Many future retirees and investors see the value of buying precious metals. But their traditional 401k doesn’t allow them to purchase precious metals like gold and silver for retirement. This seems like a major conundrum until they learn about the 401k to gold IRA rollover process.
In this 401k to gold IRA rollover guide, I’ll break down the rollover process into specific steps. I’ll share the types of rollovers investors can initiate. I’ll share the benefits of moving from a 401(k) to a gold IRA. And I’ll fill you in on other important details as the article unfolds.
Right now, I’d like to start out by sharing the advantages of initiating a gold IRA rollover. From there, I’ll move on to specific steps and share other important details.
3 Major Advantages of a 401k to Gold IRA Rollover
As you are about to learn, there are many advantages to investing within a gold IRA account. My favorite benefits include:
Traditional and Roth IRA Tax Breaks
One of my favorite things about gold IRA investments is the incredible tax advantages that they provide. Account holders with traditional self-directed IRAs do not have to pay taxes until they take distributions at 59 ½ years old. The other benefit is lowering your overall yearly tax burden.
How does that work?
Each year, the investor will earn a certain amount of money. In this example, let’s say the investor earns $75,000 in taxable income in 2021. If the investor is 49 years old or younger, they can deposit $6000 into their IRA account for investing. This will lower their overall taxable income to $69,000 in tax year 2021.
Now, if the investor is 50 years old or older, they can deposit $7000 into their precious metals IRA. In the same scenario, they’d lower their yearly taxable income to $68,000 in tax year 2021.
Are you starting to see the huge benefits? Not only will you prolong paying your taxes, you’ll use this money to grow your overall wealth and retirement.
For Roth gold IRA account holders, their tax benefit is a little bit different. They will fund their precious metals IRA using income that was already taxed. The IRS doesn’t charge taxes on the same income twice. So, Roth gold IRA investors get to keep the proceeds of your investments in their entirety.
Take Control of Your Investment Decisions
I personally like the self-directed gold IRA because it allows me to take full control of my investments. I prefer ignoring financial advisors whenever possible. They may seem like they mean well, but they ultimately want to get paid with your money. They have standard investments that they recommend, without really catering them to meet your personal needs.
With a self-directed gold IRA, you get to make your own investment decisions. You do not have somebody else buying and selling at their leisure. You are in charge and you have a range of investments to choose from with an IRA account.
Control Your Yearly Investment Fees
This last benefit is also a major favorite of mine. I hate paying exorbitant fees because it cuts down on my overall investments. And it makes it harder to grow my wealth and retirement.
The great thing about precious metals IRAs is that you have the ability to control the fees that you pay. And in many cases, a precious metals broker will waive their fees in the first year. Some will even waive their fees for 1-3 years depending on the size of your account and other factors.
Even better, you have the ability to choose custodians, vaults, and other service providers that charge reasonable rates. This will make it easy for you to invest comfortably without worrying about paying exorbitant fees in the future.
Click here to discover the best gold IRA companies in business right now.
Types of 401k to Gold IRA Rollovers
it shouldn’t surprise anyone to learn that there’s more than one way to initiate or rollover. In fact, you have two options to choose from. There are indirect rollovers and direct rollovers. One option is certainly more desirable than the other, so I’ll fill you in on the important details right now.
For the most part, the indirect rollover is the least desirable option. Why? Because it’s the most difficult to accomplish, but it isn’t unheard of by any means.
With an indirect rollover, your 401(k) provider will send you a check directly. This money needs to be deposited into your new IRA account within 60 days. If you fail to deposit the money within the 60-day time frame, you’ll incur penalties and tax implications.
How so? Well, by missing the 60-day window you can no longer deposit the money into your IRA account. This money is now considered income and it’s taxable by the IRS. On top of that, if you aren’t 59 ½ years old or older, you’ll incur a 10% early withdrawal penalty.
Obviously, it’s best to avoid the scenario above like the plague. Paying taxes is one thing. But incurring a 10% penalty on top of it is a huge waste of money in my opinion. Plus, you’re defeating the purpose of the gold IRA rollover in the first place.
So, if an indirect rollover is your only option, please deposit the money in your new IRA account right away. This will prevent incurring early taxation and unwanted penalties from ever happening.
A direct rollover is the easier and safer option by far. In this particular case, your 401k provider issues the check to your new IRA custodian. The money is sent directly to the custodian of your choice and it never reaches your hands.
This completely takes the responsibility off of your shoulders. And it all but guarantees that your money will safely reach the new custodian’s hands in the appropriate amount of time.
Remember, mistakes happen from time to time. It’s inevitable. So, please check with your new IRA custodian periodically until you find out they received your deposit.
Find out more about the top gold IRA companies in the industry by clicking here.
5 Steps to Initiate a 401k to Gold IRA Rollover
If you’re new to IRA investing, this process may seem intimidating and difficult on the surface. But nothing could be further from the truth as you are about to learn. In fact, the entire rollover process is completed in five simple steps.
Step #1: Choose a Gold IRA Custodian
You must have an IRA custodian to purchase precious metals within a self-directed gold IRA account. This is mandatory in a rule set forth by the IRS.
Your options are numerous, so that’s definitely a good thing. Find the perfect gold IRA company to work with by reading my detailed review. After you’re finished, discuss your need for an IRA custodian and they’ll help put you on the right path. They have excellent gold IRA custodians that they have great working relationships with that you can choose.
Step #2: Complete a 401k to Gold IRA Rollover
To open your new account, you’ll need to complete a 401k to gold IRA rollover to get started. Contact your 401k administrator and let them know your wishes regarding the rollover. Provide them with the contact information for your new IRA custodian.
You’ll have to fill out paperwork to initiate the process. But after the paperwork is completed, your administrator will mail the funds directly to you or your custodian. It all depends on whether or not you completed a direct or indirect rollover.
Step #3: Buy Precious Metals for Your New Account
This is the exciting part, my friends. Contact the gold company you’re working with and tell them that you’re ready to invest. If you haven’t found a gold company to work with yet, read my detailed review of the top companies in the industry.
If you’re purchasing gold, the investments you choose must have a 99.5% purity level. Some great options include:
- American Eagle Gold Coin
- Austrian Philharmonic Gold Coin
- Canadian Maple Leaf Gold Coin
And if you’re adding silver to your portfolio, it must maintain a 99.9% purity level. Some great choices include:
- Chinese Panda Silver Coin
- American Eagle Silver Coin
- Britannia Silver Coin
- Royal Canadian Mint Silver Bars
Step #4: Arrange Shipment to Your Depository
At this point, you must arrange for your custodian to have your precious metals shipped to your approved depository. Your custodian will have the items delivered directly to them. It’s best to get a receipt to keep track of all of your purchases.
Step #5: Repeat Steps 3-4 When It’s Time to Buy More Precious Metals
Most investors will continue to deposit money into their account year after year. This money will need to be used to purchase more silver and gold and other precious metals investments. Repeat the steps over and over again as needed to complete new purchases to grow your account over the years.
Clearly, completing a 401k to Gold IRA rollover is a lot easier than it sounds. Please follow the steps that I shared with you today and you’ll have no problem beginning your investing journey.
Before you get started, remember to connect with one of the top gold IRA companies in the industry right now. You can find out all about my favorites by clicking here to read my detailed review article.