September 27, 2024

What is a Gold IRA Rollover

By Stella Magay
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Find out how you can use rollovers to fund your new Gold IRA through this article.

Many first-time Gold IRA investors choose to roll over their funds from an existing retirement account instead of making new cash deposits.

In this article, learn exactly what a rollover is and why many investors prefer this method to fund their Gold IRA accounts.

What Is a Gold IRA Rollover?

A Gold IRA rollover is when you transfer funds from your existing retirement account to a new self-directed IRA to invest in gold.

This could be from your current 401(k), Traditional IRA, Roth IRA, or other employer-sponsored retirement accounts.

Since you can't invest in gold in the same retirement account where you hold securities such as stocks and bonds, you must open a special self-directed Gold IRA account. Then you can transfer a portion (or even all) of your funds to the new Gold IRA and buy physical gold coins.

Although it's called a Gold IRA, you can also buy other precious metals, such as silver, palladium, and platinum bars and coins.

What retirement accounts can I rollover to a Gold IRA?
Gold IRA companies will usually let you rollover funds from a Traditional IRA, Roth IRA, 401(k), 403(b), 457, TSP, or other employer-sponsored retirement plans.

Why Rollover?

If done right, a rollover allows you to transfer funds to your new Gold IRA tax-free.

You won't pay taxes until you withdraw from your new plan. This way, your retirement account continues to grow tax-deferred.

Otherwise, if you transfer funds from one account to another without rolling it over, it might be taxable (except for valid early withdrawal exceptions).[1]

On the other hand, if you directly buy gold outside of an IRA, you won't get any tax benefits. So many investors nearing retirement choose to rollover to a Gold IRA to maintain the tax advantages.

Direct vs Indirect Rollover

There are two major ways to rollover funds from your existing retirement account to your new self-directed IRA for gold.[2]

  • Direct Rollover
    Your funds from your 401k (or other existing retirement plan) is transferred directly to your Gold IRA without withdrawing them.

    This is the most straightforward method to rollover and incurs no tax penalties.

    There is also a trustee-to-trustee transfer if you already have a Gold IRA account and you want to change to a different provider. Similar to a direct rollover, your transfer won't have taxes withheld.

  • Indirect Rollover (60-Day Rollover)
    This is when the funds from your 401k or retirement plan is paid to you. Then you must reinvest the funds into your Gold IRA within 60 days to avoid penalties.

    If you roll over funds from an employer-sponsored plan, 20% will be withheld for taxes by your plan admin. To defer taxes, you need to reinvest the full amount in your new Gold IRA, so you'll have to cover that 20% out of pocket for now.

    You'll get the 20% back from the IRS when you file your income tax return later.[3]

There is a one-rollover-per-year rule for IRA-to-IRA transactions, but you can avoid this by using the direct rollover method.

How can I transfer my 401k to gold without penalty? By properly executing either a direct rollover or an indirect rollover, you can avoid penalties when transferring your 401(k) funds to a Gold IRA.

Are Gold IRA Rollovers Taxed?

Here's how taxes and penalties work for gold IRA rollovers:

  • There's no tax penalty if you do a direct rollover from your 401(k) or retirement plan to your gold IRA custodian. Because you didn't withdraw the funds, it won't trigger a taxable event.

  • In indirect rollovers, if you don't reinvest the entire rollover distribution within 60 days, the amount withdrawn will be taxed like a regular distribution. And if you're under 59½, you'll also face an additional 10% penalty.[4]

  • Taxes will apply if you roll over from a 401k (or other non-Roth IRA) to a Gold Roth IRA, since those 2 accounts are taxed differently. You'll need to pay income tax on the amount in the year you do the rollover.[5] But after that, qualified withdrawals from your gold Roth IRA are tax-free.

Here are some other IRS rules to be aware of for IRAs:

  • There is no maximum if you roll over funds from a 401k.
  • Additional contributions will need to follow the IRS annual limits of $7,000 per year (or $8,000 for 50 or older) for 2024.[6]
  • Withdrawing early before age 59-1/2 has a 10% penalty.
  • You must start taking required minimum distributions (RMDs) at age 72 (73 if you reach age 72 after Dec. 31, 2022).[7]

Steps to Do a Gold IRA Rollover

If you want to use funds from your existing retirement account to fund your new Gold IRA, here are the steps you need to follow:

  1. Create an account with a Gold IRA provider
    Find a reliable Gold IRA provider to assist you with the entire rollover process.

  2. Request a direct rollover
    Request a direct rollover of your retirement amount from your current administrator to your new custodian. In some cases, the plan administrator issues a check that is payable to your new custodian.

    The Gold IRA company will help you fill out the paperwork to initiate the rollover. They'll even get in touch with your current custodian.

    If you plan to do an indirect rollover, make sure that you deposit the funds into your new Gold IRA within 60 days to avoid penalties.

    Be careful of fraudulent Gold IRA companies. If they are aggressive with their sales, it could be a sign of a scam. This is especially worrisome since direct rollover means your current plan administrator directly transacts with your new Gold IRA custodian, so you're not involved in this process.

    Learn more about how precious metals can be used for fraud here.

  3. Buy gold
    Once the funds have been transferred to your Gold IRA account, you can now buy gold. Your Gold IRA provider will have a list of IRA-approved gold coins and bars to choose from.

    Your gold will be sent to an IRS-approved depository for safe storage.

  4. Hold and wait for distribution
    You cannot withdraw your funds until age 59½ without penalty (unless it's a valid exception).[8]

How much should I invest in a gold IRA? The recommended investment amount in gold is only a small portion of your overall portfolio, depending on your financial goals and risk profile. If a salesperson is urging you to invest all of your assets in gold, be wary and reach out to the CFTC to verify its authenticity.

Gold IRA Pros and Cons

Pros:

  • Tax advantages
  • Gold has historically been a good store of value
  • Secure storage in an IRS-approved depository
  • Portfolio diversification

Cons:

  • High fees
  • Low liquidity
  • May be easily subjected to fraud
  • Withdrawal restrictions; 10% early withdrawal penalty
  • No dividends or income generation

Best Gold IRA Rollover Companies

Here are some reputable Gold IRA companies that can help you with rolling over your funds. To learn more, check out their free Gold IRA kits. Make sure to research properly before committing.

  • Goldco
    Goldco is one of the well-known Gold IRA providers in the US. This A+ BBB-rated company offers a Highest Buyback Guarantee.

    However, its preferred custodian fees may be higher than its competitors. The minimum investment is $25,000.

  • Augusta Precious Metals
    Another A+ BBB-accredited company, Augusta Precious Metals offers account lifetime support and emphasizes education.

    There have been no negative complaints on its BBB page for years. However, its minimum investment starts at $50,000. It also doesn't show gold pricing on its website.

  • American Hartford Gold
    This company is one of the highest-rated, low-cost Gold IRA providers. Its minimum investment is just $10,000 and it has lower fees too.

    The pricing may not be as transparent, but the fees are waived in the first year.

  • Birch Gold Group
    This is another Gold IRA provider with just $10,000 as a minimum investment. They have a dedicated specialist who will help you with the entire process.

    It also has slightly lower fees than others. However, its pricing may not be that transparent and there is no buyback guarantee.

Gold IRA FAQs

How much do you need to start a gold IRA?
Most gold IRA companies require a minimum investment of $10,000 to $50,000. You'll also pay a one-time set-up fee, which averages $100. In addition, the account's annual fee and storage fee usually range from $200 to $300.

What is the best option to rollover 401k?
The easiest and quickest option is to do a direct rollover of your 401(k) to an IRA. This is when funds are directly transferred to the IRA account without withdrawing them, so there are no IRS tax penalties.

What is IRS-approved gold?
To be eligible for an IRA, gold bullion must have a pureness of 99.5% and silver bullion and coins must have a pureness of 99.9%.

Some IRA-approved gold bullion and coins include:
  • American Gold Eagle
  • American Gold Buffalo
  • Canadian Gold Maple Leaf
  • Canadian Gold Eagle
  • Canadian Gold Polar Bear & Cub
  • Australian Gold Striped Marlin
  • Australian Gold Kangaroo
  • Austrian Gold Philharmonic
  • Chinese Gold Panda
  • American Silver Eagles
  • America the Beautiful
  • Canadian Silver Maple Leaf

Can you store IRA gold at home?
The IRS does not let you keep IRA gold in your house. If you invest in gold through an IRA, your gold must be stored in a secure depository approved by the IRS.

If you request to have your gold sent to your home, that's considered a withdrawal. And there will be a penalty if you're under age 59-1/2.

IRS-approved depositories:
Gold IRA companies typically use one or more of these depositories:

BOTTOM LINE

Rolling over your money from your existing 401k retirement plan or IRA is a great way to fund your new Gold IRA account.

However, there are certain rules that you need to follow so that the entire process will be tax-free. Make sure to research well before transferring your funds to a new Gold IRA provider.

References

  1. ^ IRS. Retirement topics: Exceptions to tax on early distributions, Retrieved 07/08/2024
  2. ^ IRS. Rollovers of retirement plan and IRA distributions, Retrieved 07/08/2024
  3. ^ IRS. Topic no. 413, Rollovers from retirement plans, Retrieved 08/30/2024
  4. ^ IRS. Publication 590-A (2023), Retrieved 08/30/2024
  5. ^ Internal Revenue Service. Rollover to a Roth IRA or a Designated Roth Account, Retrived 4/7/2023.
  6. ^ Internal Revenue Service. Retirement Topics - IRA Contribution Limits, Retrieved 8/25/2024.
  7. ^ IRS. Retirement topics - Required Minimum Distributions (RMDs), Retrieved 09/06/2024
  8. ^ IRS. Retirement topics - Exceptions to tax on early distributions, Retrieved 08/30/2024

Write to Stella Magay at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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