How To Move a 401k to Gold Without a Penalty

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Protecting the nest egg that you have accumulated over your lifetime becomes a top priority to folks that are retired or approaching retirement age.  

Physical gold is a great way to balance out the volatility in a retirement portfolio, as well as defend against the trifecta of nasty economic storms that are inflation, rapidly rising interest rates, and whatever war or geopolitical rift escalates around the globe.

These dangers, along with the Everything Bubble in stocks, bonds, real estate, baseball cards, and you name it, have investors searching for how they can transfer all or a portion of their 401k into Gold.

And of course, investors are wondering how can they move into gold without incurring massive penalties from the IRS?

Is this even possible?

The answer is YES.

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It is possible to move your 401k to gold without getting hit with penalties from the IRS, but you have to follow specific rules.

The major warning to this that you need to be aware of is this technique only works if the 401k you are converting is from an employer that you are no longer employed by. 

This technique only works on an old 401k from a past employer.

A 401k that you are actively contributing to with your current employer is not allowed to be rolled over into a Gold IRA without paying hefty fines to the IRS.

401k Rollover to Gold – Without Penalties:

Any old 401k accounts that are no longer company-sponsored, meaning you are no longer employed by the company that created that 401k account on your behalf, can be rolled over into a precious metals IRA without paying penalties or taxes.  

Rollovers from these qualified accounts allow you to purchase physical gold and other precious metals in a tax-protected retirement account.

Unfortunately, the IRS only allows you to execute one of these tax-free rollovers per calendar year. 

With job transitions being common in today’s workplace, many investors have multiple IRA’s from their past jobs.

So you’ll want to pay attention to when the calendar year resets if you’d like to roll over multiple 401k’s without paying extra tax penalties.

Company-sponsored 401k accounts, also known as current 401k accounts, can not be rolled over without getting a hefty penalty.

This makes it an unwise financial decision to roll over a current 401k. If you’d like exposure to precious metals with your current 401k, the best you can hope for is if your plan allows an option for a self-directed IRA (SDIRA), where you may be allowed to purchase alternative assets. 

Although, this option is not available on most company-sponsored plans.

What You Need to Know About a 401k Rollover to Precious Metals

What is commonly referred to as a “rollover” is broken down into two slightly different transactions that are known as a direct transfer and a trustee to trustee transfer.

Direct Rollover

If you ask for a payout from your old 401k, you have the option to direct the plan administrator to make the payout to either a different retirement plan or to an IRA.

Each plan administrator has a slightly different process, so you’ll want to contact them to learn the best way to make this request. 

Once this step is completed, the administrator will send your payout as a check in your name for your new retirement account. You don’t have to pay any taxes on this transfer amount.

Trustee to Trustee Transfer

If you are receiving a payout from an IRA, you can ask your custodian administering your IRA to make the payout directly into your new IRA or into your other new retirement plan. 

As with the direct rollover, you don’t have to pay any taxes on this transfer amount.

Remember, the big difference between a direct rollover and a trustee-to-trustee transfer is that (basically) a direct rollover is from a 401k to an IRA and a trustee-to-trustee transfer is from an IRA to an IRA.

Investors will often use the general term “rollover”, but it’s important to know it could be either a rollover or a transfer.

How to Move a 401k While Avoiding Penalties

Something you need to be aware of when doing a rollover is the 60-Day Rule.

This is important.

You are required by the IRS to deposit the funds you receive from your transfer within 60 days. 

Otherwise, you will get hit with taxes. 

The IRS will treat your transfer as “regular income” and they will tax it at your current tax rate.  

Not a good situation, but it gets worse.

If you happen to be under the age of 59 ½ then you will also get hit with a 10% early withdrawal tax on the amount of the transfer.

These are disastrous penalties for an investor.

So, what’s the easiest way to avoid this mess?

Make darn sure you transfer your distribution to your new account in less than 60 days.  

But there is an even better way.

Ask for a 401k rollover into a precious metals IRA so that you don’t even run the risk of incurring the 60-day penalty.

To make your 401k to a precious metals IRA even more error-proof, work with a company that specializes in these complex transactions so you don’t even have to worry about the IRS.

Why Would You Roll a 401k into a Gold IRA?

401k plans are employer-sponsored saving plans that are meant for your retirement. Millions of American use these tax-advantaged investment plans. The plans are usually by large financial services companies like Vanguard, Blackrock, etc.  

When you go to choose your investments, you see that you are given the choice between a bunch of different mutual funds that are full of stocks or bonds.  

It looks like a lot to choose from, but it leaves you with choosing a mutual fund or maybe an ETF, and that’s about it.   All those financial assets are correlated together. If the market goes down all those assets will go down at the same time.

Most 401k plans are very limited in what they allow the employee to invest in and holding physical precious metals like gold is not allowed. Or at least it is not offered.  

If you want to add physical gold bullion or gold coins to your retirement portfolio, to give your portfolio exposure to gold, which is non-correlated to more common investments in stocks and bonds, then you need to perform a Gold IRA Rollover with a reputable gold company, using a self-directed IRA.

As we stated earlier, you can only do this with old 401k plans, not sponsored plans with your current employer. But if you do have an old 401k, rolling it over to a gold IRA can make a lot of sense.

The world has never been more uncertain and chaotic.  

Lockdowns, pandemics, endless government money printing, food and other supply chain shortages, unchecked inflation, and the threat of nuclear war, are roiling the markets. 

This would sound unthinkable only 5 or 10 years ago, but now it’s reality.

Because of this, more and more investors are looking for the stability that gold can offer to protect their retirement nest egg. Gold has a 5,000-year track record of maintaining its value. It’s like gold has been “rediscovered” by nervous investors.

What is old is new again and people concerned about their retirement are eager for the safe haven that physical gold, silver, and other precious metals provide.

If you don’t have some physical gold and silver in your portfolio, don’t wait. If you do, your dollars are going to buy you a lot less of the yellow metal than you hoped for, if you can even get it.

IRS Guidelines to Follow for Gold IRAs

The IRS is very strict about how gold IRAs are set up and what is allowed in them. You’ll want to follow these rules so you can steer clear of any penalties and taxes from the government.

  • to be IRA eligible the gold must be a minimum purity of .995 or 99.5%
  • Your gold and other precious metals must be held by a qualified custodian (don’t fall for the home storage gold IRA mistake)
  • You must not exceed your maximum annual IRA contribution limits
  • You cannot place gold you already own into your gold IRA, you have to have new gold purchases added to your IRA.

Most of these rules are covered in Section 408(m)(3) of the Internal Revenue Code, which can be useful to read (although it's pretty boring reading), but we recommend you reach out to a company that specializes in Gold IRA rollovers so they can walk you through it step by step.

Important IRS Penalties to Avoid for IRA accounts

  • Exceeding your annual contribution limits will get you hit with a 6% penalty
  • IRAs are not allowed to hold collectibles. This means that you are not allowed to have numismatic gold coins in a gold IRA. A numismatic gold coin is a coin that’s value exceeds the face value of the coin, this is what makes it a collectible.
  • Receiving any distributions before becoming 59 ½ years old will land you a 10% penalty PLUS it will be considered part of your regular income and the tax rate will be added to the penalty as well.

The IRS does not mess around and the penalties for errors for these retirement accounts are immense. 

Again, it’s safest to talk to a reputable gold company that specializes in gold IRA rollovers so they can walk you through it step by step and protect you from IRS penalties.

How to Convert a 401k to a Gold IRA Rollover

The penalties can certainly sound daunting but the overall process is not that complex, although you do want to make sure you comply with regulations (https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions).

  • Review your portfolio, your investment goals, and options.  Learn about precious metals and gold IRA to be sure that precious metals are right for you, and that you and your investment accounts are eligible for rolling over.
  • Find a top-quality gold IRA specialist to walk you through all the forms and paperwork needed to open your account
  • Find a top-quality gold IRA specialist to walk you through all the forms and paperwork needed to open your account
  • Collaborate with your precious metals investment guide to assist you in transferring a percentage of your retirement savings account into a self-directed IRA in line with IRS regulations.
  • Choose which precious metals you want to place into your account. Again, a precious metals expert is great at helping you make smart choices.
  • Once your metals are purchased, send them to a storage facility of your choosing.

IRS Annual Deposit Limits on IRAs

The Internal Revenue Service has contribution limits that apply to a gold IRA, the same as apply to a traditional IRA. You need to be aware of these limits to avoid incurring penalties.  

The following guidelines apply to gold IRAs as well as traditional ones:

  • Max annual IRA deposit is $6,000 if you are under 50 years old. If you are over 50 you max out at $7,000 annually.
  • Unfortunately, these $6,000/$7,000 annual limits apply across all your IRAs. So if you have a gold IRA, and one or more traditional IRAs, the total you're allowed to contribute is still limited to $6,000/$7,000 annually.
  • These annual contribution limits are per person, not per account. You can contribute $5,000 annually to a gold IRA and $1,000 annually to a traditional IRA or vice versa. The $6,000/$7,000 maximum applies to the investor, not the plan.
  • Investors that are 50 years old and up, are allowed to make additional “catch up” deposits to their 401k, but this number has been changing recently and it’s best to speak with an IRA specialist to stay current with IRS regulations.

What Are the Best Companies to Assist Me in Rolling My 401K into a Gold IRA?

As we have presented in this article, moving a 401k into an IRA that allows you to hold physical precious metals is a somewhat complicated process. This is not meant to scare you, but to reiterate that because this is your retirement savings, this is not a decision to be taken lightly.

It is critical that you work with a trustworthy company that has the expertise and specializes in these types of transfers because they can do it correctly and avoid IRS penalties and they provide the best customer service to investors.

Our Most Trusted Recommendation

Goldco

  • Author Verified
  • IRA metals: Gold, silver, 
  • Minimum IRA investment: $25,000 
  • Annual fees: $80 top $230

Our top recommendation is Goldco. Not only do they have a long and spotless track record of helping investors roll over old 401ks and IRAs into gold IRAs, but they also have a non-pushy sales approach. 

If you want to perform a 401k rollover, reach out to Goldco. They will help educate you and work with you every step of the way. We’ve referred hundreds of readers to Goldco and have gotten excellent feedback on our recommendations.

PROS

  • experts in 401k to gold IRA rollovers having successfully helped thousands of investors
  • low annual fees
  • A+ Better Business Bureau, AAA rating from Business Consumer Alliance
  • 100% FREE IRA Rollover

CONS

  • Minimum investment of $25,000
  • No palladium or platinum options. (Only silver and gold, bullion, coins, and bars)

Best Investor Education

Augusta Precious Metals

  • Author Verified
  • IRA metals: Gold, silver, platinum and palladium
  • Minimum IRA investment: $50,000 
  • Annual fees: $80 top $230

Augusta Precious Metals is another top recommendation because of their high-quality service and for looking out for their client's best interests. Their lifetime customer support, far beyond simply creating your account, is popular with clients.

Augusta Precious Metals has streamlined the rollover process making the paperwork as easy as possible for new customers. Augusta does a good job of educating clients on how precious metals can protect their retirement savings and is a key reason why they made our recommendation list.

PROS

  • Non-commissioned sales team
  • Unique, free one-on-one educational web conference designed by Augusta’s on-staff, Harvard-trained economist.
  • Rated A+ with the BBB and AAA with the BCA.

CONS

  • Minimum investment of $50,000
  • They do not offer small lots of either coins or bars

Ideal for Smaller Investors

Birch Gold Group

  • Author Verified
  • IRA metals: Gold, silver, platinum and palladium
  • Minimum IRA investment: $10,000 
  • Annual fees: $80 top $230

Birch Gold Group was founded in 2003 and is one of the larger companies in the gold and precious metals industry boasting several celebrity endorsements.

While they can roll over an eligible tax-deferred retirement account into a Precious Metals IRA -- with zero tax implications or penalties, they also offer direct sales to clients outside of IRAs.

Birch Gold Group is a good company with a long track record and their $10,000 minimum investment is the lowest of the companies that made our list, making Birch an ideal choice for smaller investors.

PROS

  • $10,000 minimum investment for both IRAs and cash purchases for physical delivery
  • Highly rated
  • In business for almost two decades

CONS

  • Only residents of the United States are eligible for Birch Gold's services
  • Not the best a client education