September 26, 2022

401(k) rollover to Gold IRA pros and cons for precious metals IRA

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Understanding the implications of rolling over your IRA money or 401(k) money to any investment should not be taken lightly. You need to understand any fees and costs of opening a self-directed Gold IRA that may require yearly payments and the results of these on your account.

You must take responsibility for the action of moving funds from one investment to another and understand all the good and bad of a precious metals IRA. Choosing to roll over your retirement to a self-directed Gold IRA should not be taken lightly.

The upside of a rollover opportunity gives you the chance to revisit your retirement account and decide if the results are what you have been wanting. With a self-directed Gold or Silver IRA, you have the ability to control the decisions within the account. This is the opposite of a standard 401(k) plan or a standard IRA, where the managers decide which funds you can choose or you are limited to investing in stocks, bonds, or mutual funds which all trade openly in the markets and are controlled by businesses, the stock market, and government intervention.  

The Plug wants to provide some insight into rolling over funds to a precious metals IRA and why you should consider stabilizing your retirement funds with physical gold or silver. Making a decision should include both the pros and cons of investing in precious metals. The Plug would advise you to work with and choose a company that has a proven track record of educating the investor prior to selling any precious metals. Working with a quality company with a proven track record will help you solidify your decisions and your retirement account. 

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What is a Precious Metals IRA?

A Metals IRA is a self-directed retirement plan that allows investors to invest in physical precious metals including gold, silver, platinum, and palladium within a structured retirement account. The IRS has specific products that qualify for a precious metals IRA. You are limited to coins and bars that are from sovereign countries with a face value. This requirement is in place so investors don't place or purchase rare coins or numismatics into an account and so the metals are easily sold when it is time for distribution.

When you purchase physical precious metals in your IRA you are required to hold those metals in a depository or vault. There are several secured and unsecured depositories in the United States and abroad. Since this is a retirement account, you can track the gains and losses of the physical metals within your account. Following the rules and guidelines of a precious metals IRA provides transparency to the IRS, similar to that of a standard IRA.

One of the major advantages of having a metal IRA is the ability to avoid taxes on capital gains until you sell the product and take your IRA withdrawals and distributions. This type of account allows for the liquidity of the metals at any time. Having the ability to buy and sell within the account allows you to take full advantage of the ups and downs of the market. Once you hit retirement, it will be your choice to take your distributions in the form of physical gold you already own, or you can sell the gold and silver and take the cash distribution.

How Does a Precious Metals IRA Work?

A precious metals IRA is a self-directed IRA. A self-directed IRA is an Individual Retirement Account that allows investors to invest in a broader range of assets than traditional IRAs allow. An investor has a more diverse collection of assets to choose from when using the self-directed IRA format.

Once an account is opened with a custodian, you are able to purchase many different investment options. In a self-directed IRA, you can choose to invest in Debt, Real Estate, Precious Metals, and more. Your only limitation is making sure the investment choice is approved and you cannot personally gain from the investment while it is in the self-directed IRA. Clarity example- any gains in buying precious metals would go back into the IRA and you cannot take advantage of those gains until 59 1/2 when you are allowed to start taking distributions without penalty. 

As the manager of the account under the custodian's watch, you're allowed to make changes and take advantage of the markets. This control is different than a normal IRA or 401(k). In those accounts, you are controlled by the funds and eligible accounts. A rollover to a self-directed IRA gives you control and various tax advantages. 

An investor can put their 401(k) and other assets into a precious metals IRA, realizing immediate savings on taxes and even paying less in management fees. With this account, one can invest in physical gold, silver, palladium, platinum bullion, coins, or Proofs.

When you decide a precious metals IRA is the right choice here is the process one would go through to open an account, fund, and store their metals. 

  1. Custodian - Decide on a precious metals IRA company to work with. Make sure the company is an approved custodian with the IRS. Here are four precious metals companies The Plug recommends; Augusta Precious Metals, Birch Gold Group, Goldco, and Noble Gold. Click on the name of the company and the link will take you to our review of the business. 
  2. Rollover or Self-Fund Your Account - A rollover from an existing IRA or 401(k) is the simplest way to fund your new account. While it is not necessary to roll over from an existing IRA or 401(k), if you are looking to diversify your current retirement holdings and utilize a 15-20% stake in precious metals, this option is best. Starting a new self-directed IRA is an option. This option would limit your contributions to the standard IRA requirements of less than $6000 for those under the age of 50 and $7000 per year for those above the age of 50. In addition, if you start contributing to a new IRA versus a rollover you must have earned income. 
  3. Purchase your precious metals - based on your investment goals and your available funds in your self-directed IRA, you can now purchase your metals. Working with the custodian or knowledgeable dealer, you purchase IRS/IRA approved bullion. This is where you get to choose gold, silver, platinum, or palladium for your account. You have a number of choices and ultimately your available funds will dictate your investment choices.  
  4. Store Metals in an approved Depository - to be eligible you cannot take possession of the physical gold until a distribution is made. Therefore, when you buy your metals you will work with the dealer to transfer your metals to the depository. Make sure you understand the depository also has yearly fees for securing your gold or silver. In addition, the most credible depositories will segregate your precious metals from those of others storing their metals within their facility. If they don't segregate the metals your specific purchases will only be part of a larger allotment of metals in the facility. Therefore, your gold goes into a pot with everyone else's. When you take possession or distributions you get a share versus the actual coins, bars, or Proofs purchased. 
  5. Review your Account Portfolio - after the precious metals are in the depository your only decision is how to handle the account. You can buy and sell as you choose or dollar-cost average you purchases. The statements will show the account balance. Understand the precious metals market fluctuates daily. The spot price changes and understand the statement of whether you are looking at the spot price of your investment or the value of the metals. There is a difference and when you understand those difference you understand your statement. 

Pros for Rolling Over Your 401(k) to a Precious Metals IRA

There are several benefits to rolling over 401k to a precious metals IRA:

1. Secure Possession

One of the primary reasons to invest in a precious metals IRA is for the security of secure possession. Secure Possession is owning a physical asset that can be sold in times of uncertainty. Owning physical gold, silver, or platinum bullion benefits the investor in emergencies or economic instability because you own physical precious metals. A metal IRA provides this security for your investment outside the confines of the markets or government involvement including the devaluation of the dollar.

2. Diversification

A precious metals IRA gives investors a diversified portfolio that provides an array of asset classes for risk diversification purposes. Gold, silver, and platinum bullion offer a low-cost store of value and are extra safe due to their relative rarity in the marketplace. In addition, investors can reap the rewards of appreciation in value as the spot price goes up. They also gain profits as inflation in the market adjusts upwards. 

Using a dollar-cost-averaging approach to your precious metals IRA purchases, one can take advantage of the changes in the price of the metals. Buying at different initial price points can help you increase your gains over time and offset any negative values in your portfolio.

3. Tax Benefits

Investment success has been noted for generations when investing in gold or silver bullion as part of an investment portfolio.

When you purchase your precious metals in a self-directed IRA you get all the benefits afforded to you with a traditional IRA. Therefore, you still get tax-free and tax deferral for any gains. 

When you invest in a gold IRA you will get tax-free growth.

 4. Upside Appreciation Potential

Investing in precious metals such as gold and silver can be a lucrative investment that has made many investors a profit. When one owns physical precious metals you watch the spot price of the metal to help determine your asset value. Unlike ETFs or stocks, when you own physical items you are concerned about the fluctuation of the price versus the effects the government or businesses have on inflation and a business's internal or external factors influencing the stock price.

The price of gold, for instance, has increased by over 28% in the last 5 years. In September 2017 the price of gold was approximately $1281 per troy ounce and in September 2022 the price is approximately $1643 per troy ounce. That 28% increase is significant for a physical asset used as a diversification tool for an investor's portfolio.

5. The Liquidity Advantage

Investors with a precious metals IRA can liquidate their holdings whenever they choose. Keeping their funds in their IRA account is necessary so as not to pay any additional early distribution taxes or fees. Like a traditional IRA, the self-directed gold IRA requires the investor to take a minimum distribution starting at the age of 72 and you can start taking distributions without penalty starting at 59 1/2 years of age.  

The benefit of the precious metals IRA is the liquidity of the investments. When you manage your own retirement account you choose when and how much to buy and sell. Having the ability to take advantage of the changing precious metals stop prices can be of benefit for taxation.

6. Reduced Risk Of Asset Price Volatility

Volatility refers to the difference in price over time. For Example; the price of a stock ranging between $30-$50 per share versus a stock between $40-$45 per share would have more volatility. More volatility also can also refer to the difference between years for a company, say in 2021 the price fluctuated between $50-$55 (low volatility), and in 2022 it ranged between $30-$60 (high volatility).

When the market is uncertain and the volatility of stocks has large swings, gold and other precious metals can help curb that volatility in your portfolio. Gold may increase or decrease with less volatility when the dollar is weak and inflation is rising. 

Having an asset in your portfolio with less volatility helps stabilize the portfolio over time. In addition, when the markets swing to a 180-degrees and stocks and mutual funds get stronger your precious metals IRA will have a similar reaction. 

Owning physical precious metals in your IRA allows you the comfort of knowing the physical assets are not being directly influenced by any governmental or economic uncertainty influencing the stock markets.

7. Favored Investment Technique During Economic Turmoil

Investing in precious metals like gold, silver, or platinum is a favored technique when faced with economic turmoil. For example, when faced with a financial downturn, precious metals assets give investors an alternative to holding cash in less performing savings accounts. Having an investment outside the standard banking system or stock market allows for the diversification necessary to hedge significant inflation. sheet showing gold values during recession periods

Per the website during times of recession in the United States Gold has had a positive change versus the S&P 500 index. 

During and prior to recessionary periods it is important to diversify your investments. When prices of goods and services increase the cost of interest rates rise and the stock markets are unstable. Having a solid physical investment in your portfolio can assist in stabilizing your portfolio and helping reduce and negative returns. 

8. Low Risk But Potential High Rewards

Investing in precious metals using your self-directed IRA is a safer investment than stocks and mutual funds in the market. The price of gold has fluctuated over the past century, but the actual returns have been strong for those who have bought and held their investment.

The returns, when investing in physical precious metals, can be good if held as a long-term investment. Ideally, the gold market is more valuable for long-term investment and as a safe haven from the markets.

An investment portfolio can be stabilized using precious metals. Having a low possibility of negative returns helps keep gold investing strong. The benefit of precious metals investing is there is no direct influence from the banking system or stock market. 

9. Total Control of Your Investment Choices

A self-directed IRA account gives investors the ability to manage their investments. As the investor, you get more control over your investment and make the decisions regarding how to invest, how much to invest and when to sell.

Having the ability to control your own investments allows for dollar-cost-averaging your investments to capture the market at different points and provide for better return opportunities. 

Having a self-directed IRA, you can choose between physical precious metals as an investment choice, real estate, debt, and many other investment choices. Altogether, the self-directed investment approach allows for control and diversification.

10. Ease of Set-Up and Funding Account

Opening a gold or silver IRA takes just a short period of time. Once you choose a custodian the paperwork is completed in just a short period of time. Having the right custodian walk you through the process will shorten the time necessary to open the account. 

Funding the account is also a simple easy process. If you are rolling over from an existing IRA or 401(k) you need to sell off your funds if currently investing and then transfer the money to the self-directed IRA. The process can involve a check sent to you directly that you would send to the IRA, or a direct rollover to the new account via wire transfer. 

Now that you have the account set-up and the funds in the account. The fun starts by choosing the investment choices that make the most sense for your investment goals. 

Cons for Rolling Over Your 401(k) to a Precious Metals IRA

1. Personal Management

Diversifying your investment portfolio into a self-directed IRA means you need to manage the process. Finding a custodian start the process, buying the product, and managing the ups and downs.

If your plan is to buy and hold, then the process is easy and not labor-intensive to manage once you have the account divested.  The only major decision to make once the account is funded is when you need to sell or buy additional bullion. 

2. Long-Term Loss of Potential Appreciation vs. an Alternative Investment Choice

With any investment, there is always an opportunity cost.  Opportunity cost is the cost to the investor, business, or individual in making one investment decision over another.

When investing in physical precious metals within a self-directed IRA you get the tax advantages of a traditional IRA as a bonus. Investor returns from an investment in a traditional stock, mutual fund, or the S&P 500 may be higher in the short term over gold or silver coins and bars.

Therefore, before you make any investment decisions, make sure you understand the opportunity cost of investing in a gold IRA.

3. Higher Chances Of Losing Money

Investors who are unfamiliar with precious metals as investments may find that there is an increased risk of a loss. When purchasing in your IRA you are required to follow the guidelines of specific investments.

The idea behind the IRS/IRA precious metals requirements is to help investors make decisions that are less risky and more understandable. Requiring the metals investment to be from sovereign government mints provides the investor a clearer understanding of the price. The price for bullion and Proof is based on the spot price of the metal. Any price over spot is a premium and could be based on the complexity of the minting process or finish. 

Final Thoughts on Precious Metals Rollover

Precious metals are an excellent way to diversify and provide a hedge against potential inflationary factors. Precious Metals are an excellent vehicle for retirement planning and should be carefully considered when constructing a long-term investment strategy.

The IRA investment cost is minimal compared to other investments such as stocks or real estate being managed in a 401(k) or IRA. A precious metals IRA allows investors to enjoy the security of physical ownership of their precious metals while minimizing the risks of investments such as stocks, bonds, or real estate.

Choosing to utilize the tax advantages of a self-directed IRA over purchasing metals with cash can be a real advantage. If the market for metals declines you can take a loss in your IRA while any appreciation in value is taken advantage of when distributions are taken. 

Overall, the choice to invest in precious metals is a good choice to diversify a portfolio, hedge inflation, and take advantage of tax deferment or tax-free profits. 

Recap the Pros & Cons of a Gold IRA

  • Tax Deferment of Gains
  • Greater Control of Investments
  • Precious Metals Use as a Hedge Against Inflation
  • Leverage the market by buying low and selling high
  • Portfolio Protection a safer investment choice
  • Physical asset purchase. No dividends, interest, or yields
  • Fees and Expenses. You will have fees and expenses for the custodian and depository
  • Opportunity cost in precious metals investment over another choice


Can I transfer my 401(k) to gold or silver?

A prior employers 401(k) can be rolled over to a self-directed precious metals IRA account. Depending on the 401(k) account set-up you may be able to transfer while you are your current job, but check with your account representative. 

How do I transfer my 401(k) to Gold IRA?

Once you establish an account with a precious metals IRA company such as those in the Top 5 Best Gold IRA Companies, they will walk you through the application process and verify eligibility. Once that is completed your precious metals IRA will be open and you will be able to fund your account by rolling over monies from the current IRA or 401(k). Typically you will sell assets in your current account and take a distribution. If your 401(k) administrator requires you to take a check personally, you will have a short period of time to deposit the funds to your precious metals self-directed IRA. Some 401(k) administrators will directly wire the money between accounts. Make sure you understand your company's process. There is no tax liability if you transfer within the required timeframe. 

Can I Roll over My 401(k) to a Silver IRA?

Yes, you would go through the same process to roll over funds from a 401(k) to a Gold IRA. Open an account, transfer the funds, and purchase your qualified silver proofs, bullion, or bars. 

I have a 401(k) plan and would like to invest a percentage in gold, can I only roll over a percentage of my account?

Yes, you may rollover a percentage of your current account and not the whole account. 

Can I hold the Precious Metals at Home if I invest through my Gold IRA?

Does your product have a target audience? Does it have benefits? Then you can and should explain those benefits to your target audience on a page like this.

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