Investors must take every necessary precaution to keep their wealth and retirement accounts protected from uncertainty, inflation, and volatility. Many of the biggest investors in the world recommend opening a gold IRA. They claim that converting other retirement assets via gold IRA rollover or transfer will protect their wealth during turbulent times.
By following the steps in this gold IRA rollover guide, investors can convert their assets into a tax-advantaged retirement account. It’s their choice to open a tax-free or tax-deferred account, depending on their specific needs. Initiating a gold IRA rollover means easily funding your new account by rolling over or transferring cash or assets. The rollover or transfer takes place by using an existing retirement account including the ones I’ll share later on.
To make this process easier than ever, I put together a gold IRA rollover guide. You’ll know the easiest way to convert assets including stocks and ETFs into physical precious metals. You can do this within a retirement account with tax advantages like a self-directed traditional IRA or self-directed Roth IRA.
The Real Truth about a Gold IRA Rollover
A gold IRA rollover happens by converting some or all of an existing retirement account to fund a gold IRA. Many investors have numerous types of retirement accounts from their employer or their personal accounts. The accounts eligible via rollover include:
With employer-sponsored accounts, the account holder cannot be employed by their employer to qualify for a rollover in many instances. Many employers do not allow their employees to rollover from one account into another. Partial rollovers are permitted when the employee is still employed but reaches 59.5 years old.
Also note that during the rollover, your account administrator or custodian will withdraw funds from your existing account. These funds are delivered to you via check or wire transfer. You have 60 days to deposit the funds once the withdrawal takes place. Failing to deposit the funds in your new gold IRA on time means paying a 10% early withdrawal penalty. You’ll also pay taxes on the withdrawal because it’s considered a distribution if it’s a tax-deferred account.
Limitations of a Gold IRA Rollover
Many investors fail to realize that the IRS has placed limitations on the rollover process. As an example, an investor can only make one rollover per year penalty free. So, if you were to initiate a rollover on May 9, 2022, you aren’t eligible again until May 9, 2023.
That’s why it’s so important to choose the right IRA custodian. If you were to change custodians before the 12-month period ended, you suffer an early distribution penalty. So, choose wisely and never switch custodians within the 12-month rollover time frame.
Learn more about the best IRA custodians in the gold company’s they work with by reading our top 10 review.
The Differences between a Gold IRA Rollover vs. A Gold IRA Transfer
As an investor, you are given two options to fund your gold IRA rollover account. You have the option to fund it via transfer or rollover. At the end of the day, a transfer is the risk-averse and safer way to move retirement assets. Why? The IRA custodians and administrators handle everything on your behalf. There isn’t a risk of suffering a penalty for failing to deposit funds within 60 days.
Gold IRA rollovers have certain rules and conditions that must be adhered to. That’s why you must become aware of them. If you unintentionally or intentionally break these rules, there are potentially costly penalties to suffer.
Rollovers are restricted by more rules than IRA transfers. Some of the major differences between the two funding options include:
Rules for Gold IRA Rollovers
- The 60-day deposit rule is in full effect. The account holder must deposit their withdrawal funds into the new gold IRA account within 60 days. Failure to do so leads to a 10% early-withdrawal penalty and immediate tax consequences.
- The account holder isn’t forced to pay the 10% early withdrawal penalty if they’ve reached 59 ½ years old. This is the minimum withdrawal age.
- If the account holder violates the 60-day rule, the income becomes immediately taxable. You must pay taxes on the income the next time you file a tax return.
- Gold IRA account holders are only allowed to make one rollover every 365 days. Violating this rule could trigger an early-withdrawal penalty.
- Tax withholding isn’t necessary if the rollover comes from one IRA account into another IRA account. Other retirement accounts require 20% tax withholding.
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Rules for Gold IRA Transfers
- There is no 60-day rule to worry about with a gold IRA transfer. The account custodians and administrators handle everything on your behalf.
- Depositing via transfer means never having to worry about paying early-withdrawal penalties. This isn’t an issue according to the IRS.
- There is no tax withholding needed because the transfer takes place from one custodian to another.
- The funds transferred during this process are not taxable. They only become taxable once the account holder takes a distribution later in life.
- There are no annual limits to the amount of transfers during the calendar year. You could technically transfer funds once a month, once every two weeks, or as many times as you desire.
More than anything, the difference between transfers and rollovers is that the account holder never touches the withdrawal via transfer. The custodians handle the distributions entirely on your behalf.
For many investors, they certainly prefer initiating a gold IRA transfer. It takes the onus off of their shoulders and minimizes the potential for human error. It also keeps their retirement funds safe from potential early-withdrawal penalties.
The 401(k) to Gold IRA Rollover Process
Regardless of what you believe, initiating a transfer or gold IRA rollover from a retirement account is possible. Nevertheless, there are certain rules that must be followed to clearly initiate the proceedings.
For example, rolling over 401(k) funds from your previous employer shouldn’t present a problem at all. Let your new gold IRA custodian know your plans and have them begin the 401(k) to Gold IRA rollover process.
On the other hand, rolling over 401(k) funds from your existing employer could be challenging. You’ll have to learn about your existing employers’ terms and policies before proceeding. In many cases, the employer-sponsored 401(k) might disallow physical gold investments while remaining employed with the company. Contact your employer to learn about the rollover rules with your existing 401(k). They’ll tell you whether a transfer or rollover is permitted to a physical gold IRA.
Just know that a rollover from your 401(k) from a current employer is possible. You just need to find out whether or not your employer permits it before you begin.
Learn about the top gold IRA companies by reading my detailed review.
Determining Your Strategy for a Gold IRA Rollover
Everyone is different, so each investor will need to take a personal approach during gold IRA investing. Some investors may prefer to remain heavily invested in the stock market. Other investors might prefer to focus more on purchasing gold and other precious metals, while minimizing stock market exposure.
On the other hand, your strategy might change entirely depending on the particular market and economic situations taking place in the world. If the world is in a major down economy or the market is selling off, you may change your strategy. You may prefer minimizing your exposure to stocks for the time being while heavily investing in precious metals.
No matter how you feel, it’s important to determine the best precious metals allocation to meet your needs. Some possibilities to consider include:
- Investing 5%-10% of your portfolio – many investors swear by the 5%-10% rule. Tony Robbins, Kevin O’Leary, and Ray Dalio immediately spring to mind as advocates of this strategy. However, you might not feel like this is an adequate amount to invest.
- Investing 25% of your portfolio – some investors may look at the overall market and decide to invest even heavier in precious metals. The stock market could be in the middle of a major downturn. Or maybe the housing market or financial markets on the verge of collapse. Gold is considered a safe haven investment during tumultuous times. Investing heavily during poor economic outlooks is always a great idea.
- Investing 50% or more of your portfolio – in truth, this is very uncommon amongst most investors. They would never tell you to put this much money in gold. Yet, gold has consistently returned 10% per year on average for the past 52 years. How many other investments can make this claim? It wouldn’t be beyond the pale to invest this much of your money in gold and other precious metals. It’s a rock-solid investment that delivers consistent healthy returns year-over-year on average.
It should be quite clear to investors that the gold IRA rollover process is easier than they might think. This isn’t the most difficult task to accomplish by any means. And if you’re working with a great gold company and IRA custodian, it gets even easier.
Speaking of which, please spend time reading my detailed review of the top 10 Gold IRA companies right now. Each of these fantastic companies works with the top IRA custodians to help simplify the account creation and rollover process. Investors cannot go wrong working with any of our top 10 favorite choices.