Are you tired of the high fees and limitations on your 401(k)? While a 401(k) is one of the most common vehicles for retirement savings, it’s not the only one. Learn about the advantages of gold IRAs and how to roll over your 401(k) into one of these IRAs.
What is a 401(k)?
A 401(k) is an employer-sponsored retirement plan. It allows an employee to set aside part of their paycheck in a retirement account before taxes are taken out. An account holder pays taxes when they withdraw money from a 401(k). Self-employed people can also set up a 401(k).
In many cases, employers match their employees’ contributions to a 401(k), up to a certain percentage.
In 2018, more than 58 million U.S. workers participated in 401(k) plans, according to the Investment Company Institute. At the time, there were over 580,000 of these plans.
What is a gold IRA?
A gold IRA, also known as a precious metals IRA, is a self-directed retirement account that enables someone to hold physical gold and other precious metals (silver, platinum, and palladium) in the forms of coins and bars. A gold IRA can be a traditional IRA or a Roth IRA.
According to research from the U.S. General Accounting Office, there were nearly half a million (485,517) self-directed retirement accounts nationwide as of 2017, with a total combined balance of $49,768,207,085.
What are the benefits of rolling over a 401(k) into a gold IRA?
Among the benefits of rolling over a 401(k) into a gold IRA are that the IRA could:
- Offer more portfolio diversity
- Provide a hedge against inflation
- Carry less restrictions for passing along assets to heirs
- Make you eligible for a saver’s tax credit
“Because gold prices generally move in the opposite direction of paper assets, adding a gold IRA to a retirement portfolio provides an insurance policy against inflation,” Edmund C. Moy, former director of the U.S. Mint, told Investopedia. “This balanced approach smooths out risk, especially over the long term, which makes it a smart choice for retirement [accounts] like IRAs.”
Potential disadvantages of 401(k) plans include limited asset options, hefty account fees, and penalties for early withdrawal, writes Money Girl reporter Laura Adams.
“Since your employer chooses your 401(k) provider, you get less flexibility in terms of [asset] options. They may or may not have made a good choice to begin with, and you might not get many good [asset] options within your 401(k) account,” according to The Dough Roller, a personal finance blog.
How do you roll over a 401(k) to a gold IRA?
First, you need to open a gold IRA. This is done by establishing a Self-Directed IRA through a trustee or custodian. U.S. Money Reserve can help you get this process started.
Once the gold IRA is set up, you can begin a 401(k) rollover. You can choose between an indirect or direct rollover:
- Through an indirect rollover, you pull your money from the 401(k) and then deposit it in the gold IRA.
- A direct rollover, the most straightforward option of the two, lets you automatically transfer the 401(k) funds to the Self-Directed IRA without having to handle the money on your own.
When the 401(k) is closed, the 401(k) manager will send a check to either you or the trustee or custodian of your gold IRA. Then that money can be used to buy physical gold or other precious metals. The trustee or custodian stores those precious metals on behalf of the account holder.
U.S. Money Reserve can get you started with a 401(k) rollover. Call 855-889-5111 today to discuss your specific retirement needs.