How to Convert a 401(k) to Gold Investment

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Gold has become a popular investment vehicle for retirement accounts. Though gold has allure in its physical form, the real attraction is its inherent value, which holds up despite the erosion of the purchasing power of paper currencies. 401(k) retirement funds can be rolled over into an Individual Retirement Account specially designated to own gold. As long you don't take physical possession of the gold or make any other early distribution from the fund, you will not be subject to income taxes on the transfer.

  • Identify a custodian for a gold IRA. Locate an IRA brokerage firm, such as CMI, that handles gold IRAs. The IRA custodian probably will be able to guide you through the transfer. You'll need a form instructing the custodian of your current 401(k) to roll over the funds.

  • Send rollover instructions to your 401(k) custodian. The IRA custodian will send the forms directly to your 401(k) custodian or send the forms to you to do so. The 401(k) custodian might charge a fee for effecting the rollover, but some IRA brokers will pick up this fee for you as a courtesy.

  • Direct the allocation of funds in your new IRA. When the 401(k) funds are transferred to your new IRA, you might have control over how the funds are invested. If you are in a gold and silver IRA, you might be able to direct how much is allocated to each metal. Because only qualifying bullion of high fineness can be legally owned by a gold IRA, it might take some time and money for the broker to find and buy the metal on your behalf.

Tips & Warnings

  • One very flexible option is to create a self-directed gold IRA through the formation of a trust. The trustee must retain control over the investments and possession of the metals, but can receive significant levels of instruction from you. Otherwise, gold IRAs come in the same basic types as other IRAs: traditional, SEP and Roth.
  • Account minimums of $5,000 or more often apply to gold IRAs. A change in your cost basis may apply if rolling over your 401(k) involves the sale of non-cash assets. IRA brokers may or may not accept non-cash assets to start a gold IRA. If you receive a check from your 401(k) instead of having the funds transferred directly, you face taxes and penalties if the funds are not deposited in a qualifying retirement account within 60 days.

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