What Is 401k To Gold IRA Rollover And How It's Done
There has been a lot of talks lately about getting a 401k or IRA rolled over to gold. From the name itself, it can be deduced that it is simply a process of transferring the value of assets in a standard fiat currency-based Individual Retirement Account to a gold-backed IRA. Typically traditional IRAs and Roth IRAs could only hold cash, stock, and bonds.
A Gold IRA allows investors to invest hard physical assets in their IRA portfolios. This came about as a result of the Taxpayer Relief Act of 1997 that allowed certain types of precious metals to be held in IRAs. These IRAs called alternative asset or self-directed IRAs, are usually limited to hold only certain precious metals such as gold, silver, palladium, and platinum. The purity standards for each of these metals are specified by Tax Law that determines which metals are approved assets.
Gold and precious metal IRAs are used by investors for portfolio diversification and by anyone concerned about a financial crisis that could cause a stock market drop and another recession like the one in 2008.
How to do a Rollover?
Certain rules and regulations have to be followed to roll over the assets in a 401(k) or IRA. The same rules apply for a gold IRA rollover, but there are even stricter regulations. The IRS stipulates 3 ways to complete a gold rollover:
1. Direct Rollover where your retirement plan administrator will issue a check directly to your new IRA with no tax.
2. Trustee to Trustee Rollover where the trustee of your IRA will facilitate a rollover to the trustee of your new IRA without withholding any taxes.
3. 60-Day Rollover where a check will be issued to you directly to invest in another IRA. If this is done within 60 days there will be no taxes withheld.
Special Rules Concerning a Gold IRA Rollover
If you have a traditional or Roth IRA that you want to roll over into a gold IRA, the first thing to do is decide whether you would like to invest in actual physical gold, a gold mutual fund, in gold company stock, or in an exchange-traded gold fund. Actual gold must be in the form of bullion or gold coins that meet IRS purity standards; cannot be held in any type of home storage; must be stored by an IRS-approved custodian.
A self-directed IRA will allow you to hold a wider range of assets including gold and precious metals such as silver, platinum, and palladium. You will need a custodian to create and administer your account. This is normally a bank, but it can also be a financial institution such as a credit union, a trusted company, or a brokerage firm. The custodian must have IRS approved asset custody services and facilities approved by state and federal agencies to store physical gold. An approved custodian will have relationships with established brokers who can buy the gold on your behalf.
The choice of a broker is important as they will need the qualifications and reputation to full fill the task of choosing the best gold and must have the appropriate insurance, licenses, and bonds to protect your investment. A good broker should be well-versed in tax laws related to Gold IRAs and be responsive to your needs as an investor. Once the gold has been purchased your new gold IRA will be funded and the physical gold stored with the custodian.
In a nutshell, the benefits of a gold IRA are:
– Stability ” the value of gold remains stable, especially in the long-run.
– Tax benefits ” although selling gold for paper money requires tax to be paid, gold IRAs have certain facilities that prevent paying a larger amount of tax that would normally be required.
– Protection ” no need to worry about an economic downturn or inflation.
It is important to understand what a 401K to Gold IRA Rollover is. This is a savings account that was created to allow workers the opportunity of investing portions of their earnings before taxation. A rollover therefore simply means that savings from these accounts are transferred into a gold account. To find out more visit Goldco their free kit explains all.