How To Rollover Your 401(k) Into A Gold IRA
/While a 401(k) account can be a great way to grow your retirement savings, you have a limited range of investment choices with it. If you want to diversify your investment portfolio, an individual retirement account (IRA) can be the best way to secure your future.
You can invest in physical gold directly through a self-directed IRA account. Gold is a secure and attractive choice to save for retirement. But you cannot invest in physical gold directly in any employer-sponsored 401(k) account. That is where a 401(k) rollover option comes in where you can rollover your 401(k) into a gold IRA.
If you have a 401(k) but want to take advantage of gold IRAs, then this article will show you how to rollover your 401(k) into a gold IRA.
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What is a 401(k)?
A 401(k) is an employer-sponsored retirement savings plan that allows an employee to set aside part of their paycheck in a retirement savings account before taxes are taken out. Self-employed people can also set up a 401(k).
Many employers match their employees' contributions to a 401(k) up to a certain percentage.
Your earnings grow tax-deferred with a 401(k) plan.
If you have left your company, or are retired or close to retirement, and are wondering what to do with your old 401(k), there are several options. These are:
Roll over your 401(k) to an IRA
Roll over your 401(k) into a new employer's plan
Leave it in your former employer's plan
cash out your 401(k)
If you are wondering what is the best option when it comes to your old 401(k) or 401(k)s, rolling over your 401(k) or 401(k)s into an IRA can be the best option if you simply want to diversify your 401(k) accounts(s)
What is a gold IRA?
A gold IRA, also known as a precious metals IRA, is a self-directed retirement account (IRA) that enables people who open this account to invest in and hold physical gold and other precious metals such as silver, platinum and palladium in the forms of coins and bars. You can open a traditional gold IRA or a Roth gold IRA.
How to roll over a 401(k) into a gold IRA
Perhaps you have changed your job but still have a 401(k) with your former employer.
If you want to rollover your 401(k) into a gold IRA, first you need to open a self-directed IRA through a trustee or custodian. Once the IRA is set up, you can choose to rollover your funds from your 401(k) to your new self-directed IRA.
You can begin a 401(k) rollover in two ways: a direct rollover or an indirect rollover.
Direct rollover
With a direct rollover, your employer automatically transfers the funds from your 401(k) account to the custodian of your self-directed IRA without having to handle the money on your own. There is no penalty when you carry out a direct 401(k) rollover.
A direct rollover is the simplest or the most hassle-free way to complete a 401(k) rollover to a gold IRA. Then you can instruct the trustee or custodian of your self-directed IRA to buy gold with your money to have a gold IRA. You can then invest gold in your self-directed IRA.
With a direct rollover, the funds from your employer-sponsored 401(k) plan are deposited directly to your self-directed IRA where your employer makes a check payable to the financial institution where you opened your IRA. No taxes are withheld when you choose a direct rollover, as the withdrawal of funds is not considered as a distribution.
Indirect rollover
With an indirect rollover, your employer makes a check payable to you after withholding a mandatory 20% for taxes from your 401(k) funds. You have then 60 days to deposit the funds into an IRA. You must also make up the 20% yourself within 60 days, otherwise the 20% withheld will be considered a taxable distribution, which means only 80% of your 401(k) funds will have the potential to continue to grow tax-free or tax-deferred.
In addition, if you are under the age of 59½ you may be subject to a 10% additional federal tax, unless one of several exceptions applies.
With an indirect rollover, you can receive funds directly from your 401(k) and then deposit it into your self-directed IRA. You will need to deposit the entire amount of your 401(k) distribution into your gold IRA within 60 days to avoid paying 10% IRS-imposed penalty as well as income taxes on it.
Withdrawal
You can withdraw funds from your 401(k) account to deposit into your gold IRA. But any withdrawal of funds from your 401(k) account before you turn 59½ years of age will be subject to an IRS-imposed penalty of 10% as well as income taxes on it.
There are a few exceptions to the early withdrawal rule. If you leave your employer with whom you started your 401(k) in the same year that you turn 55 or after that point or you have become permanently disabled, then you will not be subject to the 10% penalty. If you die and your estate takes withdrawals from your 401(k), they will not be subject to the 10% penalty.
You can roll over your 401(k) without penalty
What are the benefits of rolling over a 401(k) into a gold IRA?
There are many benefits of rolling over a 401(k) into a gold IRA, including:
Offers more portfolio diversity
Provides hedge against inflation
Increases in value over the long term
Cash incentives
Lower fees and costs
Employer-sponsored 401(k) accounts offer limited asset options. They have hefty account fees and include penalties for early withdrawals.
Conclusion
Gold is a secure and attractive choice to save for retirement. While a 401(k) is one of the most common ways for Americans to save for retirement, rolling your old 401(k) account or accounts over into a gold IRA can be the best option if you want to diversify your investment portfolio and secure your future.
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Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
