IRA Rollover to Gold – Your Best Savings Option
At some point in their life, everyone reaches a point where planning for retirement becomes an absolute priority. Particularly for those who have changed employers more than once, and have several different retirement accounts, you will need to make a decision concerning IRA rollovers. In addition, you need to take a close look at your assets and consider whether it would be a benefit you to roll them over into gold.
How Rollovers Work
IRA rollovers are tax-free distributions made from retirement accounts and invested directly into an IRA. There are several types of retirement accounts that you can roll over into an IRA, including another IRA, or an employer’s qualified plan such as a 401k. You can not roll over a Roth IRA into a traditional IRA however because the tax status is different (pre vs post-tax paid).
You can begin the process of rolling over by downloading a request form from the online account you are rolling into, or obtaining one from your account custodian and selecting an account to receive your rollover distribution. The process must be completed in 60 days in order to avoid any kind of a penalty. The distribution can take place in two days, but is often longer, as a direct rollover with funds being paid directly to the custodian of the new account, or by having the check paid to yourself and you forwarding it on.
You should always choose a direct rollover if that is an option for you. This is just a simpler process and avoids you having the manage the check, which may be subject to a 20% withholding tax, which the IRS imposes to ensure that you comply with the rollover rules, if not reverted within 60 days.
How 401k Rollovers are Different
Rolling over from one IRA to another IRA is fairly simple and can be done at any time, but 401k rollovers can be slightly different. Typically if you are under 59 ½, you can not take a distribution from a 401k unless you qualify under one of the exemptions, such as financial hardship, or if you are leaving your employment. If you are switching jobs, you usually do have the option of leaving your 401k where it is until you retire, but this is not advisable for several reasons. Your best option is to roll it over, either into your new employer’s 401k or into an IRA, with the latter option into an IRA being the best option. Unless your new employer has a fantastic 401k plan, you will probably be better off rolling over into an IRA. In addition, with a 401k, you only have the investment options chosen by your employer or plan administrator, and these may not be the most competitive in price or performance. With any IRA on the market, you have a huge range of investment options that would dwarf those available with an employer 401k.
The steps for rolling over a 401k rollover are very similar to those for IRA rollovers. You download an order form, or make a request via your custodian, and choose an account type if you don’t already have one in place. The custodian of the receiving account will usually communicate with the custodian of your existing account and arrange the transfer on your behalf.
Why Rollover Your IRA Into Gold?
IRA and 401k rollovers provide a good opportunity to take a look at your current asset structure and balance and decide whether the funds in your portfolio are likely to grow their value and meet your retirement needs. The majority of traditional IRAs are funded primarily with “paper” assets including stocks, mutual funds and bonds, or cash. However, the value of paper assets can be seriously eroded in time due to market instability, inflation, and more, while cash IRAs are affected by the constantly falling value of the US dollar.
For these reasons and more an increasing number of investors are choosing to roll over their funds to a gold IRA as opposed to a standard IRA. It is possible to use a traditional IRA to invest in gold mutual funds, gold ETFs (exchange traded funds) or gold mining stocks, but these do not invest in physical gold and are tied to the business they represent. If you want to hold physical gold in your account, you must open a self-directed Gold IRA fund
The advantages have become increasingly evident over the past decade, as the economic turbulence resulting from the recent financial disruptions shows little sign of slowing down. It appears likely that gold paper assets will be subject to the same issues and challenges as other paper assets. Gold ETFs are very popular, as they track the performance of gold, but because you don’t actually hold the gold, you end up with nothing if the fund goes bankrupt.
Conversely, gold is barely affected by inflation. People purchase gold when currencies fall, and its value increases as stock values decrease. The global demand for gold continues to be strong, while production difficulties and overall supply constraints will lead to an excess of demand over supply for the foreseeable future. It would seem sensible to have physical gold in a retirement account, if you want to ensure your account will hold its value and stand up the financial challenges we are seeing.
Rolling Over Into a Gold IRA
If rolling over your 401k or an existing IRA to a gold IRA, you don’t have such a wide choice of custodians to assist. Your custodian needs to be a specially qualified gold investment company, which will manage all aspects of your gold and its transfer. The custodian will store your gold in an IRS-approved depository, as you are not allowed to take possession of it yourself until you qualify for distribution.
After selecting the custodian that is right for you and submitting the appropriate paperwork, the next step is often to choose the dealer from whom you will purchase your bullion or coins. You can decide what to buy, but the IRS imposes some restrictions. Gold bullion bars have to be pure 24-karat, and coins must be of at least 99.5% purity, which excludes some well-known coins like the South African Krugerrand. When you have purchased your gold, the custodian will transfer it to the storage facility.
IRA and 401k rollovers into gold make a great deal of sense for several reasons. Holding physical gold in your account hedges it against the risks of inflation and economic instability, as no other investment can do. Gold tends to hold its value much better than other assets over time, and is a huge hedge against inflation, economic interruptions, global risks, and more.