If you’re close to retirement and want to pull money from your 401k into something more stable, a gold IRA is an excellent choice to consider. It allows you to diversify your portfolio as well as make you eligible for special tax benefits. However, the rules for a tax-free rollover are challenging and the penalties can be quite severe should an error occur. Planning is key.
What Is A Gold IRA?
A gold IRA is one that is invested in gold of the proper purity. These accounts are quite stable and offer a good hedge against inflation and deflation. You can get a gold IRA in a traditional format, which offers a tax break when set up with your current wages, or a Roth IRA, which is funded with post-tax dollars. With the right structure in place, you can also rollover your current retirement savings into a gold IRA.
Steps to Handle A 401k to Gold Rollover
Your 401k contributions are taken out of your check before income taxes are calculated, so rolling your 401k into a Gold IRA means that you will either need to pay the taxes on the 401k income prior to the rollover or roll the monies to a traditional IRA and pay income taxes as you withdraw money.
It is critically important that you talk to your 401k administrator and get them the information on your gold IRA rollover plans. For example, the check from the 401k accounts will need to be directed to the Gold IRA account, not to you, or you may be penalized or taxed on these dollars. You do not want this money to come into your hands; it needs to go right into your new IRA.
Additionally, you will need to make sure that your gold IRA is properly investing in metals of the required purity. One of the big challenges in retirement savings at this point in time is that the rules are in flux. For example, according to experts at Goldco, “..gold you purchase must be 99.5% pure and held by a custodian in a secure facility.” Should the purity requirements change, you may need to sell or be able to expand your holdings.
Is It Worth Doing A Gold IRA Rollover?
Current world conditions are worrying. With the state of the pandemic and how it has impacted the economy, it may be affecting how you feel about investing your money. Stock investments are fluctuating rather wildly depending on where you have your dollars, so if you have the recovery time, you may be better off riding things out. However, if your retirement is close at hand, setting up a gold rollover can protect your future income from questionable fluctuations that will either impact the quality of your retirement or the number of years you have to work.
There are many things in life that you can learn to do yourself. However, retirement investment vehicles are under a great deal of scrutiny and pressure, and the industry as a whole is constantly changing. Gold can be a great vehicle for those close to retirement, but poor handling of the transfer can be extremely costly. Talk to an IRA professional about the best way to structure your rollover and discuss your plans with your 401k administrator.