Inflation, currency weakening, and other factors can seriously impact the wealth of investors, which means it’s essential to devise a protection strategy.
One of the most common recommendations is to convert a portion of wealth to some kind of asset that does not have a symmetrical price relationship with the position of the dollar.
For example, you could consider a gold IRA transfer. You could even use another retirement account such as your 401k for the same purpose.
You may have thought your only option was to convert cash to gold. The traditional way to do so would be to purchase physical gold pieces such as gold bullion. However, you can partially convert a 401k to gold and silver instead.
Below you’ll learn more about precious metals and how you can capitalize on your retirement accounts.
The Shifting in Gold Prices
Why would you partially convert a 401k to physical gold or some kind of gold investment in the first place? As is the case with other precious metals, the price shifts can help to guide your decision.
Gold is particularly interesting as it tends to trend upwards in value as the dollar weakens.
What Is a Gold IRA Rollover?
Before you think about how to convert an IRA to gold, perhaps learning what a gold IRA is would be a good idea.
Simply put, a gold IRA rollover speaks to using a portion of a current retirement account or investment portfolio for physical precious metals such as gold coins or gold bullion. Your 401k is an example of an investment portfolio component.
When you partially transfer an IRA to gold, you take the funds from the existing IRA. At a maximum, the funds can be kept for a 60-day minimum after which they are transferred to your new gold IRA account. A new gold IRA custodian or administrator would come into play here.
Why Open Gold IRAs?
Why would you convert a Roth IRA to gold? Why would you do so with a traditional IRA either? Well, here are some of the benefits to think about:
A gold IRA has the same kind of tax benefits that your traditional IRA would
You get a measure of inflation protection
With a diverse portfolio consisting of a gold IRA, you manage your risk profile well
You don’t have to worry about government seizure with these kinds of gold investments
Selecting a Gold IRA Company
A gold IRA is different from a traditional or Roth IRA in several ways. For example, tangible precious metals such as gold and silver are held within it. A standard IRA is rooted in stocks and bonds instead.
Therefore, you need to evaluate gold IRA companies before you make a decision. Some of the reputable gold IRA company options to consider include:
It’s a good idea to evaluate the merits of any of these companies before finally deciding to settle on one. For example, you may see a promotion along the lines of “open a free gold ira account and get a bonus.”
A good gold IRA provider will also assist you along the way with elements such as hiring your gold IRA custodian, setting up the account, choosing your precious metals, and even choosing where they will be stored
Self-directed Custodian
Following your evaluation of the best rollover IRA companies, your custodian needs to be thought out. A gold IRA account custodian helps you to stay on top of transactions and it’s also essential in reporting to both you and the IRS.
Note that this is a company and not a person that comes into play when you move an IRA. After you convert a portion of your retirement account to gold or silver, the custodian will bear the responsibility of conducting the purchases and sales of the precious metals you are interested in.
Transferring IRA accounts is essential because financial firms often don’t have offerings that span physical assets such as gold. So you would need to convert your 401k to gold, for example, using this process.
Opening the Gold IRA Account
Gold IRA companies can only start to do what they’re supposed to after you’ve opened your account. The provider will work with you to identify the precious metals you’re interested in after which your gold IRA fidelity strategy gets underway.
Your custodian will work with the company to transfer the physical precious metals to a secure depository. These facilities specialize in holding such items, which is what makes them appropriate for the purpose.
A gold IRA policy can start with just about any amount of money, though this heavily depends on the provider that is chosen. Nevertheless, you will be made abreast of all the gold IRA rollover rules you need to know upon initiating the process.
Carrying out the IRA Rollover to Gold
This is where you execute the true “rollover” step by moving funds from your standard retirement accounts such as your self-directed IRA or 401k. You have two walks to handle this precious metals IRA rollover.
With a direct rollover, you send the money straight from your existing retirement account via your trustee to the new IRA custodian. Providers of gold IRAs will help you throughout this process as you will need to prepare a few things to pull it off successfully.
An indirect gold and silver IRA rollover is a little more on the complicated side. That’s because the assets from existing retirement accounts are delivered directly to you as the account owner.
When it’s done this way, the expectation is that the responsibility of transferring IRA funds then lies with you. What makes it more difficult is the fact that you must fill out the appropriate paperwork to confirm that you did indeed do this as expected.
Therefore, many investors find the direct IRA account transfer more appealing. Even experts recommend it for being less complicated and having less documentation involved.
IRS-approved Precious Metals
When you convert an IRA to physical gold, you can use just about any other retirement account to do so. Of course, you can also use elements of your investment portfolio as you would when rollover a 401k to a gold IRA, for example.
Other examples are SEP IRAs, SIMPLE IRAs, Roth IRAs, and federal Thrift Savings Plans. Note that if you want to keep your tax benefits, you must set up the account appropriately.
For example, if you convert a Roth IRA to gold, you want to maintain access to the tax benefits that come with having a Roth IRA. Gold IRAs can be set up as Roth IRAs, and this is the path that you would want to take in completing the process.
Buy Gold
After you’ve completed your gold or silver IRA rollover, the provider will then assist you in selecting and purchasing your precious metals. After all, you’re working with an expert in the field, and this allows you to pull on that industry knowledge to make optimal decisions.
Some of these companies such as GoldCo are desirable because of what their time in the industry means. Seeing “open a gold IRA online and get a bonus” is great but having a provider that has established relationships with custodians is arguably an even better advantage.
You get the final say on which items to buy as a part of your precious metals IRA. However, remember that the IRS only accepts metals that abide by the rules. For example, gold must be 99.5% pure, while silver bars and coins must bear a purity amount of 99.9%.
Differentiating Between an IRA Gold Transfer and Gold IRA Rollovers
To transfer an IRA account and to do a gold IRA rollover are not necessarily the same thing, though it may appear as if the terms are being used interchangeably.
The transfer gives access to a secure technique that comes with some level of risk management built into the equation. Essentially, if you transfer a 401k to a gold IRA, for example, you are simply transferring the funds from one custodian to the next.
A gold IRA rollover on the other hand is not just a movement between third parties, which introduces greater potential for human error to be a problem. As you can imagine then, people often prefer to simply do a transfer of a gold IRA than a whole rollover.
Why Do a Gold 401k Rollover?
You also find that investors choose to convert a 40k to a gold IRA. Your 401k is an account that’s retirement based. It essentially invests your money into the stock market, which is meant to help it appreciate the same way the stock market would.
of course, it’s susceptible to decline if the stock market should begin to underperform for any reason. A gold-backed 401k strategy is often sought after simply because of the way it can help investors to increase the value of their investments.
In knowing that the stock market can perform negatively, which can have detrimental consequences to the 401k, the option of switching with a gold IRA rollover then begins to look very attractive.
Rollover Process Factors to Consider
Strategizing is very important as you contemplate the move from a self-directed IRA to a gold IRA using a gold IRA rollover. Note that you must weigh your financial goals heavily as you proceed to make a decision.
For example, it may lead to questions about how much gold you can transfer and how much of your portfolio you should consist of precious metals instead of regular investment vehicles.
A good way to go about this is to consider what your risk profile looks like. For example, if you’re not too far from retirement and you potentially want to minimize the amount of risk you bear, perhaps you can consider allocating 20% to 30% of your wealth to precious metals.
When Is a Good Time to Start a Gold IRA Rollover?
After learning how to transfer an IRA, you may now be thinking if it’s a good time for you to get started on your rollover. Before you start, ask yourself all the relevant questions and ensure that you collect the information you will need to answer them effectively. For example:
What is my risk profile?
Do I understand what converting an IRA to gold means for my tax benefits?
Do I know how to switch Roth IRA companies if needed?
What is the best gold IRA rollover strategy for me?
Remember to lean on the expertise of the professionals in the equation. Even if you’ve already started and have some doubts, custodians and your Gold IRA provider can help you. How much gold can you transfer? What are the best gold funds to go after?
Feel free to ask the relevant questions to your providers.
Final Remarks
At this point, you now understand quite a bit about converting an IRA to gold using the transfer or rollover method. It’s an essential tool to help you diversify your portfolio.
Remember to ensure that you allow the expertise of the provider and custodian to guide you on your journey.
Frequently Asked Questions (FAQ)
What Should I Ensure I Know before Jumping into the Process?
Here are a couple of questions to ask:
Do I know how to convert cash to gold?
Do I know how to convert a 401k to gold?
Can I say I know what is a gold IRA rollover?
How much should I move? How much can I move?
How Can I Transfer My 401k to Gold Without Penalty?
Using a direct rollover is the best way to execute this without any penalty concerns.
How Long Does the Gold IRA Rollover Process Go on for?
Typically, the process will run for about 60 days. For a 401k, for example, if you wait beyond that, the funds will be subject to taxes.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.