Rolling A 401K To A Gold IRA Has Many Benefits
As you continue to build your 401K, you may start to consider diversifying your portfolio. After all, you don’t want to deal with a stock market crash that could see your portfolio cut in half in less than one month.
One of the most popular ways to protect your portfolio from market crashes is by adding precious metals. However, a traditional 401K does not allow ownership of precious metals. That’s where a Gold IRA comes in. When rolling over a 401K or retirement account to a Gold IRA, many questions may arise. That is why the executives at Allegiance Gold will help answer any question that you may have and educate you on the importance of having a Gold IRA. Here, we will take a look at how you can roll over your 401K into a Gold IRA.
What is a Gold IRA?
Gold IRA’s were created from the Taxpayer Relief Act of 1997. With a Gold IRA, you can hold gold bullion as well as silver, platinum, and palladium in your retirement portfolio and enjoy tax deferred benefits. However, be aware that you can not include just any type of precious metal in your Gold IRA. The bullion that you choose for your Gold IRA must come from an approved list by the IRS. Typically, precious metal coins and bullions with more than 99.5% purity will qualify for a Gold IRA.
Another stipulation of a Gold IRA is that the precious metals must be held by an approved custodian. That means that the precious metals are never in your direct possession.
How to Open a Gold IRA?
The first thing that you need to do is open an account with an approved custodian. Allegiance Gold can help walk you through this process. Once you have opened the account, then you can purchase the gold or precious metal bullion for your Gold IRA. Note that it is illegal for you to take any possession of the precious metal. Therefore, you can use a list of brokers provided by the custodian to make your precious metal purchases. Once you have made the purchase, the precious metal bullion will be shipped to the custodian for safe storage. When you reach the IRS approved retirement age, you can sell the precious metals or take physical possession of them. At this time, you would pay the marginal distribution tax on any capital gains.
Why Invest in Gold?
There are a number of reasons why it is a smart idea to diversify some of your retirement savings into gold. Here are some of the top reasons why investors add gold to their retirement portfolio:
- Gold is usually correlated with stocks – Historically, gold will go up when there is a bear market in stocks. This can prevent you from dealing with big drawdowns if you have a “stock only” portfolio.
- Gold holds up well during times of economic crisis – During an economic crisis, people tend to hoard gold which can raise its value.
- Gold preserves purchasing power – For thousands of years, gold has been proven to preserve purchasing power.
How to Execute a 401K to Gold IRA Rollover
Once you have opened your Gold IRA account, you can contact the company that manages your 401K to begin the rollover process. At this point, you will have to choose between a direct or indirect rollover. A direct rollover is simple where the money is transferred from your 401K directly to your Gold IRA. With an indirect rollover, you will withdraw money from your 401K and deposit it into your Gold IRA.
After an indirect rollover, you have 60 days to transfer the money to your Gold IRA custodian or Gold IRA company. If you don’t transfer the funds within the 60 day period, then you will have to pay any capital gains tax at your marginal tax rate. If you are under the age of 59.5, then you will also have to pay a 10% IRS penalty.
Is a 401K to Gold IRA Rollover worth it?
If you have 100% of your retirement in stocks, then you may not be diversified enough to handle a prolonged bear market in equities. That’s why many financial planners recommend that a retirement portfolio have anywhere between 5% to 8% in gold.
The Bottom Line
A Gold IRA may be one of the smartest ways to diversify your portfolio. If you are interested in executing a 401K to Gold IRA rollover, be sure to contact Allegiance Gold. What makes Allegiance Gold the “Top Trust Gold IRA Company“, is that our executives take the time to educate investors and retirees on not just the importance of having a Gold IRA, but why having a Gold IRA can be beneficial to a financial portfolio. To obtain a FREE Gold IRA Guide, contact Allegiance Gold at 844-790-9191 today!