How to roll over your 401(k) into a gold or silver IRA

Many investors are interested in holding precious metals, such as gold or silver, in their portfolios as a way to diversify across asset classes and potentially hedge against long-term inflation.

There are many ways to gain exposure to gold or silver, but if you want to hold the physical assets in a retirement account, you’ll need to open a gold or silver IRA. With many Americans holding a significant portion of their retirement portfolios in 401(k) accounts, investors interested in physical gold or silver assets may consider a 401(k) roll over to a gold or silver IRA.

Here’s how to roll over your 401(k) into a gold or silver IRA without penalty.

Why would you need a gold or silver IRA?

If you want to own physical gold or silver in a retirement account, you’ll need to open a self-directed IRA with a silver or gold IRA company. This is because the IRS generally considers physical gold and silver investments to be collectibles, and investments in collectibles in a retirement account are considered immediate distributions, which come with a 10 percent penalty if you’re under age 59½.

Keep in mind that you can gain exposure to gold, silver and other precious metals in ways that don’t involve buying bars or coins. You can own ETFs, mutual funds or mining stocks to bet on future gold and silver prices, all of which you can own in traditional retirement accounts such as a traditional or Roth IRA.

4 steps to roll over your 401(k) into a gold or silver IRA

1. Pick a custodian for your gold or silver IRA

The first step in rolling your 401(k) into a gold or silver IRA is to choose a custodian for the new IRA. You’ll want to pay attention to the firm’s reputation and credibility, considering online reviews of the best gold IRA providers as well as how long the firm has been in business.

Compare how a firm’s fees compare to others in the industry and watch out for high account minimums before choosing your custodian. Here are some other things to consider before choosing a silver or gold IRA company.

2. Open a self-directed IRA with the custodian

Once you’ve picked your custodian, you’ll be able to open a self-directed IRA that allows you to hold physical precious metals in your account, including gold, silver, platinum and palladium.

The account opening process should be fairly straightforward, and involves providing basic personal information and filling out forms.

3. Execute a rollover from your 401(k) to the new gold or silver IRA

The next step is to roll over your 401(k) into the new gold or silver IRA you just opened. This can be done either directly or indirectly. Here’s how the two differ.

• Direct 401(k) rollover: This involves your 401(k) administrator directly transferring your account’s assets to the new gold or silver IRA. This is the simplest approach and avoids the potential for a penalty that can sometimes occur with indirect rollovers.
• Indirect 401(k) rollover: An indirect rollover is when the 401(k) administrator sends you a check for the amount of money in your account and it’s up to you to get the money into the new self-directed IRA. Here’s the catch: the money must be deposited within 60 days, or it will be considered a distribution that you’ll be taxed on and pay a 10 percent early withdrawal penalty if you’re under age 59½.

4. Purchase investments

The final step is to actually purchase physical gold or silver assets in your new IRA. The custodian may have resources to help you make your investment decision, such as research or educational offerings. You’ll also need to understand how your physical assets will be stored, which may be done by the custodian or an outside firm.

Bottom line

If you want to hold physical investments in precious metals such as gold and silver, you’ll need a self-directed IRA with a gold or silver IRA company. Once a gold or silver IRA is set up, you can roll over your 401(k) account to the new IRA. Keep in mind that investments in precious metals likely shouldn’t make up a significant portion of your retirement portfolio, but rather can be a diversification tool alongside traditional assets such as stocks and bonds.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.