keep in mind what your income is and what it could be when you retire. In any case, an advisor can also help evaluate this type of information.
We hope that this guide has helped you understand how a traditional IRA rollover works, and rest assured that the process becomes much easier once you already know what to expect from it.
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