Can I Buy Gold With My 401k?

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Contributor, Benzinga
November 16, 2022

Jump straight to the answer: Yes, you can buy gold in some types of 401(k) plans.

For centuries, humans have coveted gold, not just as a store of wealth but also as a tradable asset. Today's investors are no exception — gold is one of the world's most desired and popular investments. Its allure arises from the fact that, besides the potential for lucrative returns long-term, the asset has a long history of serving as a reliable store of value. 

Gold negatively correlates with the traditional stock market — when the market or economy turns sour, its value typically increases. And so, most investors consider it a safe haven asset useful for hedging against an inflationary-induced weakening dollar, falling bond prices and global economic uncertainties arising from geopolitical tensions. Therefore, it makes sense to consider this alternative asset class when building your retirement wealth.

Besides individual retirement accounts (IRAs), the employer-sponsored 401(k) plan is another excellent tax-advantaged retirement savings and investment option that can help prepare you financially for your golden years. While buying gold directly with your active 401(k) plan may be challenging, you can leverage a few indirect options available to invest gold in your retirement portfolio. 

Can You Buy Gold With Your 401k?

Yes, you can buy gold in some types of 401(k) plans. A 401(k) plan is an employer-sponsored retirement saving and investing option offering employees a tax break on their contributions. When you sign up for a 401(k) plan, you automatically agree to have some percentage of your wages paid into the 401(k) account. 

These contributions are then used for diversified investments depending on your selections from the different investment options provided by your employer. Often these include an assortment of stocks and bonds, mutual funds, exchange-traded funds (ETFs), index funds and target-date funds. Unfortunately, precious metals like physical gold (or its directives) and most alternative assets are rarely part of the investment options offered by employer plan sponsors. 

Suppose you're committed to investing in gold bullion, and your 401(k) sponsor doesn't offer ready access to such an investment. In that case, you can leverage the available ETFs and mutual funds to gain indirect exposure. By constructively reviewing the fund descriptions offered by your sponsor, you can find some mutual funds or ETFs that hold stocks in gold exploration or mining companies (gold mutual funds and gold ETFs) and so grant you the needed exposure. You may also find fund types that trade gold derivatives. You can even invest in individual stocks of gold companies if your 401(k) plan has brokerage options. 

ETFs and mutual funds offer you the cheapest means of indirectly exposing your 401(k) plan to gold. However, suppose you want to directly add physical gold or its derivatives to your retirement portfolio. In that case, the best approach is to roll over the 401(k) account to a gold IRA — a self-directed IRA (SDIRA) account with gold as the investment vehicle. With a gold IRA, you can invest in a broad range of asset classes, from traditional to alternative assets, including gold bars and coins. 

As with an IRA, 401(k) plans are often supervised by private fund managers who control the funds. Contributions to a Traditional 401(k) are tax-deferred — you pay the tax on earnings during retirement, while contributions to a Roth 401(k) are made with after-tax dollars — you pay zero tax during withdrawal at retirement. A contribution limit, as stipulated by the IRS guidelines, also applies.

Types of Gold You Can Buy With a 401k

Not all physical gold types can be directly invested in your retirement account via a gold IRA. Only gold bullion, bars and coins that meet the requirements established by the IRS can be held in SDIRA. One of the qualifying criteria is a minimum fineness of .995. Furthermore, only gold produced by an accredited refiner (assayer) or national government mint is considered IRA-eligible in line with the requirements. Nevertheless, you've enough options to choose from regarding gold types. Some of these include:

  • 1 oz. American Eagle Bullion Coins
  • 1 oz. American Buffalo Bullion Coins
  • 1 oz. & 1/10 oz. Pearl Harbor Coins
  • 1 oz. Canadian Maple Leaf Coins
  • 1 oz. & 1/10 oz. Perth Mint Bars
  • 1 oz. Australian Philharmonic Coins
  • American Eagle Proof Coins
  • Australian Kangaroo Coins

IRA-eligible golds graded for their condition by a certification organization such as the Professional Coin Grading Service are considered collectibles by the IRS. Collectibles are disallowed in IRAs. And so, if you wish to grade your coins, you can only do it after distribution.  

How to Complete a Self-Directed IRA Rollover

An SDIRA rollover involves moving funds from an existing retirement account into a self-directed account. Typically funds taken out of retirement accounts are considered taxable distributions. An SDIRA rollover helps you transfer funds from your current retirement accounts (401(k), Traditional IRA or Roth IRA) into a gold IRA (an SDIRA) on time while still enjoying the tax advantages. 

An SDIRA rollover is primarily categorized into direct and indirect (or 60-day) rollovers. Both approaches are tax-free and penalty-free. In a direct rollover, your retirement fund is moved directly from your current IRA provider or 401(k) sponsor into the hands of your new gold IRA providers. Indirect rollovers involve two steps. First is the distribution whereby your existing retirement account providers or plan sponsors mail a check to your home address. Subsequently, you mail the check to your new gold IRA custodians or providers.

When your new precious metals or gold IRA providers receive the check and deposit it into your account within 60 days, you won't incur taxes or penalties. Otherwise, taxation and penalties may apply. Besides the 60-day rule, an indirect SDIRA rollover involves additional requirements, including the one-IRA-rollover-per-year rule and a government-mandated 20% withholding charge. However, the one-IRA-rollover-per-year limitation doesn't apply to 401(k), Roth conversions and direct transfers.

Because of the additional requirements and duration involved in an indirect rollover, the direct rollover is the favorite approach in most situations. For clarity, there's a clear difference between a transfer and direct rollover. A transfer involves moving funds between similar accounts, such as one Roth IRA to another or between two qualified plans. In contrast, a direct rollover consists of a transfer from different retirement accounts like 401(k) to an SDIRA. Unlike direct rollovers, transfers require no IRS reporting and may include required minimum distributions (RMD). 

Best Gold IRA Companies

The best gold IRA companies offer excellent customer service, seamless SDIRA account setup and rollover, a buyback commitment, secured storage through a partnership with third-party depositories (like Delaware Depository and Brinks), and much more. Benzinga's picks meet all these criteria. Here is a review of these companies. 

Advantage Gold

With an A+ rating by Better Business Bureau (BBB), an AA score by Business Consumer Affairs (BCA) and a perfect rating on Trustpilot, Advantage Gold is among the best gold IRA custodians. TrustLink has rated the company #1 for the past five years. While gold and silver are the company's primary business, platinum and palladium are also available for investors. What you get with Advantage Gold includes the following: 

  • An SDIRA via which you can hold various IRA-eligible gold or precious metals and enjoy the same tax advantages as a regular IRA
  • A 100% insured IRS-approved third-party depository (Brinks and Delaware Depository) for asset storage.  
  • Seamless SDIRA rollover for all retirement account types 
  • And many more.

Besides IRA accounts, the company also facilitates the direct purchase of gold, silver, platinum and palladium in bars, bullion or premium coins, delivered to your home or location of choice. Account setup is a breeze, involving three short steps with a specialist on-hand to guide you through the process. The free investor's kit is the best way to get started if you're a newbie. 

Extensive SDIRA-focused educational and research materials are also available to help you get started quickly and easily. Advantage Gold also offers one of the best fee structures in the industry with a liberal buyback program. You can easily reach out to their representatives for more pricing information.

Augusta Precious Metals

Augusta's Precious Metals focuses specifically on gold and silver. It is renowned for its transparency in all operational aspects, including pricing structure. Its high status is reflected in excellent reviews across different independent platforms — A+ by BBB, AA by BCA and 4.9/5 by Consumer Affairs. Like its peers, Augusta provides you with a tax-advantaged SDIRA (gold IRA), seamless SDIRA rollover and direct purchases and delivery to your home. 

Account setup is hassle-free, and the company can help you complete most of the paperwork. Augusta's core selling point is its comprehensive buyback commitment. Augusta offers resource-rich free guides to grant investors deeper insights into gold IRAs, one-on-one video conferencing and lifetime customer support. However, its $50,000 account minimum can be a turn-off for average investors. Furthermore, Augusta doesn't support online purchases. You can contact the company for details on setup, annual, maintenance and storage fees.

American Hartford Gold

Like most IRA custodians, American Hartford Gold aims to help you ride through market volatility that may impact your retirement savings by exposing your IRA portfolio to precious metals via an SDIRA. The company offers gold, silver, platinum and palladium in bars, bullion and premium coins. Its overwhelming positive reviews across platforms are evidence of its excellent service delivery. These include an A+ rating by BBB and a perfect rating on Trustpilot.

Setting up an IRA account with American Hartford Gold is easy. Its industry professionals lead you through a simple three-step process with no upfront costs. You can also purchase directly and get it delivered to your home. The company offers price matching and buyback commitment, helping you save liquidation fees. IRA rollovers are free, and there's free storage, maintenance and insurance for the first year.

American Hartford places a strong emphasis on educating its customers. It provides a free Gold & Silver Information Guide and an entire section dedicated to Market News and Charts designed to inform you of the latest buzz about precious metal investments. You'll have to contact a company representative to learn more about account fees and pricing.

Lear Capital

  • securely through Lear Capital's website
    securely through Lear Capital's website
    Best For:
    Retirees Wanting Security Against Market Crashes
    Rating:
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With over 90,000 customers nationwide and more than $3 billion in transactions since inception, Lear Capital is another excellent gold IRA company you may need to consider for your retirement savings. Although like its peers, the company offers SDIRA rollover, local and international investment grade bullion and premium gold coins, direct precious metal purchases with free delivery, and more, its tool-rich and user-friendly website make it very appealing. This website contains valuable investing tools ranging from smart tool suites to real-time precious metal price charts.  

Other selling points of Lear Capital include a price match guarantee, free precious metal evaluation from industry experts, special reports and extensive educational materials and resources, including the free investor's tool kit, which can especially be handy if you're just getting started. Lear assigns you an account assistant to oversee setup and other accounting issues, which makes for a fantastic experience overall. Lear also offers one of the most impressive customer services, as seen from reviews, and covers most of your storage and setup fees. You can contact the company for more information on prices and pricing.

Red Rock Secured

Red Rock Secured is a Southern California-based investment firm specializing in self-directed IRAs. Although the company's offering leans heavily towards gold and silver coins, you can also invest in platinum and palladium. Its core selling points include excellent customer service and resource-rich educational materials. The company's "never zero" risk management policy ensures that the customer's portfolio never declines to zero. 

Account setup and SDIRA rollover are easy, free and fast. Red Rock offers price protection and buyback programs. Also, all investors are eligible for free 1-on-1 advice with expert gold consultants. Free shipping with insurance applies for all direct purchases of physical gold. And the best part is you can qualify for zero management and maintenance fees for life (check the company website for eligibility). The company has a near-perfect rating on Trustpilot and Consumer Affairs and A+ on BBB.

Benefits of Gold IRAs

The core benefits of a gold IRA include:

Profitability and Tax Benefits

Historically, gold is known to deliver optimum profitability long term. In the past 22 years, the price has increased by over 550%. Since an SDIRA offers similar tax benefits as a regular IRA, it presents an efficient and legal way to profit from price increases while benefiting from tax savings. 

Hedge Against Volatility

A gold IRA can protect your investment funds from market volatility. Gold provides a hedge against inflation and deflation since the price of metal typically increases when the U.S. dollar declines to help your portfolio minimize the effects of market volatility.

Diversification

A gold IRA can diversify your retirement investment portfolio, reducing its overall risk exposure. Precious metals are uncorrelated with the traditional stock market and tend to move in the opposite direction during an economic downturn. 

Frequently Asked Questions

Q

Should I put my 401(k) into gold?

A

A gold IRA can be an excellent way to diversify your retirement portfolio and hedge against turbulent markets while reaping tax-free returns long-term.

Q

Could I incur a penalty if I roll my 401(k) into gold?

A

Yes, tax and penalty fees may apply if you violate the 60-day rule during an SDIRA rollover.

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