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What Is A 401k And Why Should I Consider Rolling It into A Gold IRA?

A 401k is a defined contribution plan that allows employees to set aside money in a retirement account. Employers can implement a 401k plan, and the contributions made by employees are taken directly out of their paychecks before taxes. The money then goes into the employee's 401k account, usually invested in mutual funds or other stocks.

This is an advantage to employees as it lets them manage their portfolios as they see fit, but it also has some drawbacks. The money taken from their paychecks is taxed as income, and the money in their accounts isn't. When they retire, the value of their 401k can dwindle significantly due to investment fees and taxes on the assets inside the accounts.

This can leave the employee with a lackluster retirement and become frustrating when it interferes with their ability to live comfortably during retirement.

Like many people, you may wonder if there is another way to do your 401k work for you. One alternative is to roll your 401k into a gold IRA. This option can be beneficial because it allows you to avoid the taxes on your money that would have been taken out of your paychecks, which can be a significant amount throughout your career.

It also allows you to sell the gold you purchase anytime. With a gold 401k, you are still able to invest in other assets like stocks and bonds through mutual funds or ETFs if you wish, but you do not have to. You are also not restricted to investing in anything your company provides, allowing you to invest in other precious metals and specialty investments.

Investing in a gold IRA also gives you an alternative investment vehicle if a company that was once part of your 401k plan goes out of business.

What Is the Process of Rolling A 401k Into A Gold IRA?

Here's a guide to get started if you're considering converting your 401(k) to a gold IRA.

❑ Open an Account with A Brokerage in Your Name

Open an account in your primary residence, as this is more convenient. You can use this account to purchase gold online or at a local store. The brokerage you use can determine the type of account you will have (e.g., Roth IRA, Traditional IRA), but it is not advisable to roll your 401k into a regular brokerage account.

These accounts have lower contribution limits, and you will have to pay taxes on your investment. The money in your rollover account should be treated as if it were your own, as you can choose which investments you want on your own.

❑ Calculate the Value of Your 401k

You should take note of the current value of your 401k before you roll it into a gold IRA. This information will help you determine how much money you'll have when you are ready to buy gold. You can ask your employer if they are willing to provide this information; some may evaen offer a matching contribution.

Bureau of Labor Statistics (BLS) data can be found here for free and can be used to calculate how much you should have in your 401k. The BLS also updates this sort of data every month, so you do have to be careful about using outdated information.

Since there are generally low transaction fees on gold purchases, it is best to keep your account balance low when calculating the value of your 401k. 

You will also have to calculate the value of any existing and additional retirement accounts. This information can then determine how much money you will have in your rollover account when you are ready to purchase gold.

❑ Check with Your Previous 401(K) Plan Administrator About A Direct Rollover

If you wait too long to talk to your former 401(k) broker about shifting your assets, they may delay the process since they want to retain your business. Always request a direct rollover from your provider, so the money goes straight into your new account.

You must deposit it into your new account within 60 days of withdrawing money from your previous account. If you don't, you'll have to fork over more cash in the form of taxes and penalties when you cash out. The best way to avoid fees is to finish your rollover as soon as possible.

Direct rollovers are possible with a variety of providers but often need the submission of paperwork. You should contact the plan's administrator after leaving your previous employment to learn more about this. Upon receiving your documentation, they will either initiate a wire transfer to your new account or mail you a check.

Indirect rollovers are also possible; however, they are far more complicated to execute. The funds are deposited into your account and then transferred to your new IRA within the 60-day limit.

If you fail to execute an indirect rollover timely, you may be required to pay income taxes and penalties. In order to cover their tax obligations, most service providers immediately deduct 20% from your withdrawals. Since the full sum needs to be sent to the new account, you'll have to determine the difference from your funds.

❑ Decide the New Investment Options You Want

Most 401k plans will only offer a limited range of investment options, but with a gold IRA, you can decide what is best for your retirement account.

➥ Gold Futures & Options

These contracts allow you to profit from the price fluctuations of gold. Due to the nature of these contracts and their trading on commodity markets, they are subject to stringent regulatory oversight.

➥ Physical Gold Bullion Bars and Coins

These purchases are available through your broker for buyers who want to own the real thing. The price is higher for the real thing, but this is the most secure form of purchase available for your account. This option allows you to purchase as much or as little gold as you want with any funds left over from your 401k rollover.

➥ Mutual Funds and Exchange Traded Funds (ETFs)

These investment vehicles were established for 401k participants to invest in other assets besides what their company offered. You can still use these investment vehicles to invest in gold with a gold IRA, although you will only be using a small portion of your total balance.

The most common type of plan people use when rolling their 401k into a gold IRA is a gold-backed IRA. This option takes physical gold out of the ground and uses it to purchase bullion. The gold bars are then held in an allocated vault for the plan participant.

How to Roll My 401k Into A Gold IRA Without A Penalty

The Internal Revenue Service mandates that a 401(k) rollover be finalized within 60 days. There's a 60-day grace period, after which you will be charged a penalty for failing to transfer your old 401(k) assets to your new account. The simplest approach to avoid this is to perform a direct rollover.

With a direct rollover, your money will be moved directly from your old account to your new one without delay.

If you cash out your retirement account before you turn 59.5, you'll have to pay a 10% penalty. Your early withdrawals are also subject to income tax at your standard rate. Your state income tax liability alone may exceed 45 percent of your payout.

The good news is that fines and taxes can be easily sidestepped with a straight rollover. By selecting this, you can have your service provider manage the transfer of funds on your behalf.

In a self-directed indirect rollover, you take charge of the transfer and monitor its progress to make sure it's finalized in the allotted 60 days. If your former service provider withheld 20% of your cash before completing the indirect rollover for tax purposes, you would need to remit this amount.

For this strategy to work, your new account has to be tax-deferred. The monies will be held until you reach the age of 59.5, at which point you may transfer them to your bank account. If you take money out of your retirement account before the required time, you'll have to pay the penalty on top of your regular income taxes.

Reputable Companies to Help Roll Your 401(k) to gold IRA

The best way to transfer your money is to contact a specialized company specializing in this service. Gold IRA companies, run by individuals who are experts in the field, will provide you with the best price for gold bars and coins and track your transactions carefully.

They will also be able to help with the paperwork, providing you with a convenient option that is easy to use.

#1. Goldco

Goldco is one of the largest precious metal wholesalers in North America. It offers a line of products that includes gold coins and bullion stored in allocated facilities for IRA purposes.

Goldco provides the services of trusted precious metal dealers to ensure that your ultimate investment reflects the highest quality and purity.

In addition, Goldco provides banking services providing gold bullion through bank-to-bank transfers, which assures that it is not just stored in a vault with paper certificates. The company boasts decades of history in precious metal trading and investment and has the experience and expertise to back this up.

The customer service staff at Goldco is available 24 hours a day, making it easy to reach someone when needed. In addition, the company has both A+ ratings with the Better Business Bureau and BBB's Online Reliability Program.

#2. Augusta Precious Metals

This company offers a wide range of gold coins and bars at some of the best prices in the business. You may contact them by phone, fax or email.

You can invest in precious metals within tax-deferred retirement accounts that this firm facilitates opening. When you're ready to invest in gold with your self-directed IRA, you may do so through your custodian and Augusta Precious Metals.

In addition to helping you purchase gold and silver coins, bars, bullion and rounds are also available. You may buy commemorative coins and collector sets in Augusta.

If the price of your precious metals changes within seven days of your confirmed order, Augusta will still honor the rate they quoted you at the time of purchase, thanks to their price protection scheme. When customers place large bullion orders, the company offers a discount.

All sorts of discounts may be found at Augusta Precious Metals. In addition, you can cancel your order for any reason within seven days of placing it.

#3. American Hartford Gold

American Hartford Gold Group is an established and reliable dealer in precious metals IRA investments. This Los Angeles, California, company is run by a family and has made it its purpose to aid clients in becoming financially secure in old age.

When advising retirees on the best gold bullion to put away, American Hartford Gold has decades of knowledge. They provide various products, such as actual gold, platinum and silver and excellent customer service to guide you through the precious metals investment process.

American Hartford Gold Group provides the tools and knowledge to help you reach your retirement objectives, regardless of your level of investment experience.

Gold coins and bars aren't the only gold investments available from American Hartford Gold; they also have a Gold IRA. When you invest in a Gold IRA with American Hartford Gold, you can access several advantages, including:

It's simple to see why American Hartford Gold is the best option for gold IRA investing with these features and the knowledgeable team of specialists available to help you.

#4. Birch Gold Group

The Birch Group is a California-based company that was founded in 2003. The company is a seasoned broker in precious metals. They can also assist you in purchasing silver, platinum or palladium in addition to gold.

In addition, they may assist you in acquiring gold for use in an Individual Retirement Account or private storage. The Birch Gold Group is committed to client education, so you may study the best ways to invest in gold and the dangers you should watch out for.

Gold purchases made with a retirement account are another service The Birch Group offers. The Internal Revenue Service has authorized all IRA investments. It's not just gold that may be invested in; there's also raw land, mutual funds, shares, private loans, bonds and more.

When you decide to work with this firm as your broker, they'll also help you choose a suitable custodian. For clients who already have a gold custodian in place, Birch Gold Group is happy to coordinate with them to make purchases and store gold. Your gold can also be sent to secure locations.

#5. Noble Gold

The Noble Group has been in the precious metal business for many years. The company specializes in gold, platinum, diamonds and other precious metals and offers various services, such as jewelry cleaning and restoration.

The Noble Group offers investment specialists and customer service professionals to help you meet your goals. These experts can assist you with determining the best path to investment success through their assistance. The Noble Gold Group is certain that they will find the most appropriate means for your future monetary success.

In addition to precious metals, the Noble Group can help you with various services through its corporate relationships. These services include diamond buying and selling, gold buying and selling, platinum investing AND buying and selling, jewelry designing and more.

New investors often wonder what's involved in purchasing precious metals for a retirement account. With the help of experts at Noble Gold Group, it's easy to invest your IRA in gold whether you're already established in an IRA or just starting one up.

Final Verdict

A gold IRA is an alternative investment vehicle for precious metals like gold. Including precious metals in your retirement portfolio is a smart move that will provide you with greater flexibility and security in the face of market volatility. Rolling your 401k into a gold IRA is an easy, convenient way to buy precious metals for investment.

We recommend going with one of the reputable companies above to help you start investing in a gold IRA account.