Precious Metals
Millions of Americans have become financially secure through hard work and diligent saving. But they didn’t just sock their money away into a bank account or stuff it under the mattress.
Growing your wealth means saving but also putting the money you’ve saved to work for you. But many people don’t know how to do that, and don’t know which assets might best serve their financial goals and needs.
Stocks and bonds are popular traditional financial assets, although they are subject to a great deal of risk. Bond markets, for instance, have been thrown into disarray in recent years after the Federal Reserve’s rate hikes, and now the future movement of bond rates and prices is tough to predict.
Stocks, too, can be subject to major losses, as we saw in 2020 and again in 2022. And with recession fears rising, there’s a real chance that stock markets could sustain large losses during the next financial crisis.
That’s why many people choose to protect their financial well-being with precious metals like gold. Gold’s performance has actually outperformed that of the broader stock market thus far in the 21st century.
And if the next recession causes stocks to plummet while gold rises, gold’s performance in relation to stock markets could become even greater. But for many individuals who want to buy gold, the question they have is: how do I buy gold?
For many people today, a 401(k) account is their primary retirement savings vehicle. These employer-sponsored plans have become incredibly popular, and employees have contributed over $11 trillion in them.
But if you acquire a 401(k) plan, you may have noticed that there’s not a “Buy Gold” option within your plan. Many 401(k) plans offer limited asset options, and gold often isn’t one of them.
However, that won’t stop dedicated individuals who are determined to benefit from owning gold. With a little bit of thought and planning, you too can buy gold with your 401(k) assets.
401(k) plans are employer-sponsored retirement plans that offer employees the ability to contribute money from their paychecks before taxes into a retirement plan. Section 401(k) of the Internal Revenue Code allows individuals to make contributions to a retirement account in a tax-deferred manner.
Those funds grow tax-free until the individual decides to or is required to take a distribution. This means that they will not be taxed on their contributions until they take a distribution (at age 59½ or later).
Because the money funded is taken out before taxes, that also reduces the employee’s taxable income, leading to lower income tax payments in the present. Many employers offer matching contributions up to a certain amount, with the average employer contributing about 4.8% of an employee’s salary.
Very often that’s free money on the table for employees to take advantage of, allowing them in some cases to double their annual 401(k) contributions. For 2024, the maximum amount employees can contribute to a 401(k) is $23,000, and the maximum total combined employer and employee contribution is $69,000.
If you only want to stick to stocks and bonds, funding a 401(k) plan can be a good choice, especially if your 401(k) plan offers a wide array of options. But if you want to acquire alternative assets, including precious metals like gold and silver, 401(k) plans often don’t offer those kinds of options.
Like most IRAs, 401(k)s are subject to required minimum distributions (RMDs), which require individuals aged 73 and older to take a specific amount in distributions each year. Without dedicated planning, RMDs could cause you to pull more money from your retirement accounts than you want, which could subject you to more taxes than you would like.
There are many benefits to a 401(k) plan, including:
For 2024, individuals are able to contribute up to $23,000 to a 401(k) plan, an increase from the $22,500 401(k) contribution limit in 2023. IRS also allows employees older than 50 to make “catch-up” contributions to 401(k) accounts to help boost their savings before retirement. The limit for catch-up 401(k) contributions was $7,500 for 2023 and remained $7,500 in 2024.
It’s common for many companies to make contributions to employees’ 401(k) plans too, but there are limits to how much employers can contribute. For 2024 the maximum combined employer and employee 401(k) contribution is $69,000, or $76,500 with catch-up contributions.
These limits will most likely increase again in 2025, as they are indexed to inflation. The official IRS figures are normally published in late October or early November, so if you really want to stay on top of things, you can browse the IRS website in the fall to find updated numbers.
Because well-paid employees can contribute more money to 401(k) plans than those who make less money, IRS wanted to make sure that 401(k) plans weren’t disproportionately benefiting high rollers. Thus, there are limits as to how much highly-compensated employees (HCE) can contribute to a 401(k) plan.
The threshold for being a highly-compensated employee for 2024 is $155,000. Once your compensation exceeds that threshold, your ability to max out a contribution to a 401(k) plan can be significantly reduced if your company designates you as a highly-compensated employee.
If you find out after the fact that you are a highly-compensated employee, any excess money you contributed will be refunded to you, and you’ll then owe taxes on that additional compensation.
If you’re at or near that highly-compensated employee threshold, you’ll want to contact your company’s HR, benefits, or payroll department to see whether you’re considered highly-compensated. It also can’t hurt to contact a financial adviser to see how you can plan for retirement if your ability to max out contributions to a 401(k) plan is hampered.
Contribution limits to 401(k) plans exist because the IRS didn’t want just highly-paid employees to benefit from the tax advantages of a 401(k). The IRS wanted all employees at every level to be able to save for retirement.
If you find yourself maxing out your 401(k) contributions, or if you find that you’ve hit a lower 401(k) contribution limit because of your income level, there are other ways to save for retirement that are similarly tax-advantaged.
You can start an individual retirement account (IRA), which also offers the same tax advantages as a 401(k) plan. Annual IRA contribution limits for 2024 are $7,000, or $8,000 for those over age 50.
You can even start a gold IRA, which can place your assets into physical gold. Funding a gold IRA can be done either through annual contributions ($7,000 limit) or through a gold 401(k) rollover. That’s an especially popular option for those whose 401(k) options are limited, or who want to protect their 401(k) assets from losing value during a stock market crash.
While 401(k) retirement plans are newer than IRA accounts, they have become one of the most popular retirement plans for many American workers. That’s because more and more companies are offering workplace 401(k) programs, allowing workers to deposit money from their paychecks directly into a 401(k) account.
That ease has resulted in trillions of dollars of money being amassed in various 401(k) programs. It doesn’t hurt that many employers also offer matching contributions, helping their workers build up their nest eggs.
Some 401(k) programs offer employees a diverse array of funds, sometimes offering dozens of choices. That allows individuals to hold small-cap, mid-cap, or large-cap funds, and bond funds.
Other 401(k) plans offer exchange-traded funds that hold commodities or foreign currencies. And by deducting money before taxes, people can put more money to work for them than if they were to spend their post-tax salary on their own.
401(k) plans work well for people who want a retirement plan that is easy and doesn’t require a huge amount of financial research. And with the tax advantages of a 401(k), the ability to transfer funds to another retirement account, and the ability to do a 401(k) to IRA rollover, 401(k) plans offer people a significant amount of flexibility.
401(k) plans have their drawbacks too. Many 401(k) plans don’t offer their employees a huge variety of options.
So, if the assets aren’t the best performing, or if their management fees are too high, your performance will be suboptimal. You also don’t have ready access to the funds in your 401(k) account, as you’re not able to take distributions from your account until you reach age 59½.
With very few exceptions, such as buying a first home or paying for certain medical expenses, trying to remove funds from your 401(k) account before that age will result not only in having to pay taxes on that distribution, but also in an additional 10% tax penalty.
If you contribute to a workplace 401(k) program and leave your employer, in many cases your assets will automatically be placed into a low-yielding cash or money market fund. In some cases that could leave your funds subject to the combined effects of management fees and inflation, causing you to actually lose money.
If you’re going to participate in a 401(k) plan, make sure that you have a good idea of what kind of performance you want to achieve and how you plan to spend your money. And if you want to explore the possibility of buying alternative assets like gold with your 401(k), you’ll want to do your homework first.
If you want to use your 401(k) assets to buy gold, starting a 401(k) plan can be a good first step before eventually buying gold. Then you can use your 401(k) assets to gain exposure to the gold market in a few different ways.
There are three primary methods by which individuals can gain exposure to gold with 401(k) funds. Those are through acquiring gold funds, holding gold ETFs, or rolling over 401(k) assets into a gold IRA.
Some 401(k) plans offer individuals the opportunity to buy precious metals funds. These funds often hold shares of gold mining companies.
The thinking is that if gold prices rise, mining companies will make more money and their share prices will increase. But that isn’t always the case, as rising costs of doing business, labor disputes, political instability, etc. may act as a drag on gold mining companies.
Some precious metals funds may offer additional exposure to precious metals through metal holdings or purchasing shares in gold exchange-traded funds (ETFs). While you’re not actually buying physical gold with a 401(k), you’re still gaining exposure to gold markets.
Occasionally, employees may find themselves participating in a 401(k) plan with a brokerage option. That enables them to acquire their assets through a regular brokerage account while still maintaining the tax advantages of their 401(k) plan.
The advantage of a brokerage account is that it offers employees a wider range of assets, such as gold ETFs. Gold ETFs are funds that purchase gold and then offer shares in their fund for sale.
One of the major downsides to gold ETFs is that you’re not actually buying physical gold, nor can you convert your shares to physical gold. So again, while you can buy gold assets with your 401(k) assets through an ETF, you’re still not holding physical gold, just in shares of a fund that holds physical gold.
If you are dead set on buying physical gold with a 401(k), your best bet could be a gold 401(k) to IRA rollover. A gold IRA rollover means that you roll over existing assets from a 401(k) plan into a new gold IRA.
That gold IRA becomes the vehicle that you use to purchase physical gold coins and gold bars. These 401(k) to IRA rollovers occur tax-free in most cases, and there is no limit to the amount of money you can roll over.
The coins or bars that you decide to buy with your gold IRA are managed by a gold IRA custodian and are stored at a bullion depository. As with other IRA accounts, your gold IRA accrues gains tax-free, and taxes are only paid when you take a distribution.
Once you decide to take a distribution, you can take that distribution either in gold or in cash. And the same required minimum distribution (RMD) rules apply to gold IRAs as apply to all other IRAs.
Owning gold is a time-tested way to protect hard-earned assets against economic uncertainty and financial turmoil. If you’re worried about your tax-advantaged retirement savings losing value during an economic downturn, you can help keep those assets protected with a simple 401(k) to gold IRA rollover.
With gold having recently hit all-time highs and showing signs of continuing strong growth, now is the time to take advantage of gold’s potential. By buying physical gold through a gold 401(k) to IRA rollover, individuals can take advantage of the fact that they’re acquiring a tangible physical asset that has been in demand for centuries and will continue to be well into the future.
People who are worried about their 401(k) losing value can roll over their funds into a gold IRA tax-free, potentially sparing themselves massive losses in the event of a market crash. And with gold looking poised to continue gaining value in the future, gold offers the possibility of keeping your assets safe and secure.
Rollovers allow you to move existing retirement assets from a 401(k), 403(b), TSP, or similar retirement account into an IRA. Since rollover contributions are not subject to the annual IRA contribution limits, they can be a useful tool in building up your retirement savings.
In general there are three types of rollovers:
Because of the potential tax consequences of a 60-day rollover, people who want to move a 401(k) to a gold IRA without penalty generally choose the direct rollover or trustee-to-trustee transfer. These ensure that their retirement savings are rolled over without taxes or penalties.
Additionally, there is a one-per-year IRA rollover rule. This means that you can only make one rollover from the same IRA per year.
You also can’t within that 1-year period make a rollover from the IRA to which you distributed that rollover. You can read more about it at the IRS website.
This one-per-year rule does not apply to:
There are additional restrictions on rollovers, such as the fact that RMDs cannot be rolled over. When you decide on doing a rollover, the IRS website has lots of useful information on the topic, including a rollover chart that shows which accounts can be rolled over into which.
You may also want to consult a tax professional to ensure that you aren’t making mistakes that could subject yourself to unnecessary taxes.
Anyone with earned income, and their spouses if married filing jointly, can start and contribute money to an IRA. You can contribute to an IRA even if you have a 401(k) or similar retirement plan at work. The only limit is to how much money you are able to contribute to your accounts.
If you are eligible to start an IRA, there are numerous types of IRAs available. These include:
Because these accounts provide tax benefits for retirement savings, there are an abundance of IRA rules that must be followed. These rules include requirements for contributions, withdrawals, and the types of assets that can be included in your portfolio.
We’ll start off with some general IRA rules and then focus more specifically on self-directed IRAs and the gold IRA rules that you need to know to make the most of your assets.
The IRS sets contribution limits on IRAs, which must be followed in order to avoid penalties. The following guidelines will help you understand contribution limits for IRAs:
The IRS sets forth penalties for not following regulations dealing with retirement accounts. Here are a few IRA rules to be mindful of so you know how to move a 401(k) to a gold IRA without any penalties:
Opening an IRA account to reduce taxes is not uncommon, but there are deduction limits set by the IRS to be aware of. Some general rules include:
Retirement planning isn’t something that you start doing when you’re a few years away from retirement. It’s something you start as early in your career as you can. There’s no substitute for time in the market when it comes to building up your retirement savings.
As you get older, you may start looking into more ways to protect the money you’ve already put aside for retirement. If you have a 401(k) from a previous employer that is sitting idle, or if your current 401(k) options don’t leave you enthused, a 401(k) to IRA rollover could offer you more options to put your money to better use.
One popular 401(k) rollover option is to roll over 401(k) assets into a gold IRA. The rollover process can allow you to move your 401(k) into gold tax-free and penalty-free.
A gold IRA is a type of self-directed IRA, an IRA that allows you to take greater control over your assets. Moving retirement savings into a self-directed IRA can give you the potential for more asset options like real estate, private bonds, private equity, and precious metals like gold and silver.
Precious metals are a popular option because gold and silver have been used as a time-tested means of storing wealth that can weather numerous economic changes, giving your portfolio diversity and stability. The price of precious metals often increases even in tough economic times, meaning that your portfolio can still get a boost even during the worst throes of a financial crisis.
Like all 401(k) and other retirement plans, a gold IRA has rules and regulations that you need to be aware of. The last thing you want to do is decide to roll over your 401(k) and be hit with taxes and penalties because you didn’t do things correctly.
Buying gold can be a great way to keep your portfolio diversified, but to take advantage of it and maximize your savings, you should be aware of the self-directed and gold IRA rules.
First, it’s important to understand the rules that govern self-directed IRAs. These include subsection 408(m) of the US tax code, which prohibits IRA accounts from acquiring collectibles and defines collectibles as:
There are, however, exceptions made for some coins and bullion in subsection 408(m)(3), namely:
In addition, If you already own gold, you cannot add that gold to your IRA. But you can open a gold IRA and purchase new gold to add to your IRA.
You can also other types of precious metals coins and bullion that meet IRS specifications. Those include silver, platinum, and palladium that meet the following minimum fineness requirements:
A gold IRA is a vehicle that allows individuals to purchase gold coins or gold bullion. Just like most other IRAs, most funds directed to gold through a gold IRA come from pre-tax dollars and taxation is deferred until individuals decide to or are required to take a distribution. This allows you to benefit from holding gold while still enjoying the same tax treatment as a conventional IRA.
A gold IRA isn’t available from most financial institutions, which prefer to push people into stocks and bonds from which they can gain commissions. But a gold IRA can be a powerful tool that can help you diversify your portfolio and protect your assets against inflation, stock market crashes, and financial turmoil.
Gold has been trusted by many for centuries, as it is the ultimate source of wealth. That’s why central banks, despite their creation of vast amounts of paper money, still maintain large holdings of gold bars. When paper assets lose their value, gold is still there in the vaults maintaining its value.
If you’re nearing retirement, a gold IRA can be one way to lock in gains made from stocks or bonds held in a 401(k) or IRA. A gold IRA can also be a good asset for younger people who want to grow their assets over the long term and who don’t want to risk the boom and bust nature of financial markets.
A gold IRA, like any other asset, has a cost. You will have to pay to set up a gold IRA, and you will have to pay your IRA custodian and bullion depository to safeguard and insure your gold.
These fees are generally fixed at a couple hundred dollars a year, no matter how much gold you own. So the more gold you buy, the less those fees become as a percentage of your total holdings.
Then there’s the matter of taking distributions and calculating taxes. You can choose to take distributions in cash, or you can take physical delivery of your gold.
If you opt for physical delivery, then you’ll be responsible for storing that gold going forward, which introduces its own difficulties. And in either case, you’ll have to calculate the amount of taxes that you’ll owe the government once you take a distribution.
Finally, if you’re only interested in short-term gains then a gold IRA is probably not right for you. Buying gold is not a get rich quick scheme, it’s a long-term proposition that can offer stable growth to younger gold owners and stable asset value to older gold owners.
The desire for better performance or for the ability to own a wider variety of assets are some of the reasons many people choose to do a 401(k) to gold IRA rollover. While the process can sound daunting, working with professionals who have years of experience with the process can make everything go seamlessly.
Goldco has helped thousands of customers navigate the gold IRA and gold purchase process, with over $2.5 billion in precious metals placements. And our dedication to customer service is why we have over 6,000 5-star reviews from our customers.
Once you’ve familiarized yourself with the IRA rules and think you’re comfortable with moving your 401(k) to a gold IRA, you’ll want to learn the steps to starting your gold IRA. You can contact the experts at Goldco to get started.
The process of starting a gold IRA rollover requires informing the existing custodian of your 401(k) assets that you intend to roll over those assets. The funds are then sent from your current custodian to the new custodian that you designate to hold the gold that you wish to purchase for your new gold IRA.
Once your new gold IRA custodian has received those funds from your previous custodian, you then decide which gold or silver coins, or gold or silver bars, you wish to purchase. Those coins or bars will then be delivered to the bullion depository you choose, who will take care of securing and storing your gold assets.
The whole process shouldn’t take any more than a couple of weeks, and then you’ll be able to reap the benefits of your new gold IRA. And because a 401(k) to gold IRA rollover can be done absolutely tax-free, you can benefit from owning gold without having to worry about additional taxes.
With a gold IRA you can get the best of both worlds: the tax advantages of a traditional 401(k) or IRA retirement account combined with the stability and asset protection of gold. Don’t wait until your 401(k) account starts to lose value before you decide to protect your retirement savings.
Contact the experts at Goldco today to find out more about a 401(k) to gold IRA rollover so that you can make gold a vital part of your retirement portfolio.
This article was originally published in April 2019 and was updated in August 2024.
Free Precious Metals Guide
Complete the Form Below
Free Precious Metals Guide
Complete the Form Below
Now that President Trump has won his second term in office, many people are wondering what his second term will mean for them Whether it’s abortion, the economy, or foreign policy, there are still...
The World Gold Council recently published a report in which it stated that it expects gold prices to rise an average of 5% annually through 2040 At a time when interest rates on Treasury bonds...
Analysts at Bank of America made waves recently when they stated that gold could become the “last perceived safe haven standing” Those same analysts believe that gold could hit $3,000 an ounce by...
CUSTOMER CARE
DISCLAIMER: This site is general in nature and not tailored to the specific goals of any individual. All investments carry risk. Some of those risks associated with precious metals include the following: prices may rise and fall, which means the value of your metals may go up or down over time and you may sell for more or less than you paid. Past performance does not guarantee future results. Goldco cannot guarantee, assure, or promise future market movement, prices, or profits. Even though Goldco and its representatives are precious metals specialists, we are not licensed financial advisors and do not give financial advice. Additionally, Goldco cannot provide tax or legal advice and will not advise as to the tax or legal consequences of purchasing or selling precious metals or opening a Precious Metals IRA. Individuals should consult with their investment, legal or tax professionals for such services.
