What Are the Top Advantages of a Gold 401K Rollover?
Rolling over a traditional 401K plan into a Roth or traditional IRA is common. This often happens when leaving a former employer because the investor wants to keep their retirement funds in the same place.
However, other people want to diversify their retirement savings with other assets. It might be good to consider rolling over some or all of the 401K to a gold IRA if that happens. Consider talking with a financial advisor to see if this is the right choice.
What’s a Gold IRA?
A gold IRA was made possible through the Taxpayer Relief Act in 1997 and is a long-term account for retirement. The custodian chosen holds the precious metals for the owner of the account. While gold is the most common option, it doesn’t mean it’s the only one. Certain types of palladium, silver, and platinum can be held, too. Typically, gold IRAs are self-directed, which offers more diversity.
There are specific rules from the IRS that depict which types of gold and other precious metals can be purchased or collected for a gold IRA.
Why Gold Investments Are Crucial
Gold holds intrinsic value, as do other precious metals. Many people worry about the stock market’s volatility and economic downturns. If these things come together as they have before, traditional currency rates suffer. Therefore, gold could be a hedge against them.
Others believe that gold is a good investment because there could be a time where paper currency loses its value altogether. This could stem from geopolitical and natural disasters. If that were to happen, gold remains a valuable investment and tangible money source.
There are various advantages of a gold IRA rollover. It can:
- Provide portfolio diversity
- Protect against inflation
- Has fewer restrictions to pass assets to heirs
- Offers eligibility for tax credits
Opening a Gold IRA
It’s straightforward to open a gold IRA. First, a custodian must be found as it’s illegal to hold the gold in a house or another institution without the right security measures. Therefore, the custodian must hold any gold purchased through the IRA.
They are located at trust companies, credit unions, and banks. Thorough research is required to find an appropriate custodian.
A broker/metal dealer is also necessary to sell the gold to the investor. The custodian usually has a list of people it has worked with to help.
Once a satisfactory broker and custodian are located, the account can be opened and the precious metals purchased. When retirement comes around, there’s an option to liquidate the metals into cash or collect them.
When the gold IRA is opened, it’s possible to contact the 401K company to start the rollover process. The investor must decide between an indirect or indirect rollover.
With an indirect rollover, the funds are withdrawn by the investor and deposited into the gold IRA. However, a direct rollover ensures that the funds go from the 401K account holder to the gold IRA custodian. It’s often easier and simpler with fewer risks involved.
Generally, an indirect rollover gives the investor 60 days to move the funds to the gold IRA company. If this doesn’t happen within that time frame, the funds are considered a taxable withdrawal, and a 10 percent early withdrawal fee could apply.
The gold IRA company may have specific requirements to satisfy. It’s up to the investor to meet them. Once that happens, the 401K company sends a check for those funds to the custodian of the gold IRA. This completes the rollover.
Is a 401K to Gold IRA Rollover Ideal?
It’s hard to say if a gold IRA rollover is suitable for everyone. If the investor wants to diversify their retirement savings, it’s a good choice. Likewise, it works well if the volatility of the stock market and paper currency are worrisome.
Generally, gold IRA rollovers and plans are appealing because gold’s price often moves opposite of the stock market. If the securities investments perform badly, the gold investments are likely rising, but the reverse is also true.
Most investors use gold and traditional IRAs so that they always have something.
Conclusion
Gold investments are a great way to diversify retirement plans and have various asset classes. While it’s possible to buy physical bars and coins, a gold IRA rollover is also ideal if the investor already has a 401K. Regardless, it’s best to speak with a financial advisor to determine every investment option available.
