How To Move A 401K To Gold Without A Penalty

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So, you want to move your 401(k) contribution to your gold IRA account? Good idea. Gold is one of the most stable assets out there in the world. It is capable of withstanding inflation unlike paper money, and above all, it is quite stable, unlike stocks.

However, the manner in which you make this transition matters a lot. A slight miscalculation and you could end up losing a substantial amount of your hard-earned money to penalties and taxes.

So, how do you get to move your money safely from a 401(k) plan to a self-directed independent retirement account? Let’s break it down for you.

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How to Transition from your Current 401(k) Plan to Gold

401k to gold

There are two ways to perform a 401(k) rollover. You can either do it directly or indirectly.

Simply put, a direct rollover is where the money is directly remitted to your IRA. This way, you don’t get to cash out your former retirement plan. Thanks to the fact that this is largely a straightforward process, it also tends to be the fastest and if done right, typically has a low risk of taxes and penalties.

An indirect rollover, on the other hand, involves the funds being availed to you so you re-invest them in an IRA of your choice. As you can imagine, this method does give you a lot of flexibility but it does also come with its fair share of limitations.

For instance, you cannot bank those funds (or even a part of them) and you have to complete the rollover in a minimum of 60-days lest you attract penalties and taxes.

Why You Should Consider Making This Transition

Whether you keep your funds in a 401(k) or an Independent Retirement Account, it is worth noting that both are actually tax-deferred investment accounts. In other words, you don’t get to pay any tax charges on your money until when you decide to withdraw your funds from the investment.

Transitioning to an IRA gives you more flexibility in the sense that you can have better control over your investment going forward. What’s more, if you prefer to work with a wide choice of investment options, IRAs are the way to go.

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Moving Your 401(k) to Gold While Legally Avoiding Taxes & Penalties

So, the rules are simple – provided you are not withdrawing your money before maturity, you will not be penalized. And here’s how to do exactly that.

1. Know Which Type of Account You Need

Knowledge is immortal. And likewise, it is important to familiarize yourself with the kinds of account(s) you need to make this move. Please note that not all IRAs are tax-deferred and penalty-exempt, so choosing the right account is quite important. Here are the three types of accounts you can rollover to:

Roth IRA: The problem with rolling over to a Roth IRA is that you have to pay your income tax for the money in advance. Fortunately, once this is done, your future withdrawals will be tax-free. Your normal income tax band will be applied in your money in this case.

Rolling Over to Another 401(k): Let’s say you’re looking for a more efficient 401(k) management and, therefore, want to rollover to another better managed 401(k). Well, in that case, you’ll not be required to part with any taxes provided this move is completed within a 60-day timeline.

Traditional IRA: If you expect to be in the same or lower income bracket when you need to make a withdrawal, then you’re better off working with a traditional IRA over a Roth IRA. Why so? With this type of account, you only get to clear your pending taxes when withdrawing your money upon maturity.

2. Set Up Your Account

Now that you have identified the kind of account you need for the rollover, it’s time to set it up. Depending on your preferred style of trading you can either choose to work with an online broker or robo-advisor.

An online broker is ideal if you want a hands-on approach and one that can potentially maximize your returns in the long-run. A robo-advisor, on the other hand, is ideal for anyone looking for a hands-off approach, it might be cheaper but can only do the basics for you.

If you choose to go with a brokerage firm, it is important to pay attention to the tiny details e.g. commissions charged, transaction fees, quality of customer support, and so forth.

Also, note that most brokerage firms have account minimums which are meant to ensure that your account operates profitably in the long-run. Again, it is important to check and ensure that you can keep up with those investment minimums.

Last but not least, check to ensure that your online broker specializes in precious metals. This way, you'll be able to buy real gold (or even silver, palladium, and platinum) from them and have it deposited under your IRA.

3. Alert Your Current 401(k) Provider of the Planned Rollover

Why is this important? Because you need to make sure they are all set by the time you start the roll over. This can help prevent delays that could even have you exceed the 60-day deadline and, therefore, attract penalties.

Obviously, your current 401(k) provider views you as a worthy client and they wouldn’t like to lose you. So, it is not unusual for them to try to delay you perhaps to slow you down and have you change your mind.

So, it is important that you alert them of your plans to conduct a direct rollover in advance.

Also note that the process of rolling over these accounts may vary from one provider to the next. In most cases, you will be required to fill in a few forms. Once you send in your paperwork, they'll look into it and send the payment to your account in due time.

4. Once Your Account is Funded, Make a Move

Once the funds reflect in your account, you have the absolute right to decide what to do with them. Of course, you will want to purchase the gold bars and coins available on sale. But the most important thing to do is to diversify your portfolio so as to protect it from market fluctuations.

Also, remember, even with precious metals, you need to give your investment time to maximize its profitability. Investment experts generally agree that a 5-year waiting time is crucial even for the best thought-out precious metal IRAs.

Yet another thing worth noting is that if you choose to buy gold bars or coins, you’ll have to pay for their storage as you are not legally allowed to keep the gold with you. If storage fees worry you, the following three techniques might be worth pondering upon.

1. Buying Stocks in Gold Mining Companies

For this, you can either work with a mutual fund or buy the stocks directly. If you choose to do so directly make sure you identify a company that is financially sound and likely to have a solid financial future.

2. Investing in Futures & Options

Yup, you read that right. You can buy gold futures and options as a way to maximize your returns and avoid the risk of losses. One advantage of taking this route is that you can make a strategic investment in this precious metal with much less capital commitment up-front. However, not all brokers provide this option, so you should check and confirm with them before moving forward.

3. Betting on ETFs

As a way to limit exposure and stabilize your investment, you might want to work with a combination of real gold, futures, and options. That’s where ETFs come in handy. It is worth noting that gold ETFs have performed quite well in recent years and can provide long-term stability if done right.

The Benefits of Switching from 401(k) to Gold IRA

gold investing

Every time you think of investing in a Gold IRA, always think of diversification. Indeed, this type of account enables you to tap into new opportunities without losing the tax preferential treatment you are used to under your current 401(k). Other than that, here are some 3 good reasons why wise investors prefer to make this switch:

1. Cushioning Against Inflation & Deflation

Historically, gold has proven to be a stable tool to protect against inflation unlike paper currency and stocks. By protecting your investment from inflation and deflation, you get a better chance to grow and stabilize your assets over time.

2. Enhanced Diversification of Assets

Most of Wall Street’s investment tools are paper-based. We’re talking about bonds and even stocks. By having a portion of your investment in a physical asset like gold instead, you can breathe new life to your investment and add a totally new layer of diversification.

3. Greater Chance of Profitability

Whenever the economy is struggling, the price of gold tends to rise. Therefore, this helps you consolidate significant profit potential over time. A case in point – between the years 2000 and 2017, the value of gold grew from $200 per ounce to $1200 per ounce. Yup, you read that right – that’s roughly a 5X ROI.

Since time immemorial, shrewd investors have learned that gold is the undisputed kind of wealth storage. Its value may stumble once in a while but overall, it keeps rising even when the economic times are tough.

And this is precisely why even central banks buy gold as it acts as a source of trust no matter the existing macro-economic environment.

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Rollover Mistakes to Avoid to Prevent a Penalty

Simple mistakes when rolling over your 401(k) can be annoying and costly at the same time. Fortunately, if you are aware of them, it’s easy to avoid them.

1. Exceeding the 60-Day Deadline

You can easily miss this deadline especially if you are not aware of when the clock starts to tick. Basically, the timer starts the minute your money leaves your previous 401(k) account. Now, even when your 401(k) company releases your check on time, a few unexpected things can happen thereby delaying the transfer of funds in good time.

For instance, the check could get lost in the mail. Or it might come when you’re away from home and you fail to notice it in good time. Before you know it, the IRS has hit you with a penalty.

Alternatively, they might make the mistake of putting your money in a taxable account instead of a rollover account and you fail to notice that mistake before the 60-day deadline.

How To Prevent This from Happening: Always open your gold IRA account with a trustworthy and efficient company. Also, request a direct transfer over an indirect transfer to prevent unnecessary delays.

2. Not Clearing Off Pending Loans

Unless an exception applies, failing to pay off any loan owed against your retirement money could mean that any owed funds when you try to rollover will be treated as a distribution. So, be sure to check and confirm if you have a loan against your 401(k) plan first before initiating the rollover. 

Doing so with a pending loan will mean your money will be considered a distribution and, therefore, subject to penalties unless you’re older than 591/2 years old.

How To Prevent This from Happening: Always clear any pending loans taken against your previous 401(k) plan prior to initiating a rollover. Don’t have the money for this? Consider borrowing funds from somewhere else if necessary.

3. Not Having Your Gold IRA Account Ready to Receive Funds

If your broker or robo-adviser fails to get your IRA correctly set up in good time, your previous 401(k) fund check might have to be sent back to you. This could also happen due to clerical errors on either end.

The problem with this is that the minute this check is sent to you, 20% of your funds will be withheld for taxes. To avoid being hit with a tax bill, you’ll have to source for this 20% on your own and to complete the indirect rollover within 60-days.

How To Prevent This from Happening: Be sure to work with a reliable broker to set up your IRA account, also double-check to ensure that your current 401(k) admin knows where to remit your funds.

4. Not Watching Your 1099 in January

Every January a 1099 letter is sent to you. It shows the total amount available in your 401(k) fund. In the event that you engaged in a direct rollover, this amount will read zero.

In this case, it is easy to simply throw the paper away thinking that it is inconsequential. Instead, you are required to file your returns and be sure to indicate the two amounts. Failure to do so might have the IRS raise a red flag against your account.

How To Prevent This from Happening: Always check your 1099, confirm if it’s accurate, and be sure to report it correctly as you file your returns.

Examples of IRA Brokerage Companies That Can Help you Convert a 401(k) Into a Gold IRA

As we have mentioned severally in this article, the kind of brokerage company you choose to work with matters a lot. Generally, you want to work with a company that has a proven track record and a strong customer support team. With a little research, you can find a competent team that will make your rollover process as painless as possible. 

Let us look at some companies that are industry-leaders in this niche.

1. Goldco

goldco logo

They have been in this business for 16 years now. And despite the many challenges witnessed in the financial world over that time, they have somehow managed to retain an A+ rating on BBB.

Goldco prides itself in providing high-quality gold and silver bars. In addition to that, it has invested heavily in a customer support team that is made up of gold IRA experts.

This ensures that you get the right people to work with even as you navigate through this crucial financial path.

What’s more, even if you are not ready to get started today, you can join their community for free. Under this community, you’ll enjoy unlimited access to educational materials such as eBooks, videos, and price charts among others.

And the best part, Goldco has a transparent pricing policy that ensures that you are aware of what you are paying for before you commit your funds to anything.


  • Excellent customer support
  • Undisputable track record
  • No hidden charges
  • They sell gold and silver


  • They do not store gold for people

2. Augusta Precious Metals (APM)

Augusta Precious Metals logo e1637180893585

Augusta Precious Metals is yet another company that comes really close to the kind of quality that Goldco is known for. They have invested greatly in customer support – in fact, they’ll assign you a specific individual to handle your finances throughout your term with them.

They also have an entire department that specifically focuses on IRA processing. This department does the job of ensuring your paper work is in order and that everything goes as smoothly as possible.


  • Excellent customer support
  • Undisputable track record
  • No hidden charges
  • They sell gold and silver


  • They do not store gold for people


There you have it – the process of how to move a 401(k) to gold without incurring a penalty. Ultimately, the goal is to ensure that you get the best value for your money. And as it turns out, it’s possible to achieve that objective by partnering with a reputable online broker.

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