Many American retirees and investors are considering moving retirement funds from an existing account such as a 401(k), a Roth IRA, a TSP, an Inherited IRA or another plan into a Gold IRA, which is essentially a special type of Self-Directed Individual Retirement Account that can hold physical gold. Now, there are three ways you can open and fund such an account: a gold IRA rollover, a transfer or a simple cash contribution. We’ll cover it all in detail in this article…
Best gold IRA accounts in 2023: (white-glove service)
Noble Gold Investments (Best overall gold IRA company)
Augusta Precious Metals (Best for High-Net-Worth)
Silver Gold Bull (Best for Gold Bars)
(Detailed Reviews Below)
A Gold IRA offers a distinct advantage over an employer-sponsored plan such as a 401(k), in that it enables investors to invest in physical gold bullion – or any of the other precious metals such as silver, platinum, or palladium. In contrast, employee-sponsored IRA accounts only allows investments in paper assets, such as stocks, bonds, and mutual funds.
Here is a comparison table of the four main ways to fund a Gold IRA account:
(IronMonk Solutions, sponsored) A comparison table of the four main ways to fund a Gold IRA account.
Moving money from an existing account such as a 401(k) or TSP into a Gold IRA isn’t a complicated process. However, investors do need to be careful to follow all the applicable IRS (Internal Revenue Service) rules in order to avoid incurring any tax penalties.
There are three avenues for funding a Gold IRA: a gold IRA transfer, a rollover or a cash contribution. This article explains both processes so that you can clearly understand them both and make an informed decision on which works best for you.
Why Roll Over or Transfer an Existing Plan into a Gold IRA?
The increase in popular interest in investing in gold and silver is due primarily to the current economic conditions. The overall economic environment is very uncertain, inflation has risen rapidly since mid-2022, the real estate markets have experienced a major downturn due to high interest rates and the markets have been very volatile overall.
Historically, gold has proven itself to be a reliable hedge against market uncertainty. It is one of the very few investment assets that has consistently kept pace, or even outperformed, during periods of recession or economic turmoil. Another advantage that investments in gold offer is that they can help investors to create a more widely diversified overall retirement portfolio.
Roth and traditional IRAs come with substantial tax advantages for investors, so investing in a Gold IRA provides a way to minimize any tax liabilities on your retirement investments. A Gold IRA or Silver IRA can be set up as either a traditional IRA or as a Roth IRA. Gold IRAs have only been available since the Taxpayer Relief Act of 1997 was passed, so many investors aren’t even aware of them as an investment option. Now let’s look at each of the three ways you can fund your new Gold IRA account…
What is a Gold IRA Transfer?
Doing a transfer from an existing retirement plan to a Gold IRA is one of the three methods of moving money into a precious metals IRA. As a reminder, the three methods are:
A Transfer
A Rollover
A Cash Contribution
A transfer of funds from an existing or previous IRA or 401k into a Gold IRA is the simplest of the methods of safely moving your money and avoiding triggering any tax liability. With a transfer, money is simply sent by one custodian trustee (e.g.: the trustee of your 401(k)) to another custodian trustee (the trustee of your Gold IRA).
After establishing a Gold IRA with the help of a Gold IRA company, all you have to do is put in a request with the administrator of your existing plan. That person is known as a custodian trustee, which simply means they manage the funds in your retirement account.
You instruct plan’s custodian or trustee to transfer the money you want to be sent to the custodian trustee of your new Gold IRA. (A Gold IRA company will help you get set up with a custodian trustee for your Gold IRA.)
With a Gold IRA transfer, there is no chance of incurring any tax liability, as you never take possession of your funds at any moment. They are simply transferred from one eligible retirement account custodian to another. You will get an IRS Form 1099-R that reports the transfer of funds, but the form will show the IRS that the movement of your money isn’t a taxable event.
What is a Gold IRA Rollover?
The other way to shift retirement investment funds into a Gold IRA is by doing a rollover. Doing a rollover involves a two-step process that you must get right.
First, the money that you want to move is disbursed to you by the custodian in the form of a check usually.
Second, you deposit the money into your newly established Gold IRA custodian.
There’s an important IRS rule you need to abide by when using the rollover method. The rule is simply that you have to deposit the money you receive from your 401k into your Gold IRA within 60 days from the withdrawal date. If you don’t redeposit the money into another eligible retirement account within 60 days, it will be subject to potential taxes and tax penalties.
Rollovers can be tricky
There is one somewhat tricky part to using the rollover method. Per IRS regulations, the trustee of your existing account will only disburse to you 80% of the money that you ask to withdraw. They will send the other 20% to the IRS to cover any tax liability that may arise. You’ll get that 20% back the next time you file your taxes, but in the meantime, in order to avoid any tax liability, you have to deposit into your Gold IRA the full 100% of your requested withdrawal. In short, that means that you might have to put up that 20% of your total requested withdrawal yourself while you wait to be reimbursed by the IRS.
As you can see, the gold IRA transfer method is much easier and stress-free, as you don’t need to worry about a 60-day deposit period, and most importantly, you don’t need to wait for that missing 20% that the IRS will hold in case of a rollover.
IRS Rules & Tax Regulations on Gold IRA Rollovers/Transfers
A Gold IRA is basically a self-directed IRA (SDIRA), which simply means that you make all the decisions on which investments to purchase for the account.
There are three important IRS rules on Gold IRA investments and a reputable gold IRA company should be able to explain them all to you.
The rules govern what type of investments can be held in the account, how the account is administered, and how Gold IRA investments are stored.
A key benefit of using a trusted gold IRA custodian to set up your Gold IRA is tha they will help ensure that your account complies with all the IRS’ regulations and tax laws.
1) Rule One: What Investments Can be Put into a Gold IRA
First, only physical precious metals – bullion or coins - qualify as acceptable Gold IRA investments. Paper assets, such as gold mining stocks, are not allowed. Second, the precious metals purchased for a Gold IRA must meet minimum purity requirements. Gold, platinum, or palladium bullion or coins purchased for a Gold IRA must have a minimum purity of 99.5%. Silver coins or bullion must meet an even higher purity standard – 99.9%. A Gold IRA company can inform you about what coins or bullion are acceptable Gold IRA investments.
Precious Metal Minimum Purity Requirements
Gold 99.5%
Silver 99.9%
Platinum 99.95%
Palladium 99.95%
NOTE: There is one exception to the IRS rule on purity, offered for American Gold Eagle coins. These coins, produced by the US Mint, are only 91.67% pure gold, but are nonetheless allowed as Gold IRA investments.
Collectible coins, such as the popular $20 Saint-Gaudens Gold Double Eagle gold coin from the early 20th century, are not acceptable investments for a Gold IRA, typically because they fail to meet the IRS’ requirements for purity.
2) Rule Two: How a Gold IRA is Administered
A Gold IRA must be administered by an IRS-approved custodian trustee. Although the investor in a Gold IRA makes all the decisions about the investments to go into their account, the decisions must be executed by the account trustee. Thus, when you want to purchase coins or bullion for your Gold IRA, you inform your custodian trustee and they will make the actual purchase and arrange for it to be sent to your Gold IRA storage facility. The custodian trustee for a Gold IRA also handles any necessary record-keeping and IRS reporting. A Gold IRA company can either provide you with a custodian trustee directly or refer you to one that you can make your own arrangements with.
NOTE: Home storage Gold IRA’s are NOT allowed. In fact, a couple got in deep trouble with the IRS after attempting to hold their precious metals at home after investing in a gold IRA, as reported by the Wall Street Journal. Your gold must be stored at an accredited vault.
3) Rule Three: How Gold IRA Investments Must be Stored
All Gold IRA investments must be kept in an IRS-approved storage facility. You are not allowed to hold Gold IRA investments in your personal possession. Arranging for proper IRS-compliant storage is another thing that a Gold IRA company can help you with. Brinks and the Delaware Depository are two of the most commonly used Gold IRA storage facilities.
Other rules to keep in mind when it comes to Gold IRA accounts:
Contributions: Contributions to a Gold IRA are subject to the same annual contribution limits as traditional IRAs. For 2021, the contribution limit for individuals under age 50 is $6,000, while those age 50 and over can contribute up to $7,000.
Taxation: Like traditional IRAs, contributions to a Gold IRA are typically tax-deductible, meaning that they can reduce an investor’s taxable income for the year in which the contribution is made. However, when funds are withdrawn from the Gold IRA, they are subject to ordinary income tax.
Required Minimum Distributions (RMDs): Gold IRAs are subject to RMDs starting at age 72, which means that investors must begin taking distributions from their account each year. The amount of the RMD is based on the investor’s age and the value of the account, and it is subject to ordinary income tax.
Best Companies for Gold IRA Transfers or Rollovers
There are numerous companies that specialize in offering Gold IRAs and will assist you through either a rollover, a transfer or a cash contribution to your Gold IRA. They differ in the level of services that they provide, the fees they charge, the ratings/reviews they have and the precious metals bullion and coins that they offer for sale.
The following are considered to be three of the best Gold IRA companies for 401(k) transfers or rollovers:
Noble Gold Investments - Best Overall Gold IRA Company
(Noble Gold | IronMonk Solutions, sponsored) Noble gold logo.
Phone: 626-605-3152
ADVANTAGES
Some of the LOWEST markups on bullion coins
Low minimum required investment ($5,000)
Focus on educating new customers
Full pricing transparency
Transparent management
DISADVANTAGES
Newer company (founded in 2017)
Cofounder has left the company
Request free gold IRA kit from Noble
Noble Gold, founded in 2017 and headquartered in Pasadena, California, offers a wide selection of the most popular IRS-approved gold and silver coins and bullion for a Gold IRA – such as gold and silver American Eagle coins, Canadian Maple Leafs, and Australian Kangaroo coins.
IRS-approved precious metals bullion produced by well-respected mints such as Pamp Suisse and Johnson Matthey are available in sizes ranging from one ounce to 100 ounces.
The Noble Gold website offers investors a wide array of investor education resources on precious metals investing, along with continually updated gold and silver market news and analysis.
Noble Gold offers an investor an advantage by not charging any set up fees for a Gold IRA. In contrast, many Gold IRA companies charge set up fees up to $100. It has a minimum investment requirement of $5,000 when a new Gold IRA is funded with money transferred or rolled over from a 401(k) account.
Augusta Precious Metals - Best for High Net Worth
(Augusta Precious Metals) | IronMonk Solutions, sponsored) Augusta Precious Metals Logo.
URL: www.augustapmira.com
Phone: 844-615-4484
MAIN ADVANTAGES
White-glove service for HNW investors (they handle everything)
Commission-free salesfloor
Has an in-house IRS Compliance Department
Harvard-educated Economist on staff
NFL’s Joe Montana is a client of this company
MAIN DISADVANTAGES
High Minimum Investment ($50,000)
Higher markups on premium coins
Request Free Gold IRA Kit from Augusta
Founded in Casper, Wyoming in 2012, Augusta Precious Metals is a family-owned business that holds the distinction of being rated by Money magazine as the “Best Overall Gold IRA Company for 2022″.
Augusta Precious Metals can also boast having a Harvard-educated economist in charge of its investor education resources. Another distinguishing feature at Augusta is the absence of any sales commission, shipping, or insurance fees.
In addition to offering a good selection of IRS-approved coin and bullion investments, Augusta also offers a lot of numismatic coins for gold and silver coin collectors.
The one major drawback with Augusta is its high minimum initial investment requirement of $50,000.
Silver Gold Bull - Best for Gold Bars
(SilverGold Bull | IronMonk Solutions, sponsored) SilverGold Bull Logo.
Phone: 877-707-4707
MAIN ADVANTAGES
Large selection of gold bars
Offers a “Best Price Guarantee” on gold bullion bars
Has retail outlets for shopping in-person
Over 3 billion dollars in transactions
MAIN DISADVANTAGES
Foreign company (Canadian) with limited US presence
No white-glove service
Request free gold IRA guide from SGB
Silver Gold Bull was founded in Calgary, Alberta, Canada, in 2006, but has since expanded with additional offices in the US, UK, and Japan.
As the name implies, Silver Gold Bull is primarily focused on offering gold and silver investment products. It has a rather limited offering of platinum and palladium products.
One thing that investors like at Silver Gold Bull are the relatively low premiums on bullion or coins that Silver Gold Bull charges. Silver Gold Bull doesn’t specialize in Gold IRAs, but does offer Gold IRA services and has strong established partnerships with custodian trustee and IRS-compliant storage companies.
Unlike Augusta Precious Metals or Noble Gold, Silver Gold Bull has no minimum investment requirement for a Gold IRA. Therefore, it may hold particular appeal for small investors.
Summary
Gold IRAs are an increasingly popular retirement investment option. They offer investors portfolio diversification and a strong hedge investment against inflation.
A common means of initially funding a Gold IRA is by moving money from an investor’s existing 401(k) account into a Gold IRA. This can easily be accomplished by either a direct transfer of funds or a rollover.
There are a few IRS rules governing Gold IRAs that investors must be careful to follow in order to avoid incurring tax liability. Utilizing the services of a respected Gold IRA company is one way to help ensure that a Gold IRA is compliant with IRS regulations.
Want to learn more?
We highly recommend that you request your free Gold IRA Guide from Noble Gold Investments, our #1-rated gold IRA company in 2023. This kit covers all the details as well as the fees involved in such an investment.
Written By: J.B. Maverick – An active investor who has written hundreds of articles, blogs, and eBooks on personal finance and investing for dozens of different investor information websites, including Investopedia.com, and acted as an advisor and editor for the Financial Educators Council.