How To Move 401k To Gold Without Penalty: The Ultimate Rollover Guide

By John Otis

January 31, 2021

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Your 401(k) may seem like your ticket to a happy retirement, but you might not feel as cozy knowing how tied it is to the stock market?

Without diversity or a means to invest in assets like real estate, your 401(k) could be in jeopardy if the market faces troubles too. It could be in your best interest to get an individual retirement account (IRA) instead. This article will explain how you can turn your 401k into an IRA.

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Since a 401(k) is employment-based, figuring out what to do with it when you start a new job can be a little frustrating.

You could cash it out or have it merged with your next employer’s 401(k).

It’s a big decision to make. Your income tax has to be considered, as do your retirement plans. A comfortable retirement could hinge on this decision.

The amount of money in the account is also significant to consider.

With a smaller amount, like $3,000, cashing out isn’t the worst decision. You can take care of some essential expenses that you’ve needed some extra scratch for, such as getting a new dishwasher.

However, if your 401(k) has a large balance, leave your money alone as best as you can. Cashing it out means you’re liable for some severe tax penalties.

You may also find that your new job doesn’t let you merge your old 401(k) into your new one.

That being said, they don’t get to decide whether or not you roll it into an IRA.

You don’t have to decide to go for this right away. It’s just good to know you have the option.

Still, let’s talk about how you can get an IRA out of a 401(k).

Why Gold?


Ever since March 2020 and the raging pandemic, central banks have printed over 75% of the money in United States history. You read that right. They have printed trillions of dollars (about three quarters of ALL money in history) out of thin air within the last year.

Why should this concern you when you are getting close to retirement? That is an astonishing number and causes a very real threat of massive inflation, and thus severe devaluation of your dollars, on the horizon.

With the uncertainty in the current economic and political climate, less and less people trust central banks and governments to make good financial decisions and be fiscally responsible.

Their poor decisions put our purchasing power in jeopardy. And as someone getting close to retirement, the last thing you want is for an economic collapse to decimate your savings.

Gold is not tied to the stock market or other traditional assets and has historically held an inverse relationship to the dollar and dollar based assets. It's great in inflationary periods of time.

This is great for protecting the value of your dollars so you can retire comfortably and not worry about a sudden 40-50% (or more) drop in your retirement money.

The rollover IRA option we mention in this article ideal for upcoming retirees. And specifically, a Gold backed IRA is an option becoming more talked about, especially with what we pointed out about today's economic and political climate.

These are all reasons to invest into gold and do it quickly before inflation hits. 

What Are The Options For Your Current Plan?


With a 401(k) and a job ending, there are four things you can do:

CASH OUT

Cashing out a 401(k) is quite simple. You tell your trustee to turn your account into liquid and get a check sent to you.

From there, your account is closed, and there’s nothing else you need to do.

Pros: Assuming you don’t have much in the account, liquidating your 401(k) is logical. You can use the money for debt or other important expenses.

Additionally, a low tax liability can mean you won’t be penalized much. You can squash credit card debt interest as well.

Cons: Your withdrawal will be taxed, and this can be difficult if you’re in any tax bracket higher than 12 percent.

Also, the IRS taxes anyone younger than 59-and-half 10 percent for early withdrawals.

KEEP IT WHERE IT IS

You don’t have to take any action with your old plan. It can just stay where it was before.

The only exception would be if your employer had a rule requiring account funds to be transferred when employment ends. Otherwise, your money can stay right there.

Pros: This doesn’t necessitate any efforts from you. Your 401(k) might have had some excellent choices for investment and plan performance, and you decide it’s best just to leave it be.

Cons: If you don’t like the 401(k) design, it doesn’t make much sense to choose this option.

It could also accumulate yearly maintenance costs, among other expenses, which could be more of a pain than it’s worth.

Letting multiple 401(k)s from different jobs sit could mean you have a fee to pay on numerous accounts.

ROLL IT OVER TO YOUR NEW EMPLOYER

In this plan, you merge your old plan into your current one.

After this is done, you can enjoy all of the fruits of your new 401(k).

Pros: This is an excellent option if your new job comes with better investment strategies and/or reduced fees.

Cons: Your new company may be prevented from doing this.

It may also turn out that the new plan doesn’t let you do nearly as much, investment-wise, and comes with higher costs.

401K TO GOLD IRA ROLLOVER

You don’t have to roll your 401(k) into another one. A great alternative is to put it in an IRA instead.

Pros: This lets you put your 401(k) finances into an IRA. You can have a lot more choices for investments, as well as smaller costs.

Having a good trustee on your side is also crucial. It should be someone with lots of investment experience who can advise you and explain some of the more complex aspects of investing.

Cons: This isn’t the best decision if you don’t feel at least somewhat confident with investing.

If you want to entrust the decision-making to another party, you can get a robo-advisor to handle your account.

There can also be some legal benefits lost when you take money from a 401(k) and put it into an IRA. We talk about that more in an upcoming section.

Advantages of Moving 401k To Gold IRA


The best reason to get a 401(k) turned into an IRA is that you have so much more control.

These are some of the things you can control when you have an IRA.

  • Ability to pick trustee - With an IRA, you can pick the investment platform you use. It has customer care available 24 hours a day, seven days. It also has lots of great aids for helping you learn more about investing. You can even find a company with offices in your area. 
  • Make your own investment decisions - With 401(k)s, your investment options may be pretty limited. IRAs have so many more choices for investing. Besides money, you can also invest in bonds, real estate, stocks, options, and precious metals. They also can include a robo-advisor in your plan. 
  • Fees Control - A fear of fees might turn you off from investing, but they’re actually a lot less egregious than you might think. The majority of brokers don’t charge any fees, and a robo-adviser can handle your portfolio at a totally reasonable rate. Your investments can more than withstand these fees.
  • Funds access - Generally speaking, you shouldn’t withdraw funds from your retirement account before you’re supposed to. However, IRAs are a lot better for this than 401(k)s or any other work-based plans.
  • Roth IRA option - You may want to convert 401k into physical gold in the form of a Roth IRA, either partially or completely. These IRAs let you take tax-free distributions during retirement. They also don’t have required minimum distributions once you turn 70-and-a-half. There are some jobs that have Roth 401(k)s, but it’s not the norm.

Disadvantages of Rollover 401k to Gold IRA


There are some disadvantages to rolling your 401(k) into an IRA. Both these and the advantages merit joint consideration. 

  • No separation from service exemption - While it’s typically discouraged to withdraw from your retirement account before you turn 59-and-half, it’s easier when you have a 401(k). That’s because they waive the 10 percent tax penalty for early withdrawals at certain ages, like 55, due to the separation from service exemption. However, IRAs don’t have such an exemption.
  • More law protections with 401(k)s - Since 401(k)s are ERISA plans, they have a lot more legal protections. This means your funds in these accounts won’t be under threat in civil cases, bankruptcy, or creditor demands. IRAs still have some protections, however. Both standard and Roth IRAs allow as much as $1,362,800 to be untouchable during bankruptcy cases. Many states also have laws stating creditors can’t go after IRAs.
  • Ease of merging with a new job plan - It’s pretty easy and common to merge an old plan with a new one, but the same doesn’t necessarily apply to an IRA.

Roth IRA vs Traditional


This part of the guide assumes you’ve firmly decided to roll your 401(k) into an IRA.

Here comes the next big decision: a traditional or Roth IRA? We’re going to delve into each type.

How Does A Roth Work?


Choosing to roll over into a Roth IRA can feel like a financial hit initially, but it can be quite a relief in the long-term.

The reason is that rolling over between a 401(k) into a Roth IRA leads to tax liability.

Income tax applies to the sum total of your 401(k), not including post-tax contributions. However, there’s no 10 percent penalty.

Assume your state and federal marginal income tax rate is 30 percent, and you roll a $100,000 from a 401(k) into a Roth IRA.

Due to all over the rollover being subject to taxes, you’ll owe $30,000 between both tax rates.

That may send you reeling a little bit, but there are promising developments on the horizon.

When you turn 59-and-a-half, you can get tax-free distributions from your Roth IRA. The only requirement is that you’ve had the account for a minimum of five years.

This is a good plan if you believe you’ll be in an upper tax bracket when you retire, as well as if you think tax rates are going to climb quite high in the years to come.

Additionally, Roth IRAs are the only retirement accounts that don’t require RMDs.

You’ll have to take distributions starting at 70-and-a-half with other plans, including traditional IRAs. Roth IRAs let you determine how much you take out.

It works very well if you don’t want your money to run out before you pass.

Give your Roth IRA as much time to increase as you can, and only go into it when you don’t have any other wells to pull from.

How Does Traditional Work?


All of the pros and cons we’ve talked about so far are in a traditional IRA.

The greatest pro when rolling over into a traditional IRA is that you don’t have to deal with any tax penalties.

You take the 401(k) funds, put them into the traditional IRA, and cite it on your next tax return. There’s no income tax taken on it, nor is there any penalty for early withdrawal.

Your money can stay snug in your traditional IRA, with no taxes to worry about as you wait until your of the age for consequence-free withdrawals, 59-and-a-half.

When this happens, your withdrawals will be like a new source of income for you.

You can take out funds before then, but you’ll have to deal with income tax as well as the 10 percent tax penalty. However, you can circumvent this if you have an exemption you can use.

After you turn 70-and-a-half, you have to take out RMDs. Your life expectancy will help to determine this.

All About Fees


Should you go for an IRA, you need to know about the various fees.

A good thing to know is that the fees with self-directed IRAs are pretty much always less than ones for 401(k)s.

These are some examples:

Annual fees - IRAs usually don’t have annual fees. They can have various names, and they’re often not too much, but it’s still good to know you can save your money even further with an IRA.

Trading commissions -
Brokerages typically waive trading commissions, which are fees for trades with stocks, options, and exchange-traded funds (ETFs). However, you may be charged fees for different kinds of investments, such as mutual funds.

Load fees -
Mutual funds have sales charges known as “load fees.” They can be up to three percent. Nonetheless, you can find that lots of mutual funds operate as “no-load.” These fees can be circumvented by keeping the funds.

Management fees -
Management fees are for managed funds. Accounts with robo-advisers would be an example of this. These accounts usually have yearly costs, between 0.25 and .50 percent. If your IRA has $100,000 in it, with a 0.25 percent robo-advisor management fee, you’d be charged $250 each year. Typically, this is taken out as a pro-rated amount each month.

Expense ratios - Expense ratios are for marketing and administrative costs. They’re known as 12b-1 fees and cost up to one percent per year. However, there are funds with fees lower than 0.20 percent. These fees aren’t stacked on top of your fund. They’re integrated into it, which means the net return is lessened.

Who Are The Best Gold IRA Rollover Custodians?


After you’ve chosen to turn your 401k into a gold IRA, you need to decide how you’re going to invest it.

For self-directed investing, such as dealing with stocks, bonds, funds, and real estate investment trusts (REITs), you need to choose a trustworthy broker to handle your IRA.

There are lots of brokers with no-limit investment opportunities who don’t charge anything for trading fees, such as:

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Should you want to stick with ETFs or mutual funds, your best bet for a broker may be Vanguard.

Vanguard lets you trade with stocks as well as different kinds of securities. However, they also have trading fees to deal with.

The good news is that they have ETFs and mutual funds with no fees.

Since many professional portfolios include Vanguard funds, you can feel a lot of security when you’re using their services.

How To Start The Process?


401k to IRA rollovers have two options.

First, you can do a direct rollover.

With this, you directly transfer 401(k) funds into an IRA account with a trustee for help.

The other way is to do an indirect rollover.

With an indirect rollover, you have the funds sent to you. Then, you put them into your IRA.

The IRS requires you to transfer these funds in no more than 60 days. Failing to do this could make your transfer deemed to be a 401k distribution.

A direct rollover is the better option.

You won’t have to worry about the 60-day deadline with a direct rollover or any of the financial penalties that would come with that.

Talk to your IRA custodian, and tell them how you want your rollover IRA to gold accomplished.

Since this is what they do for a living, they’ll know exactly what needs to be done.

They’ll talk with who’s handling your 401(k) and work to guarantee your funds are properly deposited.

Is It Worth It?


Lots of people are rolling over their 401(k)s to IRAs.

It makes a lot of sense when you see the advantages of an IRA.

When the rollover is finished, you’ll have a lot more choices with an IRA compared to a 401(k).

You can choose your trustee, investment opportunities, and fees.

It lets you feel like you’re in a lot more control and that you have more say in your retirement.

You can also get a new 401(k) going with your new job. Imagine how good it’s going to feel come retirement time when you have two bountiful accounts to withdraw from?

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John Otis

About the author - John Otis

In the modern age of reckless government spending and central bank money printing, my sole objective is to help others protect their savings, retirement, livelihoods, and purchasing power from currency devaluation. Otis Gold has been featured in Financial Times, Yahoo Finance, Kitco News, Motley Fool, Seeking Alpha, and more. If you have any questions or comments, leave them below. Welcome!


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