Earlier generations, like those of your parents and grandparents, had their pensions. For most of us today, pensions are about as obsolete as the two-bit haircut.
Instead, we have the 401(k).
Unlike pensions, with a 401(k) the investment decisions are up to you. Still, compared to an IRA your investment choices are more limited. One investment option a 401(k) won’t allow is the purchasing of precious metals. The fact that today the stock market is riding at record high levels is worrisome to many investors – here’s why it should worry you too.
In market as volatile as the one we’re experiencing, as an investor your priority should be protecting the purchasing power of the money you have. The safest fixed-income investments are paying miniscule returns and the risk of inflation remains a concern. By investing in metals, you’re taking action to protect your retirement savings with an investment that is backed with the tangible asset of physical gold and not the dollar. The good news is you can easily rollover your 401(k) into a gold IRA. To do so is a non-taxable event and there are no penalties.
Here’s what you can and can’t do when it comes to your IRA and precious metals.
If your 401(k) is from a company or companies for whom you no longer work, you can roll over those funds into a Traditional Self-directed IRA. Once the funds from your 401(k) have been deposited in an IRA, they can be used to buy gold or silver.
Even if you still work for the company that hosts your 401(k) account, it may still be possible to free up those funds for a 401(k) rollover into physical gold with a gold-backed IRA. This option, if available, is call an “in-service distribution.” To be clear, an “in-service distribution” is not a loan, it is an actual distribution of funds that can be rolled over to a Self-directed IRA. If the rollover occurs within 60 days there are no tax consequences. Different plans can have different rules so you’ll need to ask your 401(k) provider if your plan allows for such an option. If so, they can help guide you through the transfer process.
According to the Internal Revenue Code, you’re allowed to own certain gold, silver, and platinum coins as well as gold, silver, platinum, and palladium bullion that meet applicable fineness standards. As an example, among the coins you can own in an IRA are American Gold Eagle coins, Canadian Gold Maple Leaf coins, American Silver Eagle coins, American Platinum Eagle coins. These coins must be of a fineness of 99.9 percent or better. Some well-known gold coins, including the South African Krugerrand, are not allowable as are bullion bars that are not sufficiently pure.
When you own physical gold or silver in an IRA, the coins or bullion must be held by the IRA trustee rather than the IRA owner. What this means is you can’t have your IRA buy coins or bullion and stash them in your safe deposit box or bury them in your backyard.
These tax rules apply equally to traditional IRAs and Roth IRAs. If you already have an IRA, and want to shift your assets to gold or silver, you can do it easily. But if you take physical possession of gold or silver, that transaction counts as a distribution.
In order to avoid IRS penalties and taxes, you’ll need to have your gold and silver stored at a depository. The depository provides safe keeping for your precious metals and also provides easy access when you do finally need to take possession of your precious metals.
As a precious metals dealer, RC Bullion we can help you complete the necessary paperwork to set up a new IRA. We’ll ship the coins or bullion to a depository on your behalf. If at any time that you wish to deposit more precious metals, we can help you with that too.
If you’re looking for the best hedge against financial uncertainties, there is only one portfolio item that will serve you in all seasons and under most circumstances – precious metals. Before you make your purchase make sure you do your homework and get the best information available. You can begin by downloading a FREE mini-course that will help answer many of your questions about gold investing and coins. It is entitled “The Essential Guide to successful Gold and Silver Investing.” This course is full of valuable investment tips that could help you make the decisions that could save you thousands of dollars.