Can I Use My 403(b) To Invest In Gold?
Adding gold to your retirement is one of the smartest choices that you can make. Therefore, you may be wondering if you can add gold to your 403(b) plan.
If you don’t have a 403(b) plan, don’t worry. We will explain what a 403 (b) plan is and show you which gold investments are allowed on the plan.
What Is a 403(b) Retirement Plan?
A 403(b) retirement plan is a retirement account that is designed for public school employees and employees of tax-exempt organizations. Employees that can open a 403 (b) plan included school teachers, school administrations, librarians, doctors, nurses, and government employees.
403(b) plans function much like the traditional 401K retirement plans. A participant can contribute to their account through payroll deductions up to $20,500 for the 2022 tax year. All capital gains in the plan are deferred until the participant can withdraw funds at 59 ½.
403(b) Plan Rollover Rules & Limitations
If you have a 403(b), you can roll them into an Individual Retirement Account (IRA), other 403(b) accounts, a 401(k) plan or other select qualified plans without incurring any tax penalties. Here is an overview of some 403(b) rollover rules:
- When you receive funds from your 403(b) for a rollover, you have 60 days to complete the process. If you fail to do this, the IRS will treat your money as a taxable distribution. Additionally, if you are not yet 59 ½ years old, the IRS will also impose a 10% penalty on the withdrawal on top of the normal income taxation.
- You are limited to one rollover per year from a 403(b) into an IRA. This one-year period begins on the date that you receive your 403(b) distribution. This applies separately to each IRA that you own.
- You cannot use the cash from your distribution to purchase investments in the period between receiving your 403(b) distribution and establishing your IRA.
It is advised that you select the option to perform a “direct rollover” with your 403(b) funds. In a direct rollover, you never receive a check for your distribution; rather, your 403(b) plan provider will transfer the money directly into you new IRA plan.
Investing In Gold In A 403 (b) Plan
There are several ways that you can invest in gold with a 403 (b) plan. Here is a look at the various gold investment vehicles and which ones are allowed.
- Physical Gold
Physical gold, including gold coins, gold bars, and other gold collectibles, is not allowed in the 403 (b) retirement account. This follows the same rule as a traditional 401K account. If you would like to invest in physical gold for retirement, then you will want to open a gold IRA account.
With a gold IRA account, you will be able to deposit allowable gold bullion into your retirement plan. Much like any other investable asset, capital gains taxes are deferred until you withdraw your assets at 59 ½.
While you are not allowed to add physical gold to your 403 (b) account, all is not lost. There are other ways that you can add gold to your 403 (b) accounts.
You can add gold exchange-traded funds (ETF) to your 403 (b). With a gold ETF, you don’t purchase gold, you are purchasing an exchange-traded fund that holds gold. Therefore, the change in price moves pretty much in lock step with the futures price of gold.
There are two major types of gold ETFs. There are gold ETFs that are backed by physical gold and gold ETFs that are backed by gold futures contracts. Most gold investing purists will want to opt for physical gold EFTs. That’s because there is some fear that gold futures ETFs could run into trouble if there is huge mispricing in the gold market.
The most popular futures-based gold ETF is the SPDR Gold Trust (GLD).
Adding Gold To Your 403 (b) Plan
As you can see, there are several ways to invest in gold for your 403 (b) retirement account. Before you make any investment decision, it is recommended that you consult with a retirement investment specialist.