A 401(k) account is one of the best tools you can use to reduce your tax bill and save more to your retirement funds. If you plan to secure your future with a robust and comprehensive portfolio, you need to consider diversifying your assets by investing in a Gold IRA.
Most people, however, have realized that it’s almost impossible to invest in gold using employer-sponsored 401(k). However, you can rollover your 401(k) into an IRA. This helps diversify the portfolio, and in case of financial turmoil, you can be cushioned by options that are more stable, such as Gold IRA.
What is a 401(k) account?
A 401(k) is a type of savings plan that allows employees to invest a part of their income before it is taxed. As such, most people who depend on employment view 401 (k) plans as perks that encourage them to work for certain organizations.
Some organizations also promise to match what the employees contribute to encourage a savings culture and attract high-quality employees. 401(k) was introduced back in the 1980s as a way to encourage employees to save and invest in their future without putting in too much effort in managing the funds.
Although it is relatively easy to rollover your 401k into IRA, it is imperative to note that the conversion might attract numerous penalties. This article was written to help you understand how to move 401k to gold without penalty.
Rolling over your 401(k) into a Gold IRA comes many benefits. Some of the most obvious benefits include lesser charges and more solid investments that do not fluctuate in value. If you need to rollover your 401(k) to gold, you can do it in these five simple steps:
Pick a Self-Directed IRA Custodian
Most IRA custodians limit their clients only to purchasing traditional investment options. However, a self-directed IRA custodian allows you to choose any other investment as long as it does not break the internal revenue service rules regarding precious metals.
To purchase commodities, such as gold, you need to open an account with the custodian. The account should specifically allow you to buy and hold the precious metals that you buy and arrange how they will be stored. The IRS rules do not allow you to take hold of the physical gold held in an IRA.
Roll Over the Eligible Funds
Once you select a custodian and file all your paperwork with him, you can rollover the funds from the 401k. After that, you need to contact the plan administrator and let them know about your intention to roll over the funds to your self-directed IRA.
After you have contacted and informed your administrator about your plan, they usually send you some paperwork to fill and forward your funds to your IRA account. According to gold experts at Goldco, you can avoid a penalty by ensuring that you put the money in your IRA account within 60 days if the money comes to your account. Failure to do this will attract a penalty from the IRA.
Purchase Gold & Precious Metals with Your Gold IRA
Once the funds have been deposited in your IRA account, you can now use it to purchase the precious metal of your choice. While at it, ensure that the gold you purchase for your IRA is at least 99.5% pure. The gold should also be in the form of bars or IRS-approved non-collectible coins, e.g., the American gold eagle. It is also crucial to inform the gold seller that you are buying the bullion for a self-directed IRA.
Arrange Shipment to an Approved Depository
After choosing what you want to purchase and agreeing on a price, the precious metal dealer invoices the IRA custodian for their payment. Once the dealer has been paid, they will then ship the gold to the custodian storage facility of your choice.
After the process is done and the goods are shipped to the storage facility of your choice, you will then need to contact the dealer as well as the custodian to ensure that what you ordered has arrived. Always remember to ask and keep all the receipts for future reference.
Regularly Check Account Statements on Your Holdings
Once your gold IRA rollover is completed and the gold has been bought and secured, it is important to regularly go through all the statements from the custodian regarding your holding and investments. Going through the statements and regularly tracking your investments is a great way of keeping up with it and knowing what can be added or sold from the portfolio depending on your retirement needs.