Rolling over a 401 k to a Roth or traditional IRA has become fairly common. Many individuals decide a rollover is the best option when leaving an employer because there are benefits to keeping retirement savings in the same place. In many instances, this means diversifying your retirement savings. This is a good option since your assets are not tied to the economy as closely. When this is the case, you may want to consider initiating the steps to handle a 401 k to Gold IRA rollover.

Continue reading to learn Gold IRA plan basics and how to open a new IRA simply by rolling over a 401 k. You will also learn the best way to determine if this type of strategy works well for your retirement goals. If you believe you need help with questions regarding investments, your best option is to think about working with a financial advisor.

What Is a Gold IRA?

One of the most common questions we are asked is what is a Gold IRA? This is simply a long-term retirement account. As the account holder, your precious metals will be held by your custodian. Even though the most common name is a Gold IRA, you still have the ability to purchase more than gold for the plan. You can also use your account to hold specific types of silver, palladium and platinum. In most cases, a Gold IRA is a self-directed IRA. This means the account can hold more diverse investments than allowed with a traditional IRA.

We believe it is important to mention not all metals made from these materials can be held in your account. A list of very specific requirements for fineness has been established by the Internal Revenue Service. The precious metals you purchase must satisfy these requirements before they can be held in your Gold IRA.

How to Open a Gold IRA

If you are wondering how to open a Gold IRA, you will be pleased to learn the process to open an account is fairly straightforward. The first step you need to take is to locate a custodian. You are legally unable to keep your precious metals yourself. When you use your IRA to purchase gold, it must be held by a custodian. There are several different ways to find a custodian including contacting a local bank, trust company or credit union. We recommend conducting research to make certain the company you choose has a good track record for Gold IRAs providing a good performance.

You also need to find a metal dealer or broker capable of selling you gold. In many instances, you can receive a list of brokers from your custodian. Since they have already worked with these brokers, this is a good place to begin your research. Once you have located a broker and a custodian you are satisfied with, you can begin conducting the steps to handle a 401 k to Gold IRA rollover. You can also open a new account. You are now able to start purchasing your precious metals. As you reach retirement age, you have two options.

You can either liquidate your precious metals for cash or collect your metals. Whichever action you take, it will be taxed by the IRS as a distribution.

Why Invest in Gold?

The best way to answer the question of why invest in gold is because it one of the precious metals with an intrinsic value. A lot of people view gold as a hedge against both other investments and stock market volatility. Others believe gold is an excellent investment because a day may come when the value of other investments and paper money is lost due to a geopolitical catastrophe or natural disaster. If this happens, one of the only valuable investments remaining will be gold.

Although this opinion is both understandable and logical, it is not usually a good idea to invest in only gold. Instead, gold should be used as an important part of a diversified portfolio.

Steps to Handle a 401(k) to Gold IRA Rollover

Once you have established your Gold IRA, the next step is contacting the company responsible for the management of your 401 k account to start the rollover process. The first step is determining if you prefer an indirect or a direct rollover. If you choose an indirect rollover, your funds are withdrawn from one account prior to being deposited into another. If you select a direct IRA rollover, your funds are directly moved from one account to another. The simpler option is usually a direct rollover because the risk of being penalized by the IRS is decreased.

When you initiate an indirect rollover, you receive 60 days from the date your funds are received to transfer everything to either a Gold IRA company or your custodian. If your transfer is not completed within this 60 day period, your funds are a taxable withdrawal. If you have not yet reached the age of 59 and one-half, an early withdrawal penalty of 10 percent will be applied.

No matter which option you choose for a rollover, you need to make certain all of the special rollover requirements of the company have been satisfied. Once these requirements have been met, a check for your funds will be sent by the company to either your Gold IRA custodian or yourself. Once this happens, your will know your 401(k) to gold IRA rollover has been successfully completed.

Should You Do a 401 k to Gold IRA Rollover?

At this point, you are most likely wondering should you do a 401 k to Gold IRA rollover. This depends on whether or not you are interested in diversifying your savings for retirement and if you are interested in an option that does not mirror either the volatility of the stock market or paper currency. If you are interested in either one, you should consider rolling over your 401 k into a Gold IRA.

Both investments in Gold and Gold IRA plans are often appealing because in most instances the direction of the stock market and the price of gold are opposite. This means if the performance of your securities investments is poor, the chances are good your gold investment is increasing and vice versa. This is the reason gold is a popular hedge for other investments by so many investors. It is not common for the portfolio of an investor to contain only one asset class or entirely gold.

Companies selling gold often use a marketing strategy showing the contrast between Gold IRAs and stock market risks and volatility. What is important is gold almost always has at least some value. We also believe it is important to understand no investment is completely risk-free. The price of gold has the potential to rise and fall. An investment in physical assets also has the potential for theft. The majority of custodians provide insurance against this particular scenario.

Tips on Rolling Over Your 401k to Gold

There are tips on rolling over your 401k to gold every investor should be aware of. Some of the best tips are detailed below.

• Work with a financial advisor to understand the pros and cons of using a variety of investment strategies to help eliminate future headaches. Most advisors have a matching tool where you answer questions regarding your financial preferences and needs. Once you have finished, the tool matches you with three qualified local advisors.
• Before you decide if you prefer a Roth IRA or a traditional IRA, consider your income. Make a comparison between this income and your retirement income. Decide when you would prefer to be taxed. If you choose a traditional IRA, you will be charged taxes when your funds are withdrawn. You will pay taxes with a Roth IRA before your money is even invested.
• To ensure saving for your retirement is easier, figure out how much money you need to save. You need to have enough money to maintain the same lifestyle you are enjoying now once you retire.
• If you want an easier process, consider a direct rollover IRA. Your assets or cash will simply be moved between retirement accounts. You can perform this transfer easily without any need to touch the money or assets yourself. An added advantage is taxes are not withheld from your IRA or 401 k rollover.
• There are certain aspects you need to consider before you roll over your old IRA or 401 k plan into a self-directed precious metal IRA. Once this has been determined the process is easier. This includes your choice of depository, custodian, ongoing contributions and the types of precious metals you intend to purchase.
• You should conduct research before selecting a custodian for your Silver or Gold IRA account. Make comparisons such as how long the custodian has been in business, reputation, expenses, fees and customer reviews. You can make comparisons online directly from your office or home.
• You should take the same steps for a depository as you did for a custodian. There are a lot of approved depositories available in many different locations. Take the time to compare the expenses and fees. Find out if the depository provides insurance and check on the level of security.

Many investors decide to purchase precious metals including silver and gold as a hedge against the stock market and inflation. Many are also interested in portfolio diversification. Precious metals are another asset in addition to stocks and bonds. By purchasing silver or gold you can add another layer of protection and diversification to your portfolio. Since there is little correlation between precious metals and stocks and bonds, they are one of the most effective forms of diversification available.

Bottom Line

Making an investment in gold is often an excellent way to diversify your asset classes and retirement portfolio. You can decide between purchasing gold company stock, physical bars and coins or both. If you are interested in diversifying your portfolio in a new direction and do not want any investment following the economy or stock market too closely, one of your best options is rolling over your 401 k into a Gold IRA account.

Diversifying your investments is always important to help ensure your retirement. Including several different classes of assets is an effective retirement strategy. You also receive protection from risks on every side.