What Is a Gold IRA Rollover?

by Investing 07 May 2022

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On average, typical employees receive an option for a traditional retirement package from their employer. The usual choices include 401(k)s, 403(b)s, or other less popular choices.

This gives them the ability to buy stocks, bonds, and other traditional investments for their retirement.

Are you just starting out in the investment world? Or do you already have a retirement account from your employer?

Whichever answer is true, just know that a gold IRA rollover is an excellent option to add to your investment portfolio.

Typically speaking, most people have the ability to buy traditional investments with their current retirement accounts.

A gold IRA rollover gives them the option to buy precious metals, cryptocurrencies, and other alternative investments for retirement.

It’s definitely important to understand certain critical aspects of a gold IRA rollover. This is very true in relation to another available option to investors, which is the IRA transfer.

We’ll look at the difference between each type of funding and other important aspects of the rollover process below.

Gold IRA Rollover Vs. Gold Transfer & The Differences between the Two

Believe it or not, there are certainly important differences between a transfer and rollover that I’d like to explain today. The IRS clearly defines each of these opportunities, so it makes sense to go over them.

During the rollover, the actual investor will initiate the process with their 401(k) administrator. This individual will cut them a distribution check and mail it directly to their home. This check becomes the account holder’s responsibility. They have 60 days to deposit it into their new gold IRA account or it’s considered a distribution.

With a gold IRA transfer, the 401(k) account administrator is tasked with the job of transferring the money directly to the IRA account custodian that you’ve recently hired to work on your behalf.

This is the safest method because the onus is on your administrator and IRA custodian to make sure your funds are properly deposited into the new account.

You cannot be held accountable if something were to go wrong, which makes it easy to avoid paying early distribution penalties and taxes.

The Rules and Regulations of a Gold IRA Rollover

The Rules and Regulations of a Gold IRA Rollover

As Cayman Financial Review explains, when you initiate a gold IRA rollover, the proceeds of the 401(k) account are mailed directly to you, the account holder. In this case, you become responsible for making the deposit into your new gold IRA account. 

The IRS grants a grace period of 60 days to move the money from one account to the other. If you fail to deposit your rollover funds within the designated time frame, you are responsible for paying a 10% penalty for early withdrawals and you’ll have to pay taxes on this income as well. The only way to avoid the early withdrawal penalty is if you happen to be within the distribution age, which is 59 ½ years old.

The IRS allows account holders to initiate a rollover once every 12 months. Account-holders are allowed to roll over their cash or precious metals, depending on what they choose.

The Rules and Regulations of a Gold IRA Transfer

The Rules and Regulations of a Gold IRA Transfer

The rules of a gold IRA transfer are very simple to understand. The 401(k) account holder simply contacts their administrator to let them know that they would like to move funds from the account into a new or existing gold IRA account.

From here, the account administrator and the IRA custodian take over and they handle the entire transfer process from beginning to and without your personal intervention.

What happens next? The 401(k) account administrator will immediately set aside 20% of your funds to pay the taxes owed on your 401(k) distribution.

They’ll also take the rest of the allotted funds and send them to your IRA account custodian via check or wire transfer.

In most instances, account administrators will usually initiate a wire transfer before physically signing and mailing a check to the gold IRA custodians, so that’s usually what happens 99% of the time.

I personally prefer using the gold IRA transfer over the rollover whenever possible. Why? None of the negative repercussions will land on my shoulders if I would accidentally make a mistake and do not deposit the money on time.

Remember, with a 401(k) rollover, the proceeds from the 401(k) account are mailed directly to you via distribution check. If you fail to deposit the check into your gold IRA account within 60 days, you will pay a 10% penalty and early tax consequences.

You’re much better off choosing a gold IRA transfer whenever it’s feasibly possible. Let the gold IRA account custodian and the 401(k) account administrator take care of moving the money from one account to the other.

It’s their job, they do it often, and they can easily initiate the transfer process in the blink of an eye. They do not need your intervention for any reason, so there’s no reason to choose another option unless you have a personal reason for doing so.

Related Resource: How Gold IRA Companies Can Help You Prepare For Retirement

A Quick Step-By-Step Gold IRA Rundown for Beginners

A Quick Step-By-Step Gold IRA Rundown for Beginners
  • Step #1: Open a gold IRA account – the easiest and fastest way to do this is to begin working with a reputable gold company online. Some great choices include Goldco, Regal Assets, and Augusta Precious Metals.
  • Step #2: Pick your IRA custodian – more than likely, your gold company will recommend their top IRA custodians. You’re better off choosing their recommendation because they already have a connection with this individual so it makes sense to work with their favorites.
  • Step #3: Initiate the rollover or transfer process – now that you have an account and an IRA custodian, it’s time to begin the process. Contact your 401(k) administrator and tell them that you’d like to roll over funds to your new IRA. They’ll either mail you the funds directly or transfer the funds to your new IRA custodian.

Final Thoughts

The rollover process typically takes about two weeks from start to finish. Before long, you’ll have a fully funded precious metals IRA account. Now the fun part begins because you can start picking your gold, silver, platinum, and palladium investments and secure your retirement future.

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