How to Move 401(k) to Gold Without Penalty

Your 401(k) is an amazing investment vehicle to ensure you’re saving enough money to outlast you in your twilight years. Your 401(k) likely offers you the option of investing in index funds, stocks, bonds, and other asset classes that are tied to the U.S. economy. 

If you want to diversify your holdings outside of paper money and into precious metals, you’ll need to rollover your 401(k) to a gold IRA. This article will show you exactly how to convert your 401(k) to gold, and how to do so without any IRS penalties. Let’s get started!

401(k) to Gold IRA Rollover

It’s actually very common to leave a job and get stuck with an old 401(k). In this situation, people typically roll over their old 401(k) into a traditional or Roth IRA. These IRA plans are again great if you want the standard investment options of stocks, mutual funds, and bonds.

If you’re a gold bug like me and want to buy physical gold and silver with your IRA, it’ll take jumping through a few more hoops. There are a few moving parts involved. 

The good news? There are companies that specialize almost exclusively in these gold IRAs. They can walk you through the whole process.In the end, it’s worth it when you buy your gold and silver without triggering tax penalties on your retirement.

Finding a Gold IRA Company

Your first step in performing a 401(k) to gold IRA rollover is to find a gold IRA specialist. You’ve likely seen ads for companies like Goldco Precious Metals or Birch Gold Group. We’ve reviewed 25+ gold IRA companies on this site before coming up with our short list of recommended firms.

Review a few gold IRA companies, and decide who to work with. Research online reviews, ratings, and find customer reviews on sites like the BBB, or TrustLink. Once you’ve found a company to facilitate your precious metals IRA, you can start the gold IRA rollover process.

Related: Request Your Gold IRA Rollover Guide

Open a Self-Directed IRA

Your 401(k) just doesn’t allow investments like precious metals. You also cannot hold 401(k) or IRA funds in your personal possession. In order to buy more creative assets not usually found in a 401(k), you’ll need to open a self-directed IRA (SDIRA). 

With a SDIRA, you can invest retirement money into assets like precious metals, cryptocurrencies, real estate, and even private companies! Self-directed IRAs open the door to many unique investments that you otherwise wouldn’t have the ability to buy on a tax-deferred basis.

We often refer to these investments as “gold IRAs,” but understand this is really just the marketing terminology we’re using to describe a self-directed IRA holding precious metals.

Your chosen gold IRA company most likely has a self-directed IRA custodian that they recommend to their customers. This will be your new gold IRA custodian. A popular self-directed IRA custodian for example, is Equity Trust. Many of the big gold IRA companies use this firm, so we’ll use them to illustrate the gold IRA rollover process. 

Your gold company will not only send you the forms to fill out in order to open your new self-directed IRA, but they will be available to help you fill out the forms. They can answer questions, and usually get the new account open fairly quickly.

Gold IRA Rollover

Once you’ve established an account with your new custodian, you’ll have to move your 401(k) funds into the new account.  This can be done as a direct or indirect rollover. Your gold IRA specialist can work as a liaison between your old 401(k) custodian and your new gold IRA custodian.

They will figure out which option is best for your situation. In a direct rollover, you never touch your 401(k) funds. Your account savings are transferred directly from your old custodian to your new one. This option leaves little risk of penalty from the IRS as the money never leaves an IRA.

With an indirect IRA rollover, your old custodian will send you a check for the funds. You will then have 60 days to deposit these funds into your new self-directed IRA. If this takes longer than 60 days to reach your new custodian, the IRS treats it as a taxable withdrawal. If you’re under the age of 59.5, you’re also liable a 10% penalty on this withdrawal. If you go the indirect rollover route, just make sure to fund your new IRA within 60 days!

The good news is that your gold IRA company is very familiar with all of this as they setup new gold IRAs every day. You’ll have someone at your side to make sure everything is done in compliance with the IRS!

Related: How to Diversify Your IRA with Physical Gold and Silver

401(k) to Gold: Vault Storage 

At this point, you’ve opened a new self-directed IRA and funded it with retirement savings from an old 401(k). But before you can buy gold, you’ll also need a place to store it! The IRS does not allow you to hold retirement investments in your personal possession. 

Do not believe internet ads for “home storage gold IRAs.” It’s shaky ground and you will likely end up in hot water. One couple recently made headlines for triggering $300,000 in IRS penalties for their self-storage gold IRA. It’s not worth the risk. There are companies like Brinks Global Services that have IRS-approved vault storage depositories all over the world. Find a depository near you and set up an account.

Remember how your gold IRA company had a turnkey solution for your self-directed IRA custodian? Good news, they also have storage facilities that they work with daily and can get your new account set up quickly.

Move Your 401(k) into Physical Gold

Now that you have a funded self-directed IRA and found an IRS-approved vault storage facility for your precious metals, you can buy IRA-approved precious metals. The government doesn’t allow you to use your 401(k) to buy collectibles or insurance. Many coins for example, are considered collectibles. Make sure that you find gold bars and coins that meet the purity requirements for inclusion in your IRA.

The good news again is that your gold IRA company specializes in these gold IRA accounts and can help guide your selection of eligible bars and coins. IRAs usually stick with bullion bars and coins.

As an example, you can buy American Eagles, Canadian Maple Leafs, Gold Buffalos, Australian Gold Kangaroos,Gold Philharmonics, and Credit Suisse bars in their IRA.

While rare, numismatic, or collector coins are not allowed in an IRA, the government has made a special exception for the Proof American Eagles. Some investors like the idea of buying Proof American Eagle coins in an IRA as the coins appeal to both collectors and investors. 

Others argue that these coins come with high commissions and the spread on these coins are too high to turn a profit on your investment. You can discuss American Eagle Proof coins with your gold company and determine if they’re right for you.

Shipping and Storage of Your Gold IRA

After you’ve selected your precious metals, your gold IRA company will facilitate the shipment of your bars and coins to your vault storage. Unfortunately, you can not personally handle your investment or risk compromising the tax-deferred status of your metals. 

Most gold IRA companies fully insure your precious metals while in transport to your vault storage facility. Your metals should also remain insured while in storage. Some of the large gold IRA companies insure your metals with Lloyd’s of London, one of the largest insurance providers in the industry.

Should You Do a 401(k) to Gold IRA Rollover?

Most 401(k)s don’t offer true diversification as the bulk of your investments options are stock-heavy. Some investors like gold because the price of gold (and other precious metals) tend to move in the opposite direction as the stock market. 

Hedge fund manager Ray Dalio has been a big proponent of gold in his “all weather” fund, using precious metals as a hedge against inflation, a market correction, or other threats to the U.S. dollar. If you believe in precious metals as a long-term investment, a gold IRA might be right for you. 

Discuss with your financial advisor. Review your retirement goals, and decide if a gold IRA makes sense in your situation. If you’re worried about diversification, another pandemic, a stock market crash, or runaway inflation, then a 401(k) to gold IRA rollover might make sense. Research a few reputable gold IRA companies, request more information from their websites, and get ready to buy gold - tax and penalty free.