Gold IRA Rollover Guide: Moving to Precious Metals from A 401k

A gold IRA is an IRA (individual retirement arrangement) set up with a custodian that allows you to hold actual, physical gold bullion within your IRA account.

Various gold IRA companies and precious metals IRA companies offer plans or set up these rollover companies for people interested in holding gold bullion long term.

Understanding what a gold IRA is, its benefits, and what’s involved in a rollover will allow you to make the most out of this opportunity.

You’ll then use this to your advantage regarding your retirement.

What is a Gold IRA?

At their core, Gold IRAs are a subset of self-directed IRAs, so-called because there is typically no third-party money manager responsible for picking investments within your IRA.

Self-directed IRAs are also IRAs in which the custodians holding and reporting the investments on your behalf don’t limit you to Wall Street investment products and the like but allow you to invest your IRA assets in any investment permitted by law.

You can use a self-directed IRA to own:

• Gold
• Real Estate
• Private Equity
• Venture Capital
• Promissory Notes
• Closely-Held Corporations (But Not S-Corporations)
• Partnerships
• Joint Ventures
• Farms And Ranches
• Raw Land
• Practically Anything Else Of Value

The exceptions are collectibles, life insurance, and shares of S-corporations.

Why use a Gold IRA or Self-Directed IRA?

Most Wall Street investment companies won’t allow you to own physical gold or precious physical metals.

Traditional investment companies and broker-dealers don’t have the setup to store and track your physical gold and precious metals.

These companies typically limit you to paper assets of wealth, such as shares of stocks, bonds, mutual funds, annuity contracts, money markets, and CDs. But they aren’t set up to sell or track alternative asset types that exist in physical form, including gold and other precious metals.

You can set up a gold IRA with a custodian willing and able to hold physical gold assets on your behalf.

Note: The information in this gold IRA rollover guide also applies to all kinds of precious metals IRAs and self-directed IRAs.

A gold IRA can be any IRA, including a traditional or Roth IRA (explained below) or a SEP IRA.

In some cases, the IRA in question may be inherited.

In each of these cases, the same general rules apply to gold IRAs and other IRAs of that type.

For this article, I will use the term “IRA” to refer to all these account types collectively.

Benefits of a Gold IRA

A gold IRA enjoys all the same tax benefits as a traditional IRA:

• Growth is generally tax-deferred as long as it remains in the IRA.
• Contributions of new money to IRAs may be pre-tax if you meet specific income requirements. However, earn too much money to make a deductible contribution to a traditional IRA. You can still make nondeductible contributions up to the limit for the year (currently $6,500) and still benefit from tax-deferred growth. Here are the latest income limits for deducting IRA contributions.
• No income taxes are due on capital gains, interest, or dividend income as long as the assets remain in the account. Physical gold doesn’t pay interest or generate dividend income, of course. But you can buy and sell gold within your IRA account as much as possible without causing a capital gains tax liability.
• Substantial protection against creditors, depending on your state. Inherited IRAs receive somewhat less creditor protection than IRAs you and your spouse built yourselves. Again, state laws vary.

What is a Roth Gold IRA?

A Roth gold IRA is a Roth IRA account that allows you to own gold, silver, or other alternative asset classes.

If you use a Roth gold IRA, contributions are not tax deductible.

But as long as you leave the money within a Roth IRA for at least five years, your assets in the Roth will grow tax-free.

Likewise, income from a Roth IRA – including a Roth gold IRA- is tax-free, making the Roth a potent retirement planning tool.

Why?

Because income from a Roth IRA, or Roth Gold IRA, doesn’t count against you regarding taxes on Social Security retirement benefits.

This income also doesn’t push you into higher tax brackets nor count against you if you need to qualify for need-based programs like Medicaid.

Another advantage to Roth IRAs is that, unlike traditional IRAs and 401(k) accounts, and other tax-deferred investment vehicles, there are no RMDs (required minimum distributions) for the money you have accumulated within your Roth.

The government already taxed the money you contributed to it for the year.

You can let Roth accounts grow tax-free indefinitely until you leave them to your heirs.

There are also advantages to inheriting a Roth IRA or Roth Gold IRA rather than a traditional IRA or 401(k) account.

Since the passage of the SECURE Act, the benefits associated have been significantly curtailed.

What’s a Gold IRA Rollover?

A gold IRA rollover transfers assets from an existing IRA, 401(k), 403(b), or other eligible accounts into an IRA you intend to buy gold.

An IRA transfer aims to transform your account from a custodian that does not support self-directed retirement accounts to one that does.

Usually, when you pull money out of a traditional IRA, 401(k), or other tax-deferred accounts, you would have to pay income tax on the amount you withdraw.

You may also have to pay an additional 10% excise tax if you are under age 59 1/2, in most cases, unless certain ‘hardship’ conditions apply or you’re eligible for one of the exceptions to the 10% tax.

But if you do a gold IRA rollover transaction from one eligible account type to a traditional IRA, the transaction is generally tax-free.

You can continue to defer income and capital gains taxes if you complete the rollover and get the money into the new IRA account within 60 days.

Types of Rollovers

IRA rollovers come in three basic types: Direct rollovers, trustee-to-trustee transfers, and 60-day rollovers.

Direct rollover – If you’re getting a distribution from a retirement plan, including a 401(k), 403(b), or other employer accounts, you can ask your plan administrator to pay directly to another retirement plan or an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution through a check payable to your new account. In that case, the 20% withholding rule will not apply to a direct rollover, and they won’t take taxes out of your distribution check.

You’ll get Form 1099-R. But in box 7, you should find distribution code “H,” which indicates that the transfer is not taxable.

Trustee-to-trustee transfer – With this kind of rollover, you have your existing retirement account’s custodian transfer cash directly to your new gold IRA.

The rollover will not withhold taxes from your transfer amount and will not report the transaction to the IRS.

60-day rollover – You can have your existing retirement account custodian send you a check directly for all or part of your retirement account – a process sometimes called an “indirect rollover.” From there, you have 60 days to deposit the funds into your new IRA account. If you complete the transfer for the entire amount within 60 days, it will not be a taxable transaction. After 60 days, the IRS will generally consider the event a taxable distribution for any amounts that didn’t successfully deposit into your new gold IRA account.

Tax note: If you want to transfer a gold IRA using money from a retirement plan using the 60-day rollover method, the existing plan administrator will withhold 20% and forward the amount to the IRS to cover any taxes due on the transaction. You’ll also get a Form 1099-R documenting the gold IRA transfer and the withholding.

The tricky part is this: Even if your old plan’s administrator only sends you 80 percent of your requested disbursement, you still need to deposit the total amount of your withdrawal into your gold rollover account within 60 days. Otherwise, you will owe ordinary income tax and potential penalties on any amounts you failed to deposit from a tax-deferred retirement account.

The One-Rollover-Per-Year Rule.

You can only do a 60-day rollover once in any rolling one-year period. Section 408(d)(3)(B) of the Internal Revenue Code prevents taxpayers from performing more than one non-taxable rollover in one year about IRAs and individual retirement annuities.

Exceptions: The one-year limitation does not apply to the following situations:

• Rollovers from traditional IRAs to Roth IRAs (conversions)
• Trustee-to-trustee transfers to another IRA
• Rollovers from an IRA to a retirement plan, such as a 401(k)
• Rollovers from a workplace or small business retirement plan to an IRA
• Rollovers between two workplace 401(k) plans or small businesses retirement plans.

Before you execute your gold IRA 60-day rollover, ensure that you haven’t done another 60-day rollover within the previous twelve months.

Note: If you receive a distribution from an IRA of previously untaxed amounts:

• You must include the amounts in gross income if you made an IRA-to-IRA rollover in the preceding 12 months (unless the transition rule above applies), and
• You may be subject to the 10% early withdrawal tax on the amounts you include in your gross income.

Additionally, if you pay the distributed amounts into another (or the same) IRA, the amounts may be:

• treated as an excess contribution, and
• taxed at 6% per year as long as they remain in the IRA.

Common Questions: What If I Miss the 60-day Rollover Deadline?

If you miss the 60-day deadline and fail to deposit all the funds you withdrew into your gold IRA (or back into the same IRA) within 60 days, it usually becomes a taxable transaction under IRS rules.

You’ll have to pay income taxes on amounts you withdraw from your traditional IRA or other tax-deferred accounts, plus possible penalties for early withdrawal – unless you qualify under one of the various hardship provisions.

To avoid this, you can send the IRS a memo demonstrating that you missed the deadline due to circumstances beyond your control.

Why Own Physical Gold?

Gold and other precious metals have functioned as a reliable store of value for thousands of years.

While its price in local currency can fluctuate wildly in the short term, gold has generally maintained its value through times of economic and political chaos and upheaval.

Entire empires have risen and fallen. Currencies have come and gone, and paper bills are becoming worthless as dust.

But gold and silver have never fallen to zero. Instead, their value frequently increases during times of economic volatility.

Today, national governments and central banks continue to hold vast stores of gold and other precious metals as sovereign wealth or to back issued currencies and lending.

Millions of Americans have added gold, silver, platinum, or palladium to their investment portfolios.

Precious metals can help diversify a heavy conventional retirement portfolio with stocks, bonds, money markets, CDs, and cash.

From an investment perspective, you can gain exposure to gold and other precious metals in a variety of ways:

• Gold ETFs, such as SPDR Gold Shares (GLD),
• Gold mining stocks
• Collectibles and Jewelry

However, many millions of investors still prefer to own physical gold and precious physical metals, either in their accounts or within self-directed IRAs, gold IRAs, silver IRAs, and the like, for many reasons:

• Gold and precious metals are historically not highly-correlated with stocks, bonds, or other widely-held asset classes. Investors can provide meaningful diversification to their retirement portfolio by allocating a small portion of it to gold.
• The U.S. government cannot readily confiscate physical gold. Banking regulators can seize cash in savings accounts. This event happened in Cyprus in 2013, when officials subtracted millions of euros from depositors at Laika Bank and the Bank of Cyprus. If push comes to shove, and the FDIC can’t cover the shortfall, the same thing could happen in the U.S.
• Gold coins and bars will outlast the dollar as a store of value, just as they have outlasted countless other now-worthless currencies over the millennia.
• The government cannot “print” more gold as it does with paper or ‘fiat’ currencies that are not backed directly in gold.
• Physical gold can’t be “hacked” by identity thieves.
• Physical gold is anonymous. You can own gold bullion, silver bullion, or other forms of precious metals with no one else’s knowledge (though do not try to store IRA gold in your home safe. More on this later).
• There is no “counter-party” risk. Other forms of investments rely on some fallible money manager or executive’s performance in some way. But when you own genuine bullion, you need not worry about another money manager’s performance. Gold’s intrinsic value depends on the broad markets’ long-established willingness to pay for it.

Who Needs a Gold IRA?

A gold IRA may be worth considering if you meet one or more of the following criteria:

• You want or need to diversify your retirement portfolio to include gold and precious metals, or you want to own alternative asset classes in general.
• You are willing to take direct control of your gold investments in your self-directed IRA account and not rely on an outside money manager to make buying or selling decisions for you.
• You have enough assets to meet your gold IRA account’s minimum transaction requirements.

Of course, you can still hire your money manager or financial advisor to help you make buying or selling decisions.

But when you own a gold IRA or any self-directed IRA, you take on more responsibility for your investment decisions.

Who Can Contribute to a Gold IRA?

As of 2022, the total contributions you make each year to your traditional IRAs and Roth IRAs can’t be more than $6,000 ($7,000 if you’re age 50 or older) or your taxable compensation for the year, whichever is less.

But that’s just for new contributions not already in a retirement plan.

There is no income limitation for rollovers to a gold IRA from existing retirement accounts.

But if you want to do a Roth IRA conversion (that is, convert traditional IRA assets to a Roth IRA, you will pay taxes on the amount of that conversion.

This money could affect your overall tax picture in other ways.

For example, it could push you into a higher marginal tax bracket, affect the taxation of your Social Security benefits if you receive them, or both.

IRA Rollover-Eligible Accounts

Generally, you can roll existing assets in 401(k)s, IRAs, SEP IRAs, SIMPLE IRAs, 403(b)s, and similar tax-advantaged accounts into a traditional IRA regardless of your income or filing status.’

What is a Gold IRA Custodian?

A gold IRA custodian is an IRS-approved company that will hold your gold or other precious metals assets within your gold IRA on your behalf – typically by contracting with a vault company that provides secure storage and insurance for your investments.

The custodian tracks your transactions, issues statements to you or an administrator, and reports contributions and distributions to the internal revenue service.

The custodian must either be a bank, credit union, or regulated-trust company.

Generally, the company that sells you your gold is not the custodian.

Instead, it’s an independent brokerage firm called a precious metals dealer.

However, the company that sells your physical metals for your IRA will contract with a custodian.

If you buy precious physical metals for your IRA, your precious metals dealer will not send them to you directly.

Instead, they will arrange for delivery to the IRA custodian to hold on your behalf.

Can I Own Gold in Other Retirement Accounts?

Yes, you can own gold and precious metals and other alternative asset classes in a variety of accounts, including:

• Traditional IRAs
• Roth IRAs
• SEP IRAs,
• Simple IRAs
• Self-directed 401(k)s
• Self-directed Roth 401(k) accounts
• Self-directed health savings accounts (HSAs)
• Self-directed Coverdell education savings accounts (ESAs)

While different plans exist for other purposes, the same rules on eligible precious metal investments generally apply to all of them, as does the same general rollover process.

Different account types have other contribution limits, income limits, and distribution rules.

This guide focuses on traditional and Roth IRAs, however.

Can I Own Other Precious Metals in an IRA?

Yes. The law also allows you to hold silver, platinum, and palladium bullion coins, bars, and rounds within an IRA.

Under the law, only three types of assets are prohibited within IRAs: collectibles, life insurance, and S-corporation shares.

Generally, gold, silver, platinum, and palladium products are classified as collectibles.

They’re restricted under the same rules as other collectibles, such as jewelry, art, baseball cards, and comic books.

But Congress made an exception for certain standardized forms of gold, silver, platinum, and palladium, as long as they meet specific requirements.

Gold IRA Purity and Fineness Requirements

• Gold. (Minimum fineness of .9995, or 99.5% pure golf. But certain exceptions apply for American Gold Eagles, which are made of a special “crown gold” alloy of gold, silver, and copper to improve durability and reduce scuffing and wear and tear).
• Silver. (Minimum purity of .999, or 99.0% pure silver).
• Platinum. (minimum purity of .9995, or 99.5% pure platinum).
• Palladium. (minimum purity of .9995, or 99.5% pure palladium).

Other Requirements

In addition to the above requirements for purity and fineness, IRA-eligible gold must meet these additional requirements:

• A refiner, assayer, or manufacturer accredited or certified by NYMEX, COMEX, NYSE/Liffe, LME, LBMA, LPPM, TOCOM, ISO 9000, or a national government mint must produce coins, bars, and rounds.
• “Proof” coins must be in excellent condition, in complete original mint packaging, and have the appropriate certificate of authenticity from the original mint/manufacturer. (Most experts recommend avoiding proof coins for your IRA investment portfolio and routing IRA account funds into straight bullion issues instead. See the section below on standard gold IRA mistakes.
• Small bullion bars (except for 400-ounce gold, 100-ounce gold, 1,000-ounce silver, 50-ounce platinum, and 100-ounce palladium bars) must be manufactured to exact weight specifications.
• Non-proof (bullion) coins must be undamaged and in brilliant uncirculated condition. These coins have never been circulated as currency and still have their original luster.

Who Should Do a Gold IRA Rollover?

You should consider rolling over an existing retirement account, such as an IRA or 401(k), to a gold IRA rollover if you meet these criteria:

• You have significant assets in your existing IRA, 401(k), or other retirement savings accounts.
• Your accounts are eligible for rollover to an IRA.
• You want to hedge or limit your exposure to stock market risk.
• You want or need to diversify your retirement savings into a gold or precious metals IRA.
• You can meet your gold IRA company’s minimum transaction requirements. These vary by firm but can amount to tens of thousands of dollars.

Gold Roth IRAs vs. Traditional IRAs

IRAs come in two basic categories:

• The traditional IRA, created as part of the Employee Retirement Income and Security Act of 1974
• The Roth IRA became part of the Taxpayer Relief Act of 1997.

You can roll retirement assets into a traditional gold IRA or into a gold Roth IRA.

Traditional IRAs provide tax-deferred growth, but withdrawals/distributions are taxed at ordinary income rates.

On the other hand, Roth IRAs allow for tax-free growth on assets that remain in the Roth IRA for at least five years.

Rollovers into traditional gold IRAs are straightforward. They are generally non-taxable events.

Rollovers of assets already in a Roth IRA into a gold Roth IRA are generally non-taxable events.

But rolling traditional IRA, 401(k), or other tax-deferred account types into a Roth gold IRA is a little more complex.

While these tax-deferred accounts are (generally) funded with pre-tax dollars, Roth IRAs are funded with after-tax dollars.

So any assets you want to move from the tax-deferred column into the tax-free growth (Roth) column must be taxed before you can put them there.

The mechanism to do so is called a Roth conversion.

Here’s how it works:

Assets in tax-deferred accounts that are not already in an IRA must be rolled into an IRA. You can do this via a direct or indirect (60-day) rollover.

If the money is in an IRA, you have your planner or custodian do a conversion. The process follows these basic steps:

1. First, open your new Roth IRA or gold IRA account.
2. Notify the custodian of your existing account that you want to do a Roth conversion, and transfer your money to your new Roth IRA or Roth gold IRA account.

Effectively, you are taking a taxable distribution on the amount you want to convert to a Roth IRA. You will then incur a tax liability on whatever income you take from your traditional IRA to convert.

1. Once the money is in your Roth account, you tell your new custodian how you want the money invested.

Tip: It is more tax efficient to pay the income taxes on a Roth conversion from the money you have outside your retirement account.

That way, you preserve as much money as possible within your retirement accounts for tax-advantaged growth in the future.

These requirements apply to Roth gold IRAs precisely the same as any other Roth IRA.

You are just opening your new Roth IRA with a custodian who supports gold and precious metals retirement investments.

Who can do a gold Roth IRA rollover?

There is no income requirement, restriction, or threshold you need to meet to roll existing Roth IRA assets into a Roth gold IRA.

You can roll over an unlimited amount of Traditional or Roth IRA assets into a Roth gold IRA regardless of your income.

But a Roth IRA doesn’t make sense for all taxpayers. A Roth IRA conversion from non-Roth retirement accounts may make sense if:

• You don’t expect to need to withdraw the money for at least five years.;
• You expect to be in the same or a higher tax bracket during retirement;
• You pay the income taxes on the conversion using money from outside your retirement accounts
• You don’t expect to need those funds for your retirement and instead want to transfer them to your heirs.

Who Can Contribute to a Roth IRA?

While you can roll over an unlimited amount of Roth assets to a Roth Gold IRA at any income level, you can’t contribute new money unless you meet strict income requirements.

The allowable amount you can contribute begins to phase out at the lower income level listed below and phases out completely at the higher income level.

Here are the phase-out income ranges for taxpayers making contributions to a Roth IRA:

Roth IRA Income Eligibility (As of 2022).

• $125,000 to $140,000 – Single taxpayers and heads of household.
• $198,000 to $208,000 – Married, filing jointly.
• $0 to $10,000 – Married, filing separately.

Check out the most current and complete information on Roth IRA income thresholds and eligibility requirements.

What Kinds of Gold Can I Own in a Gold IRA?

Bullion vs. Collectibles and Numismatics

Gold and precious metal products held in IRAs must be bullion products.

They must be manufactured or minted primarily as a store of a certain standard weight and fineness level of gold for the specific investment purpose.

This fact distinguishes them from numismatics, coins manufactured primarily for the collectors’ market or commemorative purposes, where the specific metal content is a secondary concern.

These numismatic products are considered collectibles, not bullion products, and IRAs can’t own them.

“Proof” Coins

A proof coin is generally a bullion coin minted to an extraordinarily high standard of craftsmanship and beauty.

Proof coins may be made from specially-polished “blanks,” which are often struck twice. Special minting techniques may add a mirror-like, 3D effect or ‘frosting’ for additional clarity and beauty.

These coins are commonly minted in limited quantities for collectors as commemorative editions.

However, they’re still considered bullion and contain the same metal content as their ordinary, non-proof bullion counterparts.

E.g., a 1-ounce American Eagle proof coin contains precisely the same metal content as a non-proof, ordinary bullion, 1-ounce American Gold Eagle.

The only difference is in the manufacturing techniques and procedures.

Proofs are primarily intended for the gift and commemorative/collectors’ markets.

Proofs generally occupy a middle ground between collectibles and ordinary bullion products.

They are popular among collectors, and collectors generally bid prices up to a premium compared to the gold spot price at any given time.

But proof coins are still manufactured primarily as a standard unit of measure for gold, silver, or other precious metal.

As such, proofs are legally considered bullion rather than numismatics/collectibles.

If the coins are otherwise minted by a qualified manufacturer and meet the minimum purity and fineness requirements described above, they are generally legal to own within your IRA.

For this reason, most advisors do not recommend IRA account owners pay extra to own proof versions of coins where one can obtain the same amount of precious metals in a non-proof coin for a lower price.

All things being equal, account owners should try to keep premiums to a minimum when buying physical gold or other precious metals for their IRA.

For this reason, it’s best to focus your investing on ordinary bullion coins and bars.

IRA Prohibited Transactions

Before you invest in a gold or precious metals IRA, you must understand prohibited transactions.

In addition to prohibiting ownership of collectibles, life insurance, and S-corporation shares, the law also places other restrictions on precious metal IRA account owners:

You may not use your IRA to buy, borrow, sell, or lend to a prohibited party. These include:

• Yourself;
• Your spouse;
• Your descendants or those of your spouse;
• Your ascendants (parents, grandparents, etc.) or those of your spouse;
• Any entity (corporation or LLC) controlled by prohibited parties;
• Anyone who advises you in a fiduciary capacity on your IRA.
• You may not take personal possession of gold or any other precious metal asset within your IRA. (Note: This means that ‘home storage,’ or holding the gold within your safe deposit box or removing gold from your custodian’s care is generally prohibited).
• You may not pledge your IRA or other assets as security for a loan outside your IRA. That is, you cannot pledge your IRA or anything as collateral for a loan for you, your business, or any other purpose outside the IRA.

You cannot direct your IRA to purchase gold or anything else from your collection or any prohibited counter-party listed above.

Nor can you sell any IRA asset directly to them, nor any entity they control.

Exception: Some 401(k)s allow personal loans out of plan assets.

However, these loans must be paid back within five years, or the IRS will consider the loan distribution, and you will be liable for taxes and penalties.

401(k) to Gold IRA Rollovers

Many want to move assets out of workplace 401(k) plans to a self-directed gold IRA account because of the superior flexibility and array of options that an IRA offers.

In a 401(k) account, your plan sponsor/employer decides what retirement funds the account owner is allowed to invest in and typically provides only a limited number of mutual funds from a few different categories.

In addition, there’s a guaranteed investment contract (GIC) or money market account designed for conservative investors who don’t want to take on market risk.

Even plans that allow for more flexibility with the 401(k) and offer a so-called “brokerage window” that will enable you to trade stocks and bonds within your 401(k) account.

If you have assets within a workplace 401(k), you may or may not be able to do a 401(k) to gold IRA rollover, depending on your circumstances.

Generally, 401(k) accounts are eligible for IRA rollovers to an IRA.

But if the company still employs you, your plan sponsor may not allow you to take an in-service withdrawal.

Some company retirement plans will allow you a hardship withdrawal if you meet hardship criteria under your plan’s rules but not allow you to withdraw funds to do a 401(k) to gold IRA rollover.

This condition is true unless you are 59 1/2 or older or 55 and have left your employer.

Plans vary, so check with your employer.

If your plan does not allow for in-service withdrawals, you will have to wait until you leave the company to do your 401k to gold IRA rollover.

If your plan does allow IRA rollovers or in-service withdrawals, you can proceed with your gold IRA rollover as you usually would:

Establish your new IRA with a custodian supporting gold IRAs, and then arrange a direct trustee-to-trustee transfer to your new IRA.

Alternatively, withdraw eligible funds from your existing 401(k) account and deposit them within your new gold IRA account within 60 days.

Direct vs. Indirect 401(k) Rollovers

With a direct rollover from a 401(k) or employer-sponsored plan to a gold IRA, your plan administrator transfers your money directly to the gaining institution.

There’s no mandatory 20% federal tax withholding since you never take possession of your retirement assets.

However, when you do an indirect 60-day rollover, your plan sponsor will wire the funds to you personally or send you a check. In this event, your employer may be required to withhold 20% against federal income tax.

The way to recover this money is to roll over the amount you received from your prior employer plus the 20% they deducted.

You will receive the refund in the form of a tax credit when you file your tax return.

However, you will need the cash to do this out of your savings. Otherwise, you will wind up paying a tax on your 401(k) to IRA rollover.

How Do I Get Started?

The precious metals IRA rollover process is straightforward:

1. Decide How Much Gold You Want to Own

The amount of gold, silver, platinum, or palladium to own is a highly individual decision. It depends on your risk tolerance, expectations for inflation, your level of fear about a general economic collapse, and the mix of other assets you hold, both inside and outside your retirement account.

Recommendations vary, but retirement planners specializing in asset allocation recommend an overall exposure to gold between 2% and 6%.

A few stretch out to as high as 10% during heightened economic uncertainty and risk.

2. Choose a Gold IRA Company

There are dozens of options out there. It would be best if you did careful research to choose the best gold IRA company for you and your circumstances.

Answer the following questions before you select your gold IRA provider:

• How does the gold IRA company make money? What are the fees, if any? When do they apply?
• Are you a frequent trader? Or do you plan to keep precious metals in your portfolio for a long time?
• What is the minimum investment requirement? Knowing this can narrow down your decision considerably. For example, some gold IRA companies have investment minimums of $50,000. Augusta Precious Metals has a much more viable minimum investment of $5,000 for a gold IRA rollover.

3. Fund Your Gold IRA Account

The next step is to get your gold IRA or precious metals IRA account funded with cash so you can make your desired investments.

This funding can come from two sources:

• You can use money from your own personal, taxable accounts held in your name.
• You can do your physical gold IRA rollover using funds from an eligible existing retirement account.

1. Execute a Rollover From an Existing Retirement Account

You can roll over money from any traditional IRA you already own. You can also roll over funds from a qualified retirement plan, a tax-sheltered annuity plan (403(b)), a government deferred-compensation plan (Section 457 plans), or a traditional IRA you inherited from a deceased spouse.

1. Contribute Funds From Your Account

You can contribute IRA funds directly from your savings. However, there are caps on how much you are allowed to contribute. For the tax year 2022, the general cap on new traditional IRA and Roth IRA contributions is $6,500. Individuals aged 50 and older can contribute an additional $1,000 per year. However, Roth IRA restrictions may be limited if you have a high income.

4. Decide What Gold IRA Assets To Purchase.

Since gold IRAs are self-directed IRAs, it’s up to you to determine what specific gold and precious metal products you want to own and define your overall gold IRA rollover strategy.

Most gold IRA companies can advise you on what products suit your situation.

You will usually be assigned a broker who can help educate you about your different options and the advantages and disadvantages of each.

But ultimately, the decision and responsibility for your investments are yours.

5. Direct Your Gold IRA Rollover Company To Purchase Your Precious Metals For Your IRA on Your Behalf.

Once you’ve decided what you want to purchase and at what price, the next step is to direct your IRA third-party administrator to purchase the assets on your IRA’s behalf.

Note that your IRA administrator and your gold/precious metal broker may or may not be the same entity.

Specifically, you must provide your administrator a buy direction letter, instructing them precisely what to purchase, from where, and at what price.

Understanding Gold IRA Fees

Most gold and precious metal dealers’ primary source of profit is the spread between their wholesale and retail prices.

However, there are other parties involved, too, and consequently, there are several smaller fees you may encounter using a gold IRA:

• Setup fees. Your custodian may charge a setup or admin fee when you create your account. Usually, these are between $50 and $150. If you are rolling over a lot of money into your gold IRA, you may be able to negotiate a fee waiver.
• Maintenance fee. Your IRA custodian will typically charge annual fees for maintenance, usually between $75 and $300 per year. Sometimes these fees are connected to the size of the account.
• Seller fees. Sellers usually charge a markup over the market’s current ‘spot price’ of gold. Usually, it’s whatever they can get or the market will bear. This is a price spread, not a specific line item you can see on an invoice. You can see what it is by comparing your actual price against the spot price of gold when you bought it. You can minimize this expense by sticking to standard forms of bullion rather than proofs or numismatic/collector silver coins and bars and by trying to buy the most significant coins or bars your budget will allow. The smaller the coin or bar, the bigger the usual spread is as a percentage of the transaction, and the less cost-effective the transaction is for you.
• Commissions. Gold sellers may charge a commission or fee for handling the transaction. $40 is expected. For long-term buy-and-hold investors, this isn’t a big concern. But these costs can increase over time for people who buy and sell all the time.
• Storage fees. If you own precious metals in your IRA, it has to be stored in a storage facility with a secure vault or depositary facility. The more gold you own, the higher your storage costs. These costs vary and may consist of a flat rate or a percentage of the gold in your account. If you have substantial gold holdings in your IRA, you may be better off looking for a flat rate rather than a percentage.

If your gold or precious metals held in the vault facility are insured, you may have insurance fees or premiums, which may be separate or included within your storage fees.

These fees vary with the custodian and vault facility, but it’s common for them to run $100 to $300 per year.

• Wire transfers. If you want to send or receive money by wire, you may see a wire transfer fee, usually about $25 per transfer.
• Account termination fees. If you close your account, your custodian may charge a one-time termination fee, typically $250.

Common Gold IRA Rollover Mistakes

Buying ineligible products.

Some people mistakenly purchase gold coins or bars that don’t meet the legal requirements for inclusion within IRAs.

For example, they may buy a South African Krugerrand gold coin – a well-known and popular coin among collectors, assuming that because it’s a genuine and well-recognized coin, it must be a gold IRA asset.

But the Krugerrand is not eligible: They are struck in a “crown gold” alloy that’s only 91.67% gold – well short of the 99.5% requirement.

Investors sometimes make the mistake of buying collectible or numismatic coins from ineligible mints.

They may assume that the product is IRA-eligible because the coin or bar in question has very high purity. But this is not necessarily the case.

Investors should carefully check the eligibility of any coin, bar, or round before they attempt to buy it within their 401(k).

Buying an ineligible product could result in the IRS ruling your transaction a distribution and imposing significant taxes and penalties.

Trying to do “home storage” with IRA assets.

Many gold companies advertise for home delivery of gold coins, bars, and other products.

You can buy silver, platinum, palladium, or gold bullion bars, rounds, and other products for your collection or own them as investments in your name.

But if you want to own gold or precious metals in your IRA, do not do this.

Do not attempt to take personal possession of the gold in your IRA or anything else you intend to place within your IRA. Do not try to store it yourself in your own home or a safe deposit box.

It is illegal.

And if there was ever any doubt about it, the U.S. Tax Court just dispensed with those doubts in December 2021.

It ruled that a couple that tried to use an LLC within their IRA to take personal possession of IRA gold coins and bars committed a prohibited transaction, disallowing the favorable tax treatment of $730,000 in IRA assets.

It ruled that they owe almost $270,000 in income taxes, plus penalties of almost $50,000.

To preserve the tax benefits of your gold IRA, and to avoid severe tax ramifications, always keep your gold IRA and precious metals assets with your IRA custodian, who usually keeps your assets with a third-party vault company.

If you try to take personal possession of the gold in your IRA, the IRS will consider it a prohibited transaction and potentially disallow the whole IRA.

This forces you to take a taxable distribution on the entire amount and exposes you to other significant penalties.

To avoid these problems, keep the assets with your custodian with one of their partner vault companies.

Yes, you can buy gold for home storage in your name. But don’t try to store your IRA gold in a home safe or deposit box. You must keep it with your custodian, in their vault or depositary facility, for as long as it remains in your IRA.

Some investors get confused by gold company advertising that depicts individuals sitting at their kitchen tables with stacks of gold coins. In contrast, company literature or ads tell the public that the company supports gold IRAs.

Yes, you can buy gold for your connection. And you can buy gold for your IRAs from the same company.

But it can’t be the same gold.

Buying Proof Coins

Proof coins are specially-minted coins offered via the U.S. Mint and authorized precious metals dealers.

These are beautifully made, display-worthy coins made from specially-polished blanks and struck multiple times to create a striking, lustrous finish.

The most common proofs in the U.S. market are American Gold and Silver Eagle proofs. These are often made in box sets and sold to collectors or as gift sets.

They are legal to own in IRAs.

But there’s no benefit to owning them, and it may cost money.

These coins sell at a 10 to 20% higher premium to spot price than ordinary bullion coins of the same type, but the metal content is precisely the same.

Which Gold IRA Company Is Best For You?

Here are a few of the leading reputable gold IRA companies doing business today.

While all of them can set you up with a gold IRA or precious metals IRA, each company may vary widely in its fee structure, minimum investment, shipping policies, access to educational materials, and customer support.

The best gold IRA companies for you depend on your budget, track record and experience level, need for education or advice, and other individual factors.

You should do due diligence before you choose a gold IRA provider.

• Augusta Precious Metals
• Birch Gold
• Goldco Precious Metals
• Advantage Gold
• Noble Gold
• Regal Assets
• American IRA
• JM Bullion

Most of these companies are gold and silver dealers themselves.

They make their money by buying gold at wholesale prices, selling it to you at retail gold prices, and profiting from the spread.

American IRA, LLC, however, is a third-party administrator of self-directed IRAs with a different business model:

They don’t buy or sell gold.

They arrange for a custodian to track your transactions and allow you to hold gold, silver, and other eligible precious metals within an IRA that also owns other assets. They also charge a flat rate per transaction rather than assets under management (AUM) fee of 1%, a standard arrangement among investment companies and asset managers.

When a Gold-Backed IRA Is Not a Good Idea

While a gold-backed IRA can be a great way to diversify your retirement portfolio, there are better solutions for some investors.

If you are looking for short-term gains or need access to your funds sooner rather than later, there may be better options than a Gold or precious metal IRA.

The costs associated with setting up and maintaining a gold IRA make it an expensive endeavor that one cannot take lightly.

Storing Gold IRA at Home 

You can’t store your Gold IRA at home.

As the law requires, holders must store their self-directed gold IRAs in a safe deposit box at an IRS-approved depository.

It is illegal to store the metals anywhere other than the appointed depository, and you may be subject to penalties if you do not follow this rule.

Situations to Move 401k to Gold 

When moving from a regular IRA or 401k to a gold or precious metals IRA that is right for you, you should consider several factors.

If you want to diversify your retirement portfolio with an investment of long-term growth potential, then rolling over part of your current investments into a Gold IRA may be a good option.

Additionally, if you feel like your current investments have become stagnant or too risky, diversifying with Gold can help protect your nest egg from market instability.

Converting IRA to Gold Without Penalty 

Following the proper steps to convert your traditional IRA or 401k to a gold-backed IRA is essential without incurring any tax penalties.

The IRS provides specific guidelines for converting an existing retirement account without incurring taxes or penalties.

Make sure you are following all of the rules and procedures when it comes to building a successful gold IRA for yourself.

Gold IRA Rollover FAQs

What is a partial gold ira rollover?

Financial advisors define this as a process where some, but not all, of the assets in a traditional IRA are converted to a Roth IRA.

What does typical precious metals ownership consist of?

Precious metals ownership in an IRA can take several different forms. The most common are gold coins and gold bullion, but other options include rare coins, platinum, and palladium.

What are custodians, and for a custodian, however, track your storage fees?

A self-directed account will have an annual storage and custodian fee. These fees are typically based on the number of assets held in the account.

Appendix 1: Coins Approved for Gold IRA Accounts

The following coins are approved for use within gold IRA accounts and other tax-advantaged retirement accounts in the U.S.

• American Gold Eagles. These American Gold Eagle coins are only 93.7% pure gold, so they don’t meet the usual fineness requirements for an IRA. But Congress created an exception for these popular coins in the law.
• American Gold Buffalos
• Australian Gold Kangaroos
• Austrian Philharmonic gold coin
• ​Austrian Philharmonic coins (silver)
• British Gold Britannias
• British Gold “Queen’s Beast” Falcon Coins
• Canadian Gold Bisons
• Canadian Gold Maple Leafs
• Canadian Silver Maple Leafs
• Royal Canadian Mint Gold Bars
• UBS Gold Bars
• Credit Suisse Gold Bars
• Chinese Gold Pandas
• Somalian Elephants
• PAMP Valcambi Gold Bars
• PAMP Suisse Fortuna Veriscan Gold Bars
• Argor Heraeus Lunar Tiger Gold Bars

Appendix 2: Common Coins That Are Not Eligible for Gold IRA Accounts

The following are popular coins that are not eligible for IRA accounts in the U.S., usually due to insufficient purity or lack of proper certifications.

They may be great coins to add to your collection or for investment in your name.

But you should not, under any circumstances, attempt to purchase an ineligible coin for inclusion in your IRA.

• South African Krugerrands
• British Sovereigns
• American ‘Double Eagle’ coins

The two Canadian Gold Maple Leaf coins are eligible to be held in a gold IRA. The South African Krugerrand, however, has a visibly higher copper content, as does the U.S. Golden Eagle “Liberty” coin at left. Neither has a high enough fineness to qualify for inclusion in an IRA. But the American Gold Eagle coin (with Lady Liberty on the obverse, as shown) is allowed under a notable exception to the law, designed to support domestic gold mining.

Sources

IRC Sections and Treasury Regulations

• IRC Section 408(m)
• IRC Section 4975(c)
• Treas. Reg. Section 1.401(a)(4)-4

Resources

• Revenue Procedure 2019-19, 2019-19 I.R.B. PDF
• IRM 4.71.9.5, Determining the Statute of Limitations Expiration Date
• IRM 4.72.11, Prohibited Transactions
• Publication 590-B, Distributions from Individual Retirement Accounts (IRAs)
• IRA FAQs – Investments
• Retirement Topics – Investing Plan Assets
• Retirement Plan Investments FAQs
• IRS Publication 590 A – Contributions to Individual Retirement Arrangements (IRAs)
• IRS Publication 590 B – Distributions from Individual Retirement Arrangements (IRAs)

Disclaimer: The information above is meant for informational purposes only.

Further reading on AdamEnfroy.com: Here’s what to do if your 401k is losing money.

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