How To Move A 401K To Gold Without A Penalty

By John Simpson

July 8, 2021

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You can save money for your retirement with an independent retirement account (IRA) or a 401 (k) plan. What’s more, traditional IRAs and 401 (k) plans enable you to avoid incurring taxes on contributions made. You can also invest a percentage of your 401 (k) funds in gold if you are looking to diversify your account.

There are numerous reasons why people turn to gold. Some choose to invest in gold to secure their portfolio from inflation. Since people have been prizing gold for centuries now, gold investments will most likely preserve their value. Furthermore, most people buy gold because they’re simply scared of market volatility.

Gold can never go bankrupt, unlike a corporation. Your tangible coins and bullion will always be in your vault regardless of what happens to this economy.

Have you decided to invest in gold? Well, the next thing is to determine the right way to get started. Although you can purchase gold coins and bullion right away, you will not be enjoying any tax benefits from buying gold. However, if you purchase gold via a 401 (k) account, you can subtract your 401 (k) contributions from your yearly tax return.

You will not need to pay any taxes on your investment unless you decide to sell the gold and withdraw the earnings. 

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How Do You Move a 401 (k) Into Gold?

Since you have already made the important decision to invest in gold, the next thing is to figure how you will carry out your plan. There is a high likelihood that your present 401 (k) plan doesn’t provide gold investment options. Most 401 (k) plans provide you with limited investment options; therefore, you have to get a new plan that will make it easy to invest in gold directly.

In this case, you’ll need to do a 401 (k) rollover to avoid incurring taxes on this transition. A 401 (k) rollover is the process of transferring your money from your old 401 (k) plan to a new one. Basically, you can transfer funds to a new IRA or 401 (k).

The Internal Revenue Service (IRS) specifies that you should finish this transaction within 60 days. In case you don’t complete within this period, your transaction will be viewed as a 401 (k) withdrawal. You must always adhere to the IRS rules & regulations - unless you don’t mind paying penalties and taxes on your withdrawal.

Once you shift from a new IRA or 401 (k), you get to enjoy the new benefits. In general, employer options have high fees and limited options. Although an employer usually offers the plan as an advantage to their employees, they don’t offer an incentive to shop around for a good plan.

As a result, you might require to have a new 401 (k) if you are looking for lower account fees, cheaper investments, and more gold investment options.

You can follow these few steps if you want to convert your 401 (k) plan to a new gold 401 (k) or IRA.

1. Choose the Account You Want

As you already know, you can have more investment options by taking a 401 (k) rollover. You can often save on fees too. Since employer plans usually have relatively high fees, changing plans will save you a substantial amount in the end.

  • Traditional 401 (k). If you do a rollover to your traditional 401 (k), you’ll not need to incur taxes on your rollover provided you finish the transfer within 60 days.
  • Traditional IRA. Traditional IRAs are also a tax-exempted retirement plan - much like a traditional 401 (k). 
  • Roth IRA. In case you do a rollover to your Roth IRA, then you’ll need to incur taxes on the money you transfer.

The government permits you to own multiple IRAs and 401 (k) plans. It is a fundamental thing since it implies that you can also set up a self-directed IRA or solo 401 (k) for precious metals. Typically, the trustee tends to be the custodian of the physical metals - as well as your broker. 

If you use a 401 (k) or gold IRA, you can actually purchase and sell gold. And if you want to do this, you’ll need to comply with certain government standards. Most likely, gold IRAs and self-directed 401 (k) plans don’t enable you to physically hold that gold. 

Essentially, the real distinction is that 401 (k) plans will let you contribute more funds every year. Apart from this, they got somewhat similar rules and advantages.

2. Open Your New Account

Quite frankly, going online is the simplest method to set up your account. Most people set up their IRA through an online broker or a Robo-advisor. If you don’t wish to deal with the stress of choosing your investments, you could utilize a Robo-advisor to invest in a balanced portfolio.

You can actually gain more control over your investments with an online broker. Apart from picking which investments you purchase, you can also divest any time you wish. Because commission costs and fees can add up quickly, you should get a provider that charges relatively low fees.

More so, you have to choose a provider that deals with precious metals, like gold.

3. Consult Your Old 401 (k) Plan About Having a Direct Rollover

Another important thing to do is to consult your previous provider about transferring your money. You must start this step as soon as possible since your provider could slow down the process because they are not ready to lose you as a client. What’s more, you should always request the provider to perform a direct rollover since the check requires to straight to your new account rather than going to you.

This next step is really important - so follow closely. After the money leaves your old account, it must reach your new account within the set 60-day period. Otherwise, as previously stated, you’ll be forced to pay penalties and taxes on your withdrawal. Is paying a penalty not that pleasant to you?

Then, you have to finish your rollover as soon as possible.

Although the procedure may differ, many providers will need you to provide several forms if you’re looking to progress with a direct rollover. If you don’t know how to do this, consider getting in touch with the administrator of your previous employer’s plan. Once you provide the necessary paperwork, they’ll send a wire transfer or check to your new account.

You can also technically do an indirect rollover; however, this option is much more difficult to carry out. When it comes to an indirect rollover, the funds are sent to your account. You then transfer the funds to your IRA within 60 days.

It’s also worth noting that an indirect rollover might complicate your taxes in the end. If you don’t complete it in time, you might end up incurring penalties and income taxes on that rollover. In most cases, providers will keep 20% of your withdrawal as a tax payment.

Since you must send the whole amount to the new account, you’ll need to point out the difference from your account. 

4. Choose Your New Investments

This is an interesting part. After you have finished with your direct or indirect rollover, you’ll then establish how you’d like to use your funds. Apart from investing in physical gold, you can also check out index mutual funds. Having a diversified portfolio will help secure it from market fluctuations.

Even though lots of people purchase gold coins and bullion, you will realize that there are a few challenges with these investments. Above all, you might have incurred broker fees and commissions for storing your gold. You can also invest in gold via other methods if you are looking to diversify your gold portfolio. 

  • Gold futures and options: In essence, these contracts are agreements to purchase or sell gold at a certain cost in the future. Since these contracts are usually traded on commodity exchanges, they’re keenly regulated by the federal government.
  • Gold exchange-traded funds (ETFs): What is an ETF? This is basically a basket of other assets. In other words, a gold ETF might own physical gold, futures, and gold options. Mutual funds may only be exchanged once the market closes for that day, but an ETF may be traded if the market is open.
  • Stocks in gold mining: Are you interested in investing in the gold mining & refining business? If so, you can purchase stock from a reliable mining company. It would be prudent to do thorough background research of that company before choosing them to figure out whether they are financially stable. Alternatively, you can purchase shares in a mutual fund that usually invests in gold mining to minimize your risk.

When Will the IRS Charge a Penalty on 401 (k) Rollovers?

As previously stated, the IRS allows you to complete your 401 (k) rollover within 60 days. In case you withdraw funds from your old 401 (k) and don’t deposit them in your new account within the set 60-day period, you’ll be forced to pay a penalty on that money. Doing a direct rollover is the best way you can avoid this because your money is instantly sent from one account to the other. 

And in case you withdraw the money before you’re 59.5 yrs old, you’ll also need to incur a 10% penalty. Additionally, you’ll be needed to incur your normal income tax rate when it comes to early withdrawals. And if you also got to pay state income tax, then you can easily spend 45% of your withdrawal on penalties and taxes. 

How Can You Move a 401 (k) to Gold Without a Penalty?

The good news is that you can opt to avoid paying taxes and penalties on your 401 (k) rollover. You’ll only need to do a direct rollover. This option allows your provider to handle the transfer such that your money automatically appears in the new account. 

Do you need to handle this transfer yourself? Then, you can perform an indirect rollover. You simply need to ensure that the rollover is finished within 60 days. In case your previous provider kept 20% of the money for taxes, you’ll need to replace this money once you complete the indirect rollover. 

For it to be a successful plan, the new account should be a tax-deferred plan. Remember, you can’t deposit this money in your bank account unless you’re at least 59.5 yrs old. Or else, you’ll need to pay taxes and a penalty on your withdrawal.


Changing your retirement plan is undoubtedly a huge decision. Fortunately, converting to a gold IRA is pretty easy. Below are some of the most frequently asked questions when it comes to turning a 401 (k) plan into gold.  Please continue reading:

Can I Invest My 401 (k) in Gold?

Although your present 401 (k) plan might not allow you to invest in gold, several plans enable gold investments. It’s worth remembering that there are certain IRS rules regarding how the gold should be purchased and kept. As a result, you must find a reliable company to work with.

Can I Purchase Gold Without Incurring Taxes?

401 (k) plans and traditional IRAs are essentially tax-deferred savings accounts. That means that you don’t incur any taxes on your contributions. After you retire and decide to withdraw money, you’ll pay taxes on those withdrawals. And if you purchase gold for personal ownership, you won’t get any tax breaks.

So, the best to avoid paying taxes is by purchasing gold through your IRA or 401 (k) plan.

Do I Need to Pay Taxes Whenever I’m Rolling Over an IRA or a 401 (k)?

According to the law, you can carry out a 401 (k) rollover without incurring any penalties or taxes. To escape these taxes, you’ll have to do the 401 (k) rollover properly. You should begin by talking to your present 401 (k) to get started on the process. Since this procedure can take several weeks (even months) to complete, you should start it early.

Can I Purchase Physical Gold in My IRA?

Yes! But this procedure can be a bit challenging. Technically, your IRA can’t be the holder and seller of the gold. They’ll need to use a third party to store physical gold. You’re not personally permitted to hold that gold.

The IRS claims that your 401 (k) plan should only have physical gold if other individual stores the gold. Although you might be permitted to access the storage facility, you won’t be permitted to get physical control.

Which Companies Can I Turn To Convert My 401 (k) into Gold?

Are you trying to invest in an IRA or gold 401 (k), there are several companies you can rely on. Many companies don’t let you invest in precious metals. As a result, you must confirm with your new provider beforehand. It only takes some background research to successfully start investing in precious metals.


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John Simpson

About the author

Welcome! In these perilous times of government overreach, reckless fiscal and monetary policies, shutting down small and medium sized businesses and paying people not to work, it has become my mission to protect my assets, my family's assets, and educate as many folks as possible on ways to protect their savings, retirements, and purchasing power, from rapidly devaluating fiat currency.

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