Beginner’s Guide to a Gold IRA
If you are looking to invest in gold, this Beginner’s Guide to a Gold IRA will walk you through everything from the reasons why gold is a solid investment to the simple process of setting up your...
Beginner’s Guide to a Gold IRA
As you age, you may start looking into the many ways in which you can put money aside for retirement. If you have a 401(k) from an employer that is sitting idle, rolling over all or part of your 401(k) into a gold IRA may be a good option for attaining your financial goals.
To do that, you need to start by setting up a self-directed gold IRA. Moving your retirement funds into a self-directed IRA gives you the potential for more investment options like real estate, private bonds, private equity, and precious metals like gold and silver.
Investing in precious metals is a popular option because they 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 has extra insurance against the woes of a financial crisis.
Like any 401(k) and other retirement plans, there are rules and regulations to be aware of. The last thing you want to do is decide to roll over your 401(k) and be hit with penalties because you didn’t do things correctly.
So, how do you move your 401(k) to gold without penalty? This guide will help you understand what a 401(k) is, how it works, its benefits, and how to effectively roll over your 401(k) to gold without incurring penalties.
Section 401(k) of the Internal Revenue Code allows individuals to make contributions to a retirement account in a tax-deferred manner. This means that they will not be taxed on that contribution until they take a distribution when they retire (at age 59 1/2 or later). The following guidelines about 401(k)s are set forth by the IRS:
Employer matching is a valuable way for individuals to save additional money for retirement if an employer offers that plan, and some even refer to it as “free money.”
If you are contributing to a 401(k) fund, remember that the company managing the fund takes fees from your 401(k) even when you aren’t contributing. Over time, those fees can add up to a significant amount if you’re not continually contributing money. One way to help avoid those fees is through a 401(k) rollover, which transfers assets to an IRA to broaden your investment choices.
Like IRAs, 401(k)s are subject to required minimum distributions (RMDs), which require investors aged 72 and older to take a specific amount in distributions each year. Due to the global COVID-19 pandemic, the US Congress passed the CARES Act, which waives RMDs for the remainder of 2020. Yet, it’s still important to know how to take RMDs to avoid penalties in the future, which we’ll discuss throughout this guide for how to move a 401(k) to gold without penalty.
There are many more benefits to a 401(k) plan that include:
To add to these benefits, you can consider a gold IRA rollover. Knowing how to roll over your 401(k) into a gold IRA means keeping all the great benefits of a tax-advantaged retirement account, plus the peace of mind of knowing that your investments can be secured in precious metals.
A rollover IRA is a term for an individual retirement account (IRA) that is funded by moving funds from a 401(k), 403(b), TSP, or similar retirement account into an IRA. The main difference between a 401(k) and an IRA is that an IRA is normally opened by the individual rather than being offered by an employer.
With a rollover IRA, investors can use existing retirement funds to take advantage of a broader range of investments than are available through 401(k) investments alone. And by investing in a self-directed IRA, you have even more options for investments, such as a gold IRA rollover.
Rollover IRAs are most often created when changing jobs or retiring, as they allow employees to move their current 401(k) or other retirement account balances into an IRA account that will offer a better array of investments and superior performance.
When performing an IRA rollover, funds from existing tax-advantaged accounts can be rolled over into a new IRA tax-free. You can even roll over funds from multiple retirement accounts into a single self-directed IRA, making it easier for you to consolidate and manage your retirement savings.
With a gold IRA rollover, investors can minimize their tax exposure since distributions are normally subject to ordinary income tax rates. Particularly for those in lower-income tax brackets, that can result in gold held in an IRA being taxed at a lower rate than if it were not in an IRA. And for those investors who invest in a Roth gold IRA, they won’t be taxed at all on the gains on their gold investments.
It is possible to roll Traditional IRA funds into a gold IRA, but there are guidelines to follow when investing in precious metals. These include:
Some of these rules are included in Section 408(m)(3) of the Internal Revenue Code, which sets guidelines and exceptions for investing in coins and bullion. Knowing these basic rules may help avoid common pitfalls when you’re preparing for a gold IRA transfer.
When you contribute to a gold IRA as part of your retirement portfolio, you’re purchasing actual physical gold as opposed to a gold ETF, which only certifies that you have a vested interest in gold, but not actual ownership. The benefits of investing in gold as part of your IRA include:
The IRS sets forth penalties for not following regulations on different types of retirement savings. The following are a few IRA investing rules to be mindful of so you know how to move a 401(k) to a gold IRA without any penalties:
If you’re new to transferring an IRA or rolling over a 401(k), and more specifically, transferring or rolling over into a gold IRA, we’ve put together a simple 4-step process to get you started. Of course, always keep in mind the IRS guidelines for rollovers and distributions to ensure that you are complying with regulations.
As you start the process, remember that only IRA-approved gold is eligible. It may be helpful to contact a qualified gold IRA specialist who understands the nuances of self-directed IRAs and how to roll your 401(k) into a gold IRA.
Once you’ve established a rollover IRA, you can contribute to it just like with a traditional IRA.
If you establish a rollover IRA and begin making contributions to it, you may inhibit your ability to do a reverse rollover IRA (back to a 401(k)), so evaluate all your options before making any changes.
The IRS has contribution limits for IRAs, which must be followed in order to avoid penalties. The following guidelines will help you understand the contribution limits for gold IRAs:
Many investors ask if they can roll over a 401(k) into a gold IRA without penalty–and it’s a worthwhile question to ask to protect your investments. The best way to conduct a gold IRA transfer is to work with precious metals investing experts.
By simply filling out our contact form, we’ll connect you with a qualified gold IRA expert who can answer your questions, offer valuable reference materials, help you fill out forms, and choose the best precious metals for your account. We’re ready to help you facilitate the diversification of your retirement portfolio so you can feel more in control of your financial future.
Continue reading Chapter 5 to learn more about how a self-directed IRA works and how you can set up your self-directed gold IRA.