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Rollover to Gold IRA
In this brief 401K to Gold IRA rollover guide we’ll explain what a Gold IRA is and how an existing retirement account can be rolled-over or transferred into a Gold or Precious metals IRA. Our primary focus will be on how to pick a company to invest with when we are considering a Gold IRA rollover.
What is a Gold IRA
The IRS allows Investors to hold physical Gold and other Precious metals inside individual tax preferred retirement accounts (IRAs) as part of the Taxpayer Relief Act of 1997.
While traditional IRAs are limited to stocks and mutual funds, self-directed IRAs allow for tax-preferred ownership of asset classes like real estate and Gold.
In a self-directed IRA your physical Gold is held in your name by a third-party Custodian in the same manner that the securities in your existing retirement accounts are held in your name by your broker-dealer.
IRA-approved Precious metals include Gold, Silver, Platinum, and Palladium.
In general, IRA-acceptable Precious metals fall into two categories:
Numismatic or collectible Coins are not allowed.
401K to Gold IRA rollover guide
A 401K rollover is one of the ways to transfer funds from one retirement account to another.
The originating account for the 401K to Gold IRA rollover must be from a previous employer.
Investors are unable to transfer a currently active 401K while they are still employed.
Convert 401K to physical Gold
Converting a 401K to physical Gold is a straightforward process.
DIY Investors will be able to walk through the steps on their own.
If questions arise or you want to talk to someone about your options, rest easy knowing that all of the reputable Gold IRA companies have knowledgeable representatives to assist you.
There are two areas of particular risk that Investors need to be aware of with a 401K to Gold IRA rollover:
With just a little bit of knowledge you can easily avoid these risks and add physical Gold to your Investment Portfolio.
Gold IRA tax rules
Capital gains on Precious metals held for less than one year are taxed at the short-term capital gains rate (up to 37% tax rate depending on tax bracket).
After the metal has been held for a full year any capital gains are taxed at the 28% rate for collectible items like art.
Inside a Gold IRA these tax rules come into effect:
How to move 401K to Gold without penalty
The ‘How To’ part of moving a 401K to Gold without penalty involves the simple steps below.
In a 401K rollover the Investor never takes possession of their retirement funds. The monies are transferred directly from one retirement account to another so there is no risk of triggering the IRS penalty for early withdrawal.
In a 401K transfer the Investor takes possession of their funds and has 60 days to deposit those funds in a new retirement account. Any funds that aren’t re-invested within the 60 day window will be counted as income and will be subject to early withdrawal penalties.
All of the reputable Gold IRA companies have knowledgeable representatives who can guide you through these straightforward steps.
In addition to 401(k) accounts, it is also possible to transfer these types of retirement accounts into a Gold IRA:
Because each of these retirement plans have different rules based on age and tax bracket, it will be necessary for you to contact a tax specialist who can address your specific circumstances.
Home storage Gold IRA
Some people claim that an IRS loophole allows Investors to act as their own Custodians for holding the physical Gold in an IRA.
The alleged loophole is Checkbook IRAs.
These IRAs involve the Investor setting up an LLC which acts as the Custodian for the IRA.
Pursuing a solution like this involves a great deal of risk since the IRS could ultimately disallow the IRA account when it is liquidated.
Instead of enjoying the expected tax bennies of a Gold IRA the Investor could end up paying the 28% tax rate for collectibles in addition to any back taxes and penalties the IRS might assess.
As always, perform your own due diligence before putting your hard-earned money at risk.
Noble Gold IRA
One of the key benefits that Noble Gold offers is a very low minimum Investment of $2,000.
Many Gold IRA companies set their minimums at $10,000 or $15,000.
Noble's low minimum Investment allows Investors to open a Roth Gold IRA using the IRS-allowed maximum contribution of $6,000 per year. This isn't possible when the minimum Investment is $10K or more.
Refer to table below to see how the Noble Gold IRA compares to its peers.
Schwab Gold IRA
Schwab is popular with self-directed Investors and the company ranks well in the customer support department.
Unfortunately Schwab doesn't offer a Gold IRA.
The company recommends commodity ETFs for Investors seeking exposure to the Precious metals Markets but also warns about the inherent volatility in commodities.
Gold IRA guide
When we are considering which companies offer the best Gold IRAs we need to decide on the factors we will use to judge them.
Because we are talking about storing physical Precious metals one of our primary considerations is obviously the trustworthiness of the Custodian.
There are several resources we can use to evaluate Gold IRA companies and their Custodians.
In this Gold IRA guide the BBB is our starting point. If a company offering Gold IRAs hasn't joined the BBB we have to wonder why since most of their competitors have not only joined, they have A+ ratings.
The BBB rating is only one data point for evaluating a Gold IRA company but ideally we want them to be current BBB members with an A+ rating.
If there have been any complaints registered with the BBB against the company, we want to see that those complaints have been resolved or that the company has at least tried to resolve the issue.
After a Gold IRA company passes the BBB test we can then look for company reviews on the internet. We want to see what kind of experience other people have had in their interactions with the company.
For example, we can search for "Goldco reviews" and look at the results.
The list of review sites above provides links to companies that gather customer reviews globally.
Gold IRA marketing vs Legitimate customer review
Most of the results from a search like "Birch Gold IRA reviews" will be from affiliate marketers just trying to make a buck.
These people don't care what they sell you, they only care that you buy. And their knowledge of Precious metals is slim to non-existent. They are simply playing a numbers game on the internet and they will be happy to separate you from your money.
Read a few reviews and you will see the difference between marketing hype and legitimate customer experiences. Or simply stick with reviews on BBB and consumeraffairs.com since marketers are less likely to place false reviews on those platforms.
Contacting Gold IRA companies
Once a Gold IRA company passes our initial checks it is time to make contact.
Reading reviews is useful while we are doing research but what really matters is our own personal experience with the company.
Call and talk with a few representatives. Let them know you are shopping for a Gold IRA and plan on comparing their company against their peers. Ask them what sets their company apart.
There are lots of companies offering Gold IRAs. If you don’t get a warm-fuzzy feeling when you interact with a company’s representatives, cross that company off the list and move on.
Understand that each of the representatives you talk to will try to motivate you into taking immediate action. That’s what good salespeople do.
If the representative becomes pushy or uses fear tactics during the phone call, cross that company off the list. Again, there are lots of companies offering Gold IRAs and the reputable ones don’t have to use high-pressure sales tactics.
Ask a loaded question
A loaded question to ask a Gold IRA representative is whether they recommend holding Gold Bullion bars and Coins or if 'Investment grade' Coins make more sense.
‘Investment grade’ Coins in the context of a Gold IRA refers to 'proof Coins', 'first strike Coins', 'boxed Coins with certificates of authenticity', etc.
These Coins carry a premium for Numismatic value even though the IRS prohibits Numismatic Coins in IRAs.
The sales pitch for these Coins is likely to focus on a ‘lack of liquidity’ when you decide to cash out your Gold IRA. Shady representatives will claim that the ‘Investment grade’ Coins have greater demand from Investors and are therefore more liquid. This is pure BS, don’t fall for it.
Understand that it never makes sense to pay a premium for collectible Coins unless you personally want to appreciate them as timeless works of fine art. It is unlikely that you will ever see the physical Gold in your IRA – why would you care what it looks like?
Gold is Gold. It is one of the most liquid Investments on the planet. It doesn’t matter whether a chunk of Gold is pretty or has a certificate of authenticity. Gold is Gold whether we are talking about a certified first-strike Coin or a beat-up Krugerrand from the scratch-and-dent bin.
If a Gold IRA rep tries to sell you anything besides Gold Bullion bars and Coins they are looking out for their own interests and not yours.
Cross these aggressive salespeople and their companies off the list.
Most weight of metal, least amount of money
Keep in mind that any money spent on Numismatic value inside a Gold IRA is money wasted.
Remember that we are talking about Precious metals that we will most likely never personally hold in our hands.
This Gold will be held in trust for us by a third-party. It doesn’t matter whether the metal is pretty or not. Any hype about 'Investment grade' is BS. It’s a sales tactic – don’t fall for it.
As Investors and consumers we always want to get the most metal for the least amount of money. This is true whether we are talking about a Precious metals IRA or Gold Coins to bury in the garden.
Gold IRA guide
This short Gold IRA guide has focused primarily on how to transfer existing retirement funds into physical metal while avoiding any tax consequences.
Pointers have also been provided on how you can compare and review Gold IRA companies.
Simple but important advice was provided on how to avoid overpaying for the metal in your Gold IRA.
If you have questions about completing a Gold IRA rollover reach out to one or more of the companies in the table above. All of them have knowledgeable representatives available to help you.
Bryan V Post is a California-registered Investment Advisor Representative specializing in the Precious metals.
He is the founder and CEO of Satori Traders LLC, a California-registered Investment Advisor.
Bryan has worn numerous hats during his life:
Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.
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