Can I Rollover My 401(k) To A Gold IRA?

An increasing number of 401(k) plan participants are asking this question nowadays.

The main reason being that their 401(k) plan does not include an investment option for gold, which unfortunately is true for most 401(k)s. The closest one might come is a precious metals mutual fund and that too is quite rare. Rarer still are plans that have a "brokerage window" that allows you to invest in a broad range of stocks, bonds and funds, including gold stocks and gold funds. So if you want to invest in gold, specially physical gold, the only way to do so is to roll over your 401(k) money into an IRA which will make that possible.

In-Service Distribution
The good news is that the IRS actually does allow you to rollover all or a portion of your existing company's 401(k) even while you are still working there but don't expect your plan administrator or your company to be as generous because of two reasons: 1) they are not required to and 2)most just don't want the hassle of dealing with the additional paperwork this kind of transaction will involve and therefore simply do not allow it. So your first step is to ask your 401(k) administrator if they allow what the IRS calls an "in-service distribution". If you work for a larger plan with 5,000 plus participants, you have a better chance of getting a "yes" answer but again, be prepared to pry it out of them! Very few smaller plans allow in-service distributions but it does not hurt to ask.

The IRS Rules
The IRS rules allow you to rollover all or a part of your 401(k) to either a Traditional IRA or a Roth IRA without any taxes or penalties if you are over 59 1/2 years old. For folks younger than that, the IRS is still generous and allows in-service distributions for employer pre-tax contributions to your account, your own (employee) after tax contributions and all earnings in your account. Companies are a lot less forthcoming with employees less than 59 1/2 year old however and only about one in ten will allow it. Again, by all means ask.

Disadvantages of In-Service Distributions
As with most things in life, every silver lining has a dark cloud behind it! Here are a few things to consider before you roll over your 401(k):

	Protection from creditors--your 401(k) is protected from creditors by the federal government but not your IRA which is governed by state laws.
	Age 55 Rule--this rule allows a participant who is at least 55 years old to withdraw money from a 401(k) without paying the 10% penalty for premature withdrawals. This is not true for IRAs which apply the penalty until you are 59 1/2. So if you are planning to retire between 55 and 59 1/2, you may want to preserve this exemption from the 10% penalty. If you still want to invest in gold, you can make a partial distribution.
	Age 55 Rule--this rule allows a participant who is at least 55 years old to withdraw money from a 401(k) without paying the 10% penalty for premature withdrawals. This is not true for IRAs which apply the penalty until you are 59 1/2. So if you are planning to retire between 55 and 59 1/2, you may want to preserve this exemption from the 10% penalty. If you still want to invest in gold, you can make a partial distribution.

By the way, the rules above apply to all qualified plans, including 403(b)s and other similar government and non-profit plans.
                                                                                                 <Back to IRA Gold

Share |