Disclosure: This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. This compensation is how we fund our in-depth research. (read more)
Precious metals, especially gold, have become a hot commodity in the investment market today. Many people are turning to it as an alternative investment option because of the high turmoil in the economy. Investors today, more than ever, use gold to safeguard their retirement savings from inflation and volatility by investing in precious metals 401k.
One of the ways investors hedge their funds for retirement is by opening a gold IRA. A gold IRA allows investors to invest in physical gold using their 401k funds. Even with the rise of gold investments, many investors still need to learn how to proceed. Hence, in this article, we want to show you how to invest in precious metals using your 401k retirement account funds in a practical step-by-step approach.
The 4O1k retirement plan is a self-directed plan that employers sponsor. It is a retirement plan that many employers in the United States offer their employees. The plan gives these employees huge tax-advantaged investment options to aid them in comfortably living out their retirement years.
Typically, 401k retirement plans allow employees to divert a portion of their salaries toward investments in the long term on either a pre-tax or post-tax basis. While some employers offer to make partial matching contributions, others provide 100% of the money their employees will invest in the 401k plan.
401k plans have contribution limits, and the IRS (Internal Revenue Service) is responsible for setting the contribution limits for 401k plans. The IRS in 2022 required employees to deposit $20,500 into their 401k accounts from their salaries annually. In 2023, the IRS increased the contribution limit to $22,500. For employers over 50 years, the catchup contribution limit set by the IRS for 2022 was $6,500. This year (2023), the IRS increased it to $7,500.
A 401k plan administrator generally handles the 401k plan. This fund manager is usually a financial service company. The 401k plan administrator also offers various investment options to employees to allow them to diversify their investment portfolios. The most popular investment type is mutual funds. Employees who own 401k retirement accounts can choose from different kinds of funds, from small to large-cap funds to index and bond funds. The growth potentials of these types of funds are different.
401k investors know that these plans are very important and can allow them to leverage significant investment opportunities in the market. That is why some investors have become interested in investing the funds from their 401k retirement accounts into precious metals. They want to profit from the increasing prices of precious metals in the gold and silver industry.
A gold IRA is also called a precious metals IRA. It is a unique retirement account that allows you to hold gold and other precious metals as long-term investments through a custodian.
Aside from investing and keeping the gold safe, many possibilities come with a gold IRA. A gold IRA also allows you to add precious metals like silver, platinum, and palladium investments to your retirement assets. However, you cannot buy just any precious metal product because you own a gold IRA. The IRS regulates the kinds of precious metals you can add to your gold IRA portfolio. The IRS calls these investments IRA-eligible precious metals. These precious metals meet the IRS minimum purity and fineness standards for IRA-eligible precious metals. In the later section of this article, we will give you more details about the minimum purity requirement and fineness for IRA-eligible precious metals.
Investing in physical gold assets is one of the most effective ways to exploit the gold wave. However, 401k plans come with a high level of restrictions. Only a few 401k investment plans allow investors to invest in physical gold directly. Generally, most 401k plans restrict employees from buying precious metal investments. It means that most 401k plans will not allow you to purchase and add physical gold bullion, gold bars, or gold coins as investments to your retirement portfolio. We know this information may sound disappointing, but the good news is that there is still a way around it.
Suppose you want to invest in physical gold using funds from your 401k account. In that case, you can open a new gold IRA account and roll over your funds from your 401k into your gold IRA. Similarly, you can invest in gold through ETFs (Exchange Traded Funds) or mutual funds.
If you do not want to roll over your 401k to a gold IRA, you can alternatively invest in gold and other precious metals by purchasing 'paper gold' or gold mutual funds. When you look through your 401k plan fund descriptions, you can locate mutual funds allowing you to hold gold mining companies' stock. Before investing in some gold mutual funds, please find out their expense ratio. Mutual funds with high expense ratios may not yield significant profits.
Some 401k plans come with a brokerage option. Usually, this 401k plan allows investors to invest in more assets than they would make through a traditional brokerage account. It means investors can access almost all types of precious metals investments. If an employee has such a 401k investment plan, one of the simplest ways to invest in gold is through gold ETFs (Exchange Traded Funds). This type of gold investment allows you to buy into the shares of funds that hold physical gold bullion.
In addition, a 401k brokerage option allows investors to invest in gold companies' stocks.
From the last session, we have seen how you can invest in gold paper assets using your 401k retirement plan. However, most investors ask a vital question: "Can I use my 401k to buy actual gold?"
You must open a self-directed IRA to invest your 401k retirement funds into physical gold and silver bullion, coins, and rounds. A gold IRA allows 401k plan investors to buy eligible precious metal products as investment assets and keep them in a secure third-party depository. However, buying eligible precious metals with your 401k is only possible when you perform a gold rollover.
You must roll over a part or all your funds from your 401k account to your gold IRA. Please be informed that the money you rollover from your 401k into your gold IRA will no longer be part of your 401k retirement plan. It will now be part of your gold IRA plan.
A gold IRA is an amazing retirement plan because it allows investors to keep their wealth safe from economic issues while also enjoying the huge tax advantages of an IRA.
We recommend investing in precious metals IRAs when employees have funds in their existing traditional that they wish to protect against the associated risk of a stock market crash or devaluation or are looking to provide a more robust hedge against the effects of inflation.
Suppose you have an existing 401k plan and are eligible to perform an 'in-service' rollover. In that case, you can transfer a portion or all of your 401k funds to your gold IRA. In addition, if you're leaving your current job and have an existing 401k account with your employer, you can roll over your funds into your gold IRA.
As mentioned, you should consider converting your 401k into a gold IRA through a rollover to diversify your 401k retirement investments properly. Rolling over your 401 k into a gold IRA allows you to purchase physical precious metals using funds in your 401 k account.
Unlike a 401k plan, a gold IRA offers more investment options in gold, silver, platinum, and palladium categories. A 401k to gold rollover is a common practice in the gold investment world, especially when employees are leaving their jobs and want to secure the funds in their 401k from economic crises.
You can also perform a rollover if you still work for your company. However, you must be eligible for an in-service withdrawal for early access to your retirement savings. You can transfer your 401k funds into your gold IRA without penalty if you complete your rollover within 60 days. A gold IRA rollover allows you to have access to funds originally locked away in your 401k until later.
One of the first things to do if you want to avoid penalties when moving your 401k to gold is to perform your gold IRA rollover through a reputable gold IRA company. In the later section of this article, we will show the top 5 companies in the United States that can help you perform a gold IRA rollover without penalties.
To begin your gold IRA rollover, you have to find out if you are eligible for a gold IRA rollover. According to the IRS, you must meet certain requirements to qualify for a 401k to gold rollover.
Part of the eligibility criteria set by the IRS for rolling over your 401k to gold is that you must have worked for at least one year in the company that opened the 401k retirement account.
After checking your eligibility criteria and ensuring you have met all the IRS requirements to qualify for a 401k to gold rollover, the next step is to call the reputable gold IRA provider you have chosen to work with to initiate the rollover process. You must get the paperwork from your gold IRA provider and send it to your 401k plan administrator. You can transfer your 401k funds to your gold IRA through a direct or an indirect rollover.
In the case of a direct rollover, your 401k plan administrator transfers the funds electronically from your 401k account directly to your newly opened gold IRA account. This 401k to gold rollover type takes two to six weeks to complete.
For an indirect rollover, your 401k plan administrator will issue a check containing the amount you want to roll over into your gold IRA to you. Then, you have a 60-day time window to deposit the money into your gold IRA. If you exceed the timeframe, the IRS will see the rollover as a distribution, and you will pay a 20% tax penalty from the funds.
We recommend opting for the direct rollover when moving funds from your 401k account to a gold IRA because it is easy and less complicated.
After successfully rolling over funds into your new gold IRA, you can purchase gold and other precious metal investments. Although the gold IRA allows you to invest in a wide range of precious metals, you cannot hold every precious metal asset in the gold market in your account.
The IRS determines the types of precious metal investments investors can include in their portfolios. Usually, the precious metals must meet a certain purity standard and fineness. They are called IRA-eligible metals. According to the IRS, the purity and fineness standards for IRA-eligible precious metal products are mentioned below.
The only exception to this purity rule is the American Eagle Gold coin. The United States Mint produces the coin with a purity level of 91.67% (22-karat). The other percentage is the composition of silver and copper for luster and durability.
The IRS does not allow the inclusion of rare coins or collectibles in your precious metal IRA portfolio. The IRS considers adding rare or collectible coins to your precious metal portfolio a distribution. Hence, adding rare collectible coins will incur a tax penalty.
After buying your investments for the first time, you can keep investing in your gold IRA using your yearly annual IRA contributions ($7,500). You can buy your investments once every year using your yearly contributions or buy monthly.
Suppose you want to judge the profitability of precious metals using their looks. In that case, you may conclude that gold and silver coins are more profitable than bullion bars because they have beautiful designs and look attractive.
However, that is not the case. Gold and silver bullion bars are more profitable investments because they have lower premiums over gold and silver spot prices.
If you buy your gold and silver bullion bars from legit minters worldwide, you do not need to worry about whether your assets are IRA-eligible.
Precious metal bars from legitimate minters always meet the IRS purity and fineness standards for IRA-eligible products. Some of the legit minters in the world are:
Below are some of the most profitable precious metals products to add to your gold IRA.
Gold Proof Coins
Gold Bars and Gold Rounds
Silver Proof Coins
Silver Bars and Silver Rounds
Platinum Proof Coins
Platinum Bars and Platinum Rounds
Palladium Bars and Palladium Rounds
It is supposed to be the link to the article on “A Comprehensive Gold 401k Rollover Guide,” but we haven’t uploaded that article yet.
This company is the absolute best gold IRA firm in the U.S. today due to Augusta's transparency, pricing, dedication to education, and extraordinary attention given to customers.
We highly recommend that everyone take advantage of their free web conference that helps you understand the economy, threats to your retirement, and the precious metals buying process (designed by their in-house Harvard-certified economic analyst). They even share tips for avoiding gimmicks and high-pressure tactics in this unregulated industry.
This gold precious metals specialist company was chosen by Money magazine as "The Best Overall" in its Best Gold IRA Companies list for 2023. It is the only gold IRA firm with ZERO complaints on the BBB website since 2012.
It has an outstanding track record proven by consumer watchdog ratings and tons of the best customer reviews, including endorsement by hall-of-fame quarterback Joe Montana, whose advisors found Augusta for him. We are thrilled to recommend Augusta as our #1 gold IRA company!
To start investing with Augusta Precious Metals, please click this link to download its 2023 gold investment kit for free.
Augusta Precious Metals is our best rated overall precious metals company
Established in 2006, this company has an excellent solid record and is our top recommendation for people looking to invest over $25,000 in a gold IRA. We consider this gold trading online platform the 2nd best Gold IRA Company in The USA Today.
To start investing with Goldco, please click this link to download its 2023 gold investment kit for free.
Goldco is our second top-rated gold and precious metal company. Having been top-rated all of last year, they were very close to Augusta Precious metals
One of the most trusted Gold and Precious Metal brokers in the United States is American Hartford Gold. This family-owned company is endorsed by Bill O'Reilly and America's Mayor, Rudy Giuliani.
American Hartford Gold is great for gold and palladium IRA and purchasing physical Gold, Silver, and Platinum.
To start investing with American Hartford Gold, please click this link to download its 2023 gold investment kit for free.
Since it was established in 2003, the company has delighted customers and provided excellent customer education. Birch Gold Group's one-on-one interactions with customers are a fundamental advantage for those who want to make vital decisions impacting their financial future.
To start investing with Birch Gold Group, please click this link to download its 2023 gold investment kit for free.
The truth is that Noble Gold has not been around the scene for a long time, but it has, in the shortest time possible, made huge impacts on the gold IRA market.
Since its inception, the company has captured customers' hearts via its vast educational resources gallery, a wide range of investment options, and low investment requirements. The company's commitment to customer service also has high ratings on third-party rating sites like BCA and Consumer Affairs.
According to the agent we spoke to, Noble Gold gives customers a committed account manager from the first day they decide to open a gold IRA account with it. The knowledgeable professionals will also give the customers all they need to know about how a gold IRA works and the setup process. In addition, they offer a smooth buyback process to their customers.
Noble Gold works with Delaware Depository and Brink's Global Services to provide storage services for its customers. In addition to these storage companies, Noble Gold owns its depository in Texas. Hence, customers can choose to store their metals in any of these three depositories.
To start investing with Noble Gold Investment, please click this link to download its 2023 gold investment kit for free.
You can only directly invest in precious physical metals using your 401k if you perform a gold rollover. While you can explore other alternatives of gold investments using your 401k, like investing in paper gold, there are better investment types than this one. We recommend investing in real gold and silver products because the stock market will not influence them like it will influence your paper gold investments.
Suppose you have decided to invest in a precious metals 401k. In that case, you will need to perform a gold IRA rollover. This article has detailed information about successfully rolling over your 401k to precious metals without penalties. As we mentioned, it all begins with choosing a reputable company to work with.
Hence, to begin your gold investment journey by rolling over funds from your 401k into your precious metals IRA, please click the relevant links in the previous section to download the free review guides of any of our recommended companies that suit your investment needs and goals.