I wrote before what Gold IRA Rollover Guide is, and why professionals believe that it is better to keep your investments in gold. You can read about it at the link. Therefore, today we will talk about how to make a rollover in practice.
401(k) to Gold IRA Rollover
A Gold IRA rollover is when you convert your retirement account (or part of it) or an investment account (such as a 401(k), Roth IRA, SEP IRA) into gold through the purchase of precious bars, gold coins, and so on.
Transfer from former employer
Most people today think it’s not realistic or very difficult to transfer or rollover funds from an existing employer-sponsored or self-directed 401(k) to a Gold IRA. However, it is not. If you want to transfer your funds from your former employer, then you only need to decide on a new vault for your money in metal (gold). And consider that the deed is done.
All you need to do next is instruct your Gold IRA custodian to transfer your 401(k) to gold (or other precious metal) in your Gold IRA.
Transfer from your current employer
For such a transfer, you need to first look at your policy. Or ask the employer directly. Rarely, there are employers who are opposed to your 401(k) being sponsored in gold. In this case, you will be able to transfer savings into precious metals only after you stop working with this employer.
In most cases there is no problem to ollover a current-employer 401(k) to a new Gold IRA.
Gold IRA Rollover vs. Gold IRA Transfer
To keep your savings in gold, you have two options. Either make a rollover or make a transfer. In short, a transfer is an easier way to transfer funds from your 401(k) to gold (or other precious metal) to your Gold IRA.
A Gold IRA transfer is a fairly simple procedure. You simply move funds from one fund to another. All this is done by your company-custodian.
The main difference between the two types is that when you choose an IRA transfer, funds are transferred directly from custodian to custodian. Otherwise, it is needed to withdraw funds to a bank account and transfer it to a new custodian.
- Risk is manageable
- It’s more secure
- Very easy to do
- Your assets are transferred directly from your retirement savings accounts to your Gold IRA.
The main disadvantages of rollover:
- In order to make a rollover, you will need to perform more different actions, and follow more rules for transferring funds
- There are penalties for those who transfer funds in this way, violating the rules
- Sometimes the fines reach very large amounts 🙂
Gold IRA Rollover Rules:
- You can make an IRA Rollover no more than once a year (meaning every 365 days).
- The main requirement is the 60-day transfer rule, which obliges the account holder to complete the transfer from their account into the new gold IRA in full within 2 months. If you do not make it in time, then the distributed funds will be taxed as ordinary income. This is very bad.
- If you are under 59.5 years old and you decide to withdraw funds back, then you will lose 10% of your funds (they will be withdrawn as a penalty).
There are no such rules for Gold IRA Transfer.
Benefits of Moving to a Gold IRA
The main advantage of Gold IRA is that it allows you to form a long-term investment strategy. That, with the right approach, allows you to overtake not only inflation, but also prevent the depreciation of the dollar.
Pay attention to the chart of monetary base in circulation. As you can imagine, the more dollars the Fed prints, the higher the inflation.
So as you see, a 401(k) account doesn’t provide you with such investment opportunities as with a Gold IRA.
You also benefit from the costs of maintaining the account. There are no fees while you are working, but when you retire, the fees for withdrawing from a gold IRA are much lower compared to a 401(k).
More options in terms of choosing which company to work with when investing your money in a gold IRA.
The best companies offer good customer support, low fees, and robust investment tools.
You can create a Roth IRA if you wish. What is Roth IRA is the ability to withdraw funds after retirement without paying taxes.
The main advantage of the Roth IRA is that it does not have a minimum amount for withdrawing funds upon reaching a certain age.
Plan Your Investment Strategy Ahead of Time
The two most common GOLD IRA questions.
The first question is what is better to invest in, gold, silver ..? The second question is what part of the deposit is better to keep in precious metals.
First of all, you need to ask yourself what the economy of the world and the country will be like by the time you retire. At the same time, I recommend looking at historical charts, for example, the gold chart:
And then take a look at the 30-year Breakeven Inflation Rate:
If you are an investor who is retiring very soon, there is not much point in converting all your savings into gold. In this case, you can consider investing 10-20% of the funds in gold bars. In this case, you will have experience in working with precious metals, and statistics on how profitable it is. In the future, you will be able to share your experience with children and help them develop their own retirement strategy.
If the pension is still far from you, then you can buy gold at the best prices. For example, if there is a crisis in the market now, and all stocks are falling down, and metals are rising, then you can wait out this time and buy precious metals when they become cheaper. Gold, like other metals, retains its value in the long run, but you need to remember that it is also volatile like other financial markets (like stocks, futures), so if you buy precious metals at maximum prices during times of crisis, then you may need decades to wait for it to grow even more.
So, for example Ray Dalio swears by the 5-10% rule. Others advise converting to gold for a much higher investment percentage. As for me, I used to keep 10% of my investments in precious metals. Some of my acquaintances keep almost all their funds in investments in securities. But for example, one of my acquaintances keeps more than 60% of his investments in gold, and has been doing this for decades.
Therefore, determine for yourself what percentage of investments you consider optimal, and start investing by choosing the right company.