Step-by-Step Gold IRA Rollover Process for Beginners

IRA rollover

With the US economy seemingly headed for recession in the near future, more and more Americans are taking steps to try to protect their wealth. An increasing number of people are doing that by buying gold.

Demand for gold coins and bars has increased significantly in recent years, as investors around the world have sought the safety of the yellow metal. In the US, a growing number of people are learning about how they can protect their retirement savings with a gold IRA.

For people who are accustomed to owning stocks, bonds, and shares in funds in their 401(k) and IRA accounts, the idea of owning gold in an IRA may seem a little strange. But thousands of Americans have started gold IRAs over the last several years and are benefiting from their ownership of gold. Now you can too.

What Is a Gold IRA?

A gold IRA is simply an individual retirement account (IRA) that invests in physical gold coins or bars. While most IRA accounts own intangible financial assets like stocks, bonds, or shares in funds, a gold IRA actually owns physical gold.

How Does a Gold IRA Work?

A gold IRA works in a similar way to any other IRA. You fund your IRA, then use your IRA funds to buy physical gold coins or bars. You’re not buying shares of a gold exchange-traded fund, like you would in an ordinary IRA. You’re buying actual physical gold.

That gold is managed by an IRA custodian and stored in a bullion depository. Relatively few IRA custodians offer gold as an investment option, which is why you’ll need to find an IRA custodian that specializes in or offers gold as an option. Goldco works with established gold IRA custodians to provide our customers with options for custodial services for their gold IRA assets.

Why Start a Gold IRA?

Now, you may be asking yourself, why should I start a gold IRA? Can’t I just buy gold and store it wherever I want?

Certainly you can do that, and many of our customers do choose to make direct cash purchases of gold that they store themselves. But you can’t buy that gold with funds that you have in 401(k) or similar tax-advantaged accounts.

Or rather, if you want to use those funds to buy gold directly, you would have to take a distribution from your 401(k) plan if it is allowed, pay any applicable taxes and penalties, and then buy gold.

With a gold IRA rollover, you can move those funds from a 401(k) into a gold IRA tax-free and use those funds from within your gold IRA to buy gold coins or bars. Those physical gold assets are then managed by your gold IRA custodian and stored at a bullion depository. And if you really want that physical gold, you can take a distribution from your gold IRA as an “in-kind” distribution, meaning you can take possession of some of your gold as a distribution.

One other important thing to note is that contributions to an IRA account that come from rollovers are not subject to the annual IRA contribution limit. For 2023, the annual IRA contribution limit is $6,500, or $7,500 for those over age 50. But because rollovers don’t count towards that limit, you could roll over $10,000, $100,000, or even $1 million or more.

The Basics of Rollovers and Transfers

Rollovers and transfers can sometimes be referred to with various terms. Very often funds being moved from a 401(k) or similar employer-sponsored plan to an IRA are referred to as rollovers. Funds being moved from one IRA to another IRA are often referred to as transfers.

Whether called a rollover or transfer, these movements of funds are subject to rules and regulations set by IRS. But in general, as long as these funds are being moved directly from one custodian to another, these rollovers and transfers can be made tax-free.

Rollover Rules

IRA rollovers are subject to specific rules administered by IRS. If you’re not familiar with them already, don’t worry, because most people aren’t. IRA, 401(k), and other tax-advantaged retirement accounts are intended for long-term retirement savings, not for short-term investing like day trading. They’re intended to invest in assets with long-term potential, like value stocks or gold, not assets held in the short term.

That’s why the number of rollovers you can do is strictly limited. If you want to move funds from account to account weekly or monthly, that’s what brokerage accounts are for. Tax-advantaged accounts are intended for long-term wealth accumulation and for assets to stay where they are.

IRS has a handy chart detailing the accounts you can roll over money from as well as the accounts you can roll over money to. There are nine different categories of retirement accounts, and not all potential rollover combinations are allowed.

IRS also has a publication available online that goes into greater detail about IRA accounts and rollovers. In general, however, there are no limits to how many times you can roll over funds from a 401(k) account to an IRA. Limits only come into play when transferring from certain IRA accounts to other IRA accounts, in which case you’re only allowed one rollover every 12 months.

Because there are 81 different theoretically possible rollover combinations, we can’t get into every single one in this guide. So let’s focus on the most common rollovers that we’re going to see. Those are the 401(k) to Traditional IRA rollover, the 401(k) to Roth IRA rollover (Roth conversion), and the IRA to IRA rollover (IRA transfer).

401(k) to Traditional IRA Rollover

When you read about IRAs, you’re normally going to be reading about Traditional IRAs. These are the IRA accounts most people are familiar with, which invest with pre-tax dollars, gains accrue tax-free, and taxes are only paid when you take a distribution.

One of the most common rollovers is from a 401(k) to a Traditional IRA. This means shifting money from one pre-tax account to another. There are no taxes to be paid, as the money moves directly from your 401(k) plan to your IRA account. And because both accounts are pre-tax, there are no distribution taxes or penalties to be paid.

401(k) to Roth IRA Rollover

Another option is to roll over funds from a 401(k) to a Roth IRA. A Roth IRA uses post-tax dollars, gains accrue tax-free, and no taxes are paid at distribution.

Since money moved from a 401(k) to a Roth IRA entails moving money from a pre-tax account to a post-tax account, you will owe income taxes on the amount moved into your Roth IRA account. There is, however, no 10% penalty owed if you perform this conversion before age 59½.

IRA to IRA Rollover (Transfer)

Rules for rollovers from one IRA to another can vary depending on what types of IRA you’re rolling over from and what type of IRA you’re rolling over to. The most common types of IRA to IRA rollovers are going to be rollovers from one Traditional IRA into another Traditional IRA, or rollovers from a Traditional IRA into a Roth IRA. Note that money in a Roth IRA can’t be rolled over into a Traditional IRA.

Rollovers from one Traditional IRA into another Traditional IRA in which funds are sent directly from one custodian to another will occur tax-free. However, you have to remember the once per year rollover rule.

Rollovers from a Traditional IRA to a Roth IRA are Roth conversions, and will trigger income taxes on the amount rolled over. Once again, however, if this Roth conversion occurs before age 59½ you will not have to pay the 10% penalty that normally applies to early distributions from an IRA account.

Three Steps to a Gold IRA Rollover

A gold IRA rollover doesn’t function that much differently from any other rollover. In this example we’re going to focus on a rollover from a 401(k) to an IRA, since that’s one of the most common types of rollovers. This 401(k) to gold IRA rollover can be done in just three easy steps.

Open a Gold IRA

The first step is to open a gold IRA. I know what you’re thinking. “Why do I need to open a gold IRA first? Can’t I start the rollover, then decide where to move the money?”

That’s not how it works, at least if you’re trying to do a direct rollover from your 401(k) plan to your gold IRA custodian. When you start the rollover process, you’ll need to inform your 401(k) plan where to send the funds. In other words, you’ll need to know your gold IRA custodian’s name, address, and your new IRA account number so you can tell your plan where to send your money.

This means that you’ll need to have a gold IRA account established and have all the information about your account ready to go before you start your rollover. And this is where you’ll want to do your homework and find an IRA custodian that deals with or specializes in gold IRAs, or work with a trusted partner like Goldco that has experience working with gold IRA custodians.

Transfer Funds

Once you have a gold IRA opened, you can start the gold IRA rollover process. Each 401(k) plan has its own rules for outgoing rollovers or distributions, and its own process that you’ll have to follow.

In general, you’ll fill out paperwork or fill out online forms to initiate the rollover process. This will include providing your plan with the information on your new gold IRA custodian, your IRA account number, how much money you want to roll over, etc. Some plans, like the federal government’s Thrift Savings Plan (TSP) will require your spouse to sign off on a rollover as well.

401(k) plan administrators often get paid based on the amount of funds they manage, so the more people who roll over funds into other accounts, the less money the 401(k) administrators make. Don’t be surprised to get some pushback or to have roadblocks placed in your way. The TSP, for instance, will require you to wait one week after providing the details of your IRA rollover destination account before you can initiate a rollover.

Once you’ve initiated your rollover, expect it to take a few business days for your 401(k) plan to release and send funds. Then expect another few business days for your funds to reach your IRA account and fully clear. In general, expect it to take one to two weeks for the rollover process to complete.

Buy Gold

Once your gold IRA account is funded, you can then choose which gold coins or bars you want to buy. The choices are numerous, with only certain exceptions.

For a gold coin to be eligible for purchase for your gold IRA, it has to be produced out of gold that is at least 99.5% pure (.995 fineness.) The only exception is for the modern American Gold Eagle series of gold coins, which are 22-karat (.9167 fineness) and which are specifically allowed for IRA purchase by government statute.

Gold coins that are less than .995 fineness are not allowed for IRA accounts, and are considered collectibles under 26 U.S.C. 408(m). Attempting to purchase these coins with IRA funds would be considered as a distribution by IRS, triggering potential taxes and penalties.

Goldco works with mints around the world to bring our customers IRA-eligible gold coins with numerous different designs. We do the work of providing IRA-eligible coins so that you don’t have to determine whether the coins you buy are eligible or not.

Gold IRA Rules and Regulations

In addition to the rules surrounding IRA-eligible coins, there are other gold IRA rules and regulations you need to be aware of.

Like any other IRA, a gold IRA must be managed by an IRA custodian. If you’ve been doing research on gold IRAs, you’ve probably heard about something called a “home storage gold IRA.” It’s an arrangement that purports to allow you to buy gold with IRA assets and store that gold at home.

If that sounds too good to be true, that’s because it is. People who have tried to go that route before have found out the hard way that IRS doesn’t take kindly to people who ignore the rules regarding IRA custodianship.

Your IRA custodian will store your gold at a bullion depository, where you can choose either segregated or unsegregated storage. At age 73 you’ll be required to start taking required minimum distributions (RMDs), just like with any other IRA or 401(k) accounts, at least if your gold IRA is a Traditional IRA.

You can take that distribution either in cash or in physical gold. And if your gold IRA is a Roth IRA, you won’t be required to take any RMDs.

Is a Gold IRA Rollover Right for You?

Like any other financial decision, the decision about whether or not to start a gold IRA is dependent on your particular circumstances, your financial situation, and your financial goals. For many Americans who have built up tens or hundreds of thousands of dollars of retirement savings in tax-advantaged retirement accounts, the thought of leaving those funds at the mercy of the market in the face of recession doesn’t sound terribly appealing. A rollover can provide them with additional options to help protect their retirement savings.

For those looking to benefit from owning gold, a gold IRA rollover can be a useful option to help benefit from owning gold while simultaneously protecting the tax-advantaged status of your savings. And a gold IRA rollover that gets you into gold before a recession occurs and before the gold price takes off could do a great deal in protecting your wealth if the economy ends up doing as badly as many fear.

The experts at Goldco have years of experience in helping customers with gold IRA rollovers. Thousands of our customers have used gold IRA rollovers to diversify their portfolios, hedge against inflation, and hold a safe haven asset that can help protect them during times of turmoil.

With over $2 billion in precious metals placements, Goldco continues to earn its reputation for quality products and outstanding customers service. But don’t take our word for it, read what our customers have to say. If you think a gold IRA rollover might be what you’re interested in, give us a call today to learn more about how you can benefit from a gold IRA.


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