I have a gold IRA as my retirement account. Sounds fancy when you say it, right? However, before you decide to roll over your 401(k) into a gold IRA, there are numerous things you need to take into account. Our guide will tell you what exactly a gold IRA is and how you can have one too!
What do you mean by a gold IRA?
This form of IRA was made legal in 1997. Gold IRAs are retirement accounts with a focus on long-term gains. Even though these accounts are called gold IRAs, do not be fooled by the name. You can invest in other precious metals such as silver, platinum, and palladium as part of these accounts as well. You should note that the IRS has certain standards regarding what can and cannot be collected in these accounts.
So you cannot just buy anything made from these metals; you must abide by the requirements set by the IRS regarding purity and fineness. These types of IRAs are also self-directed, which means that you get to choose a lot of the investments yourself and diversify your portfolio. The top rated gold ira companies can help you choose safe investments and advise you on the best time to sell.
How to roll over from a 401(k) to a gold IRA?
Many people believe that gold is a safer investment compared to shares or other paper money options. This is because paper money is considered a volatile investment, whereas gold has maintained its intrinsic value for centuries. This is why it is perfectly normal to convert the traditional 401(k) you have into a gold IRA. The process can be done in two ways.
The first way to roll over is to use the direct rollover method. You will need to find an agent to hold the gold for you beforehand since it is illegal to own gold directly in an IRA account. Then contact the plan manager at your employer’s place since a 401(k) is an employer-sponsored retirement account. Tell the plan manager that you want to roll over into a gold IRA, and he can electronically transfer the funds. This is an easier and less risky method for managing the process.
The second way is to opt for the indirect rollover method. In this method, you withdraw the money from the 401(k) account yourself. You have 60 days within which you must transfer the money into the IRA from that moment on. If you cannot do so, you must pay the taxes on it since it is then considered a taxable withdrawal. A 10% penalty can accompany this tax if you are not above the age of 59.5 years since all withdrawals before this age are considered early withdrawals.
Who should roll over to a gold IRA?
In all honesty, there is no right or wrong answer to this. Whether or not you should opt for a gold IRA depends on your personal preferences. Gold is often known to behave oppositely to the stock market. So if your portfolio consists of stocks, diversifying it by adding in gold investments can help balance out some of those risks.
We hope you find our guide on converting the traditional 401(k) into a gold IRA. Even though making this choice is a matter of personal preference, we recommend giving it some serious thought due to its numerous benefits.