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The Complete 401k to Gold IRA Rollover Guide: How You Can Turn Your 401k to Gold Without Penalties


Written by John Rothans

Feb 10, 2023

Research from the Investment Company Institute (ICI) found that more than 40% of households owned an IRA in 2022. Are you part of this group but considering what more you could do to help increase the strength of your retirement portfolio? If so, a gold IRA rollover might be a good option. This gold IRA rollover guide is a great starting point for learning about the basics of 401(k) plans and individual retirement accounts (IRAs), what a gold IRA rollover is, and how gold IRA rollovers work.

What is a 401(k)?

A 401(k) is an employer-sponsored retirement plan. It allows a self-employed individual or an employee to set aside part of their paycheck in a retirement account before taxes are taken out. In some cases, employers match all or a percentage of their employee’s contributions to 401(k). The 401(k) holder pays taxes when they withdraw money from the account.

In 2022, roughly 60 million U.S. workers participated in 401(k) plans, according to the Investment Company Institute. At the time, there were over 625,000 active 401(k) plans.

What is the Difference Between a 401(k) and an IRA?

A 401(k) and an IRA are both retirement accounts, but they differ in a few fundamental ways. A 401(k) is opened through an employer, which may match a portion of your contributions. You open an IRA on your own—with your own money—through a bank or broker. Typically, an IRA gives you more asset options than a 401(k), and a 401(k) has higher annual contribution limits than an IRA.

IRAs are increasingly becoming more popular. The ICI’s research found that in mid-2021, 55 million U.S. households owned an IRA, with assets totaling $11.7 trillion. In the last 20 years, IRA assets have gone from 18 to 24% of the total retirement assets market.

What is a Gold IRA?

The Taxpayer Relief Act of 1997 allows for the creation of gold IRAs. A gold IRA, also known as a precious metals IRA, is a self-directed retirement account that enables someone to hold a wider variety of assets as part of their retirement portfolio, including physical gold, silver, platinum, and palladium. This kind of IRA can be a traditional IRA or a Roth IRA.

What is a Rollover?

A rollover involves moving some retirement funds from an existing retirement plan—which could be a regular IRA, Roth IRA, or 401(k)—to a new IRA. Those funds must be deposited into your new IRA within 60 days. Under this scenario, you won’t owe taxes. But if you remove the funds from your current retirement account and fail to deposit them in a new account within the 60-day window, you must report the money to the IRS as taxable income. Per the IRS, only one rollover is allowed in any 12-month period, regardless of the number of IRAs you own.

Rollovers have become quite common. The ICI notes that, as of September 2022, half of the $11 trillion held in IRAs came from rollovers from 401(k) and employee-sponsored retirement plans.

What is a Gold IRA Rollover?

One option for rolling over retirement funds is putting some funds into a gold IRA. When you transfer funds to this type of account, it’s known as a gold IRA rollover. If you want to roll over an IRA into gold, the process involves switching all or part of a retirement portfolio to physical precious metals to help shield your assets from economic and inflationary pressures.

How to Do a 401(k) to Gold IRA Rollover

Every day people roll their 401(k) plans over to IRAs. There’s a set procedure for doing a 401(k) to gold IRA rollover, which you can accomplish in three steps.

Step 1: Create Your Gold IRA

First, you need to open a gold IRA. This is done by establishing a self-directed IRA through a trustee or gold IRA custodian that’s licensed and regulated by the IRS. A gold IRA custodian can be a bank, credit union, or trust company. Your U.S. Money Reserve IRA Account Executive can also help with this process.

Step 2: Initiate Your 401(k) to Gold IRA Rollover

Once the gold IRA is open, you can start the rollover. You have two rollover options: indirect or direct.

Indirect Gold IRA Rollover

Through an indirect rollover, you take the money out of your 401(k) and deposit it into a gold IRA.

Direct Gold IRA Rollover

A direct rollover is the more straightforward option of the two. With a direct rollover, the funds are transferred automatically from the retirement account to the self-directed IRA. You never touch the funds. Once the old retirement account is closed, the manager of that account will send a check directly to the new gold IRA trustee or custodian.

Step 3: Purchase Precious Metals for Your Gold IRA

Funds deposited into the IRA can then be used to purchase physical gold or other precious metals through a trusted gold IRA distributor like U.S. Money Reserve. The trustee or custodian then stores and safeguards those precious metals for the account holder.

How to Choose Your Gold IRA Allocation

Step 3 is what many people have the most questions about. Asset allocation is up to you, the account holder, and not your financial advisor. That means you’ll need to understand how gold compares to other assets.

After analyzing years of financial data, experts recommend that precious metals comprise as much as 25–30% of your portfolio, with a minimum of 10%. This is because historically, gold has superior long-term performance compared to stocks. And because gold prices aren’t tied directly to the U.S. dollar, prices have fared well over the years and have outpaced inflation.

Ultimately, how much you allocate to gold or other precious metals depends on your financial situation. You may wish to speak with a financial advisor about your asset allocation strategy prior to funding a self-directed IRA.

Can your portfolio benefit from more diversification? Take our diversification quiz to see how protected your portfolio is against market downturns.

How to Avoid IRA Rollover Penalties

An IRA rollover is fairly straightforward, especially if you opt for a direct rollover. However, there are requirements that must be followed, or you could be subject to penalties. To avoid IRA rollover penalties:

Transfer Funds Within 60 Days

If the funds disbursed from the 401(k) are not deposited in the new gold IRA within 60 days, these funds are considered taxable like ordinary income.

Consider Using a Direct Rollover

Since direct rollovers automatically transfer the funds to the new account, there’s much less concern about meeting the 60-day requirement.

Do Not Withdraw Funds Early

As with other IRAs, there is a 10% penalty if self-directed IRA funds are withdrawn when the account holder is under the minimum age of 59.5.

What Are the Benefits of Rolling Over a 401(k) to an IRA?

Social Security, personal savings accounts, stocks, bonds—there are many avenues for funding your golden years, and you don’t have to pick just one route. You can have multiple retirement accounts, like a 401(k) and an IRA.

Many people roll some of their 401(k) money over to an IRA because they want more asset options and more control over the account. Plus, moving money to an IRA could help you streamline your retirement portfolio.

Rolling over part of a 401(k) to an IRA can deliver several other advantages. Financial planners at Bogart Wealth highlight the following benefits:

  • Depending on the bank or broker, an IRA may come with lower fees than a 401(k).
  • An IRA may impose less rules than a 401(k).
  • Payouts from an IRA are easier to carry out after your death than payouts from a 401(k). Certain payout situations may simplify estate planning.
  • An IRA enables you to consolidate 401(k) accounts from several employers into a single account so you can continue saving for retirement wherever your career takes you.
  • An IRA often supplies more asset flexibility than a 401(k) does.

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.” —The Dough Roller personal finance blog

The IRA Advantage of Asset Flexibility

Asset flexibility is perhaps the most attractive benefit of rolling over some of your money from a 401(k) to an IRA.

Usually, a 401(k) plan is focused on buying shares of mutual funds, and it’s an employer’s responsibility to run the plan. The experts at 401khelpcenter.com explain that the employer decides:

  • Who is eligible for a 401(k) plan
  • When and how much an employee can contribute
  • How much the employer is going to contribute to the plan
  • What assets will be included
  • How often assets can be reallocated
  • Whether vendors are needed and which vendors will manage the plan
  • What features are included with the 401(k) plan

That doesn’t leave very much control in the hands of the person who stands to benefit from the 401(k) plan. But with a self-directed IRA, you can take more control over your financial future. You choose the assets at your discretion. You can direct your IRA custodian to add mutual funds, stocks, bonds, exchange-traded funds (ETFs), and even alternative assets to a self-directed IRA.

What Are the Benefits of Rolling Over a 401(k) to an IRA With Gold?

One of the benefits of a gold IRA is that you directly control the assets you put into it, whereas you typically have less control when it comes to assets within a 401(k) and other traditional retirement accounts. A gold IRA also offers a clear and simple way to diversify your portfolio.

Among the alternative assets that you can hold in a gold IRA are precious metals (gold, silver, platinum, and palladium). This type of IRA account can include one kind of precious metal or a combination of those metals as long as they meet the requirements set forth by the IRS.

If you already have a 401(k), you may question whether rolling it over to a gold IRA is worth the effort. Transitioning from a 401(k) to a gold IRA may provide a few key advantages that make it more attractive for you and your beneficiaries.

The benefits of rolling over a 401(k) to an IRA with gold could include:

  • More portfolio diversity
  • The ability to hedge against inflation
  • Fewer restrictions for passing along assets to heirs
  • Additional tax benefits

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 and U.S. Money Reserve Senior IRA Strategist, told Investopedia. “This balanced approach smooths out risk, especially over the long term, which makes it a smart choice for retirement [accounts] like IRAs.

Rolling over part of your 401(k) or an existing IRA into a gold IRA may help alleviate some of the uncertainty you might feel regarding more traditional paper-based assets like stocks. Request our free Gold IRA Information Kit to get more in-depth information that builds on this gold IRA rollover guide or connect with a U.S. Money Reserve IRA Account Executive for personal assistance.


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