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Gold IRA GuideGold IRA Rollover: Step by Step

Gold IRA Rollover: Step by Step

If you currently have a retirement account or investment portfolio that is biased towards stocks, bonds or any other asset bound to the dollar, you may have considered converting part of it to bullion coins or bars as a protection against inflation, currency debasement and economic uncertainty. This process is known as a Gold IRA Rollover. This is essentially the official term that refers to the process of opening a new type of self-directed IRA that will be used to invest in gold.

While funding your new Gold IRA with cash is an option, a rollover is a much safer and tax-advantaged strategy of moving your retirement savings. In this brief article, we will discuss the individual steps involved in a Gold IRA Rollover.

The first thing you should know is that there are two ways to fund your new Gold IRA in a tax-advantaged way, a rollover and a transfer. People often confuse the two processes and call both of them “rollover”. In reality, they are totally different.

Important differences between a Rollover and a Transfer

While some people tend to call any movement of funds from one retirement account to another a rollover, the IRS makes a clear distinction between a rollover and a transfer. In a rollover, the money being moved is paid to you and you then deposit the funds in the other account. In a funds transfer, the original custodian of the IRA transfers the funds directly to the new IRA custodian you designated to receive the funds. You basically never see the money.

Gold IRA Rollover Rules

In this case, if you were to accomplish a Gold IRA rollover, you would receive the money from your current custodian, and you would have 60 days from the date you receive the funds to deposit the money in the Gold IRA Company or Custodian you have chosen. If you do not complete the transaction within this period, the money becomes a taxable withdrawal and you will face the 10% early withdrawal penalty if you are under 59 1/2. If you are withdrawing from a personal IRA for a rollover to another IRA, there is no tax withholding. But you can do only one rollover per year.

Gold IRA Transfer Rules

A transfer is a custodian to custodian move. You do not receive any money which simplifies the process and helps you avoid any penalties. In a direct custodian-to-custodian IRA transfer, you do not have to worry about the 60 day transfer rule since you never receive the money. The transfer may is usually accomplished by wire transfer directly between the respective IRA custodians. The original IRA custodian can also accomplish the transfer by issuing a check made out to the custodian of the receiving IRA and mailing it out. This is the easiest way to invest in gold through your IRA since it is all handled in the background by your existing and new custodian.

401k to Gold IRA rollover

401ks can have slightly different rules for rollovers and transfers. If you have a 401k from a previous employer, it shouldn't be an issue and you should be able to do a gold ira rollover with any new custodian of your choosing. However, if you have a retirement plan through your current employer, you will need to check with them first. Some employers do not allow gold investments as part of their 401k plan unless you quit your job. Before diving into a Gold IRA Rollover, make sure you understand your employer's 401k plan. While there are ways around employer restrictions, it is helpful to know whether this will be an obstacle from the beginning of the process.

Note: Call your Employer ans inquire about the rules of your current 401k and whether or not you can rollover or transfer to a Gold IRA.

Decide On Your Gold IRA Rollover Allocation Strategy

chess-moveWhen conducting a Gold IRA Rollover, it's important to understand how you want to invest your funds and how your investment strategy affects your planning needs. We at Gold IRA Guide often receive emails from investors and retirees asking us: what percent of my portfolio should be allocated to precious metals? The reality is, there is no easy answer to this question.

We have even interviewed several financial advisors and the opinions when it comes to gold allocation differ. Famous investors tend to stick to the 5-10% rule (e.g. Kevin O'Leary, Tony Robbins, Ray Dalio), but some more aggressive investors have gone above that. The questions you need to be asking yourself that will help you determine your bullion allocation strategy are: what is your outlook on the economy as a whole? How has your portfolio been performing so far? What is your main objective when it comes to investing in physical bullion (e.g. protection, diversification, profit)? Here are some of the most popular strategies we've gathered by looking at several celebrity and high net worth portfolios and speaking with many financial professionals: (NOTE: this is NOT financial advice and cannot be taken as such. Always speak to your financial advisor before investing any sum of money in a new asset class.)

1 – Diversification/Protection: if you believe that your current portfolio is biased towards stocks, bonds or mutual funds, allocating 5 to 10% of your entire portfolio size to precious metals can help you effectively diversify and protect your portfolio. This is the strategy adopted by the likes of Kevin O'Leary, Tony Robbins, Ray Dalio and others.

2- Loss of trust in the US dollar: if you smell the Weimar catastrophe in the air and lost confidence in the dollar (and other paper currencies), allocating 10 to 20% would be a more common strategy.

3- Total loss of confidence in the system: if you strongly believe that the current financial system will collapse, and that the price of gold will reach new heights when that happens, then allocating 20%-30% of your portfolio would not be uncommon. Be warned that this is a risky position as price of gold is still viewed as highly speculative. Experts we've interviewed agree that beginners should “play it safe” by going for a lower allocation, and adjust it annually based on results and the economic landscape.

Disclaimer: the content provided on this page and throughout this website is for informational purposes only. It does not constitute financial advice and should not be taken as such. Always speak to your financial advisor before making an investment decision.

Also remember that when investing through an IRA, IRS-approved bullion coins or bars are necessary.

Some IRA and 401k custodians also allow investors to utilize Gold ETF's, gold mining stocks or mutual funds. While this type of investment doesn't require the storage facilities needed by physical bullion, it should be understood that the Gold ETF is an investment in “paper gold” and not actual Physical Gold. [click here for more details]

Lastly, find a trustworthy Gold IRA Custodian For Your New Gold IRA Rollover

Careful research into the background and business practices of any potential Gold IRA company is very important for two reasons:

  • First, you want to be certain your retirement savings are being handled by a certified and trustworthy company, not a scammer or a profit-hungry dealer that wants to push numismatic coins because they have higher profit margins for them, but lower gold purity content. Check out IRA-Approved Precious Metals page to see what gold & silver coins are considered pure enough to be IRA eligible.
  • Second, the Internal Revenue Service (IRS) only allows for one tax-free rollover of IRA funds each year and this rollover of the full amount of funds must occur within 60 days of removing the funds from your current IRA custodian's care to avoid penalty. If you choose a custodian that you want to change later, you will have to wait the full 12 months or face tax penalties on the money you are moving.

The reputable Gold IRA custodian you chose will be able to furnish you with all of the necessary paperwork and contact information needed to arrange your IRA rollover. Having this paperwork handled prior to the rollover date ensures that the money will be successfully transferred to the Gold IRA account within the IRS's required 60 day period. In some cases, your existing IRA custodian may choose to issue you a check for the full amount of your IRA and then you will have to arrange deposit of the full amount of these funds with the new Gold IRA custodian. There may be fees associated with the rollover of your current IRA and these should be discussed with your IRA custodian prior to making any decisions.

NOTE: Restrictions on gold bullion coins and bars

The IRS laid out strict rules when it comes to the types of gold bullion coins and bars that you can invest in as part of your IRA. The coins need to be minted at a minimum purity level of 99.9% or better. This includes the American gold & silver eagle, Canadian Gold Maple Leaf, Austrian Philharmonic, American gold & silver buffalo and other similar coins. It also includes certain gold bars such as the Credit Suisse gold bar.

allowed gold

While there are some considerations involved in switching from a traditional IRA to a Gold IRA, the advantages of adding Gold to your investment profile make it well worth the trouble. Understanding the steps required to complete your Gold IRA Rollover will make the process both simple and stress-free from a tax standpoint.

Ready to start your rollover?

Your first step is to find a company to work with. Check out our Gold IRA Companies page to see a comparison table of the leading firms in the field.

Gold IRA Rollover FAQ

What is a Gold IRA Rollover?

A Gold IRA rollover is when you convert part of an existing retirement account or your investment portfolio into bullion coins or bars, as a hedge against economic uncertainties and inflation.

How does a Gold IRA Rollover Work?

Sometimes any movement of funds from one retirement account to another, is referred to as a  “rollover”. However, it’s important to note that the Internal Revenue Service (IRS) makes a clear distinction between a rollover and a “transfer”. In a rollover, the money being moved is paid to you and you then deposit the funds in the other account. With a transfer, the original custodian of the IRA transfers the funds directly to the new IRA custodian you designated to receive the funds. In essence, you never see the money, personally.

Custodian-to-custodian transfers are the most common method of establishing self-directed IRAs like a Gold IRA with exiting qualified funds. A new account is established with an IRS-approved IRA custodian who, with your consent, requests the transfer of IRA assets from your existing retirement account. The custodian will then be able to accept the money and invest the assets according to your instructions.

Additionally, if you choose to go with a rollover, it is highly recommended to elect to perform a “direct rollover” instead of an “indirect rollover”. Indirect rollovers have withholding requirements and run the risk of incurring early distribution penalties.

What are the IRS Rules for a Gold IRA?

The IRS has stringent rules and regulations for Gold IRA accounts. The most important rule pertaining to self-directed IRAs like Gold IRAs, is that by federal law you must use an approved IRA custodian to open this type of retirement account.

It is most critical to note that you never buy gold or other precious metals with your IRA account funds personally. The IRS requires that your IRA account administrator do the actual transactions on your behalf. You will simply give directions to your custodian in order for them to start purchasing precious metals. They will make all arrangements for shipping and insurance when they conclude the transaction.

The IRS has stringent rules and regulations for Gold IRA accounts. The most important rule pertaining to self-directed IRAs like Gold IRAs, is that by federal law you must use an approved IRA custodian to open this type of retirement account.

It is most critical to note that you never buy gold or other precious metals with your IRA account funds personally. The IRS requires that your IRA account administrator do the actual transactions on your behalf. You will simply give directions to your custodian in order for them to start purchasing precious metals. They will make all arrangements for shipping and insurance when they conclude the transaction.

Once your gold has been purchased, it must be stored according to IRS regulations for precious metals IRAs like a Gold IRA. The custodian of your new Gold IRA will receive your precious metals and then hand them over to an IRS sanctioned third-party, off-site depository. You are allowed to select the depository which is used, or conversely, you can utilize the one with which the account administrator already has an established pre-existing relationship. They will inventory and safeguard your gold holdings all the way to the point when you give explicit orders to your account administrator to either sell your gold or distribute it to you. At this point in time, distributions would be sent by insured delivery to your home address.

What are the IRS Rules for a Gold IRA Rollover?

The IRS has stringent rules pertaining to an IRA Rollover. As per the IRS regulations if you were to do a Gold IRA rollover, you would have 60 days from the date you receive the funds to deposit the money in the Gold IRA company or Custodian you have chosen. If you do not complete the transaction within this period, the money becomes a taxable withdrawal and you will face the 10% early withdrawal penalty if you are under 59 1/2. If you are withdrawing from a personal IRA for a rollover to another IRA, there is no tax withholding. But you can do only one rollover per year.

What are the IRS Rules for a Gold IRA Transfer?

In a direct custodian-to-custodian IRA transfer, you do not have to worry about the 60 day transfer rule since you never receive the money. The transfer is usually accomplished by wire transfer directly between the respective IRA custodians. The original IRA custodian can also accomplish the transfer by issuing a check made out to the custodian of the receiving IRA and mailing it out. This is the easiest way to invest in gold through your IRA since it is all handled in the background by your existing and new custodian.

What are the Fees Involved in a Gold IRA Rollover?

There are no government sanctioned rollover or transfer fees to move over an existing traditional IRA to a precious metals IRA account like a Gold IRA. However, that being said, there may be account application fees involved. Those sanctioned custodians and administrators of the precious metals IRAs often charge a processing fee in order to start the account opening for these self-directed IRAs like a Gold IRA. Different administrators will charge different amounts, but the average is approximately $50 for this particular category of fee.

How does a 401k to Gold IRA Rollover Work?

If you have a 401(k), you can roll it into an Individual Retirement Account (IRA) or another qualified plan without incurring any tax penalties. Here is an overview of some 401(k) rollover rules:

  • When you receive funds from your 401(k) for a rollover, you have 60 days to complete the process. If you fail to do this, the IRS will treat your money as a taxable distribution. Additionally, if you are not yet 59 ½ years old, the IRS will also impose a 10% penalty on the withdrawal on top of the normal income taxation.
  • You are limited to one rollover per year from a 401(k) into an IRA. This one-year period begins on the date that you receive your 401(k) distribution. This applies separately to each IRA that you own.
  • You cannot use the cash from your distribution to purchase investments in the period in between receiving your 401(k) distribution and establishing your IRA.

It is advised that you select the option to perform a “direct rollover” with your 401(k) funds. In a direct rollover, you never receive a check for your distribution; rather, your 401(k) plan provider will transfer the money directly into your new IRA plan.

What Physical Gold is allowed in a Gold IRA Rollover?

The IRS has strict regulations pertaining to the types of gold and other precious metals allowed in an IRA. An investor can hold gold bullion, gold coins and bars as long as they meet two basic standards. The gold must be the official currency of a recognized public entity and it must meet a certain purity standard. In the United States, the purity must be 0.995. This standard is different for different countries, so research is necessary to determine the exact purity level that is necessary. The types of physical gold you can hold in a self-directed IRA like a Gold IRA include:

  • The American Gold Eagle coin
  • The Canadian Gold Maple Leaf coin
  • The Austrian Philharmonic gold coin
  • The American Gold Buffalo coin
  • Gold Kilo Bars
  • Certain Gold Bullion Bars
  • Credit Suisse Gold Bars
  • Swiss PAMP Gold Bars
What is the Best Gold IRA Rollover Company?

A Gold IRA company is a firm that specializes in the process of setting up Gold IRAs from beginning to end - including an IRA rollover/transfer. Other components that these companies deal with include IRA account setup, the purchase of IRS-approved precious metals, and storing them with an accredited IRS-approved depository. Reputable Gold IRA companies should be able to handle the entire process for you and answer any questions you may have at any point in the process. Gold IRA Companies typically form strategic alliances with traditional IRA custodians, accredited depositories, and wholesale metal dealers. 

Choosing the best Gold IRA company completely depends on what factors are most important to you. Be it ratings, customer support, availability of other alternative asset options, physical location, storage options? Once you decide which factors are most important to you, make a shortlist of a few companies that meet your criteria, and either give them a call, or request their free gold kits to learn more about the specific company and products. Below are our reviews of some of the top Gold IRA companies to give you an idea of your options available.

Note: It is highly recommended that do your due diligence and call a few different companies before making an investment decision. Also, speak to your financial advisor before investing in any asset class.

 

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