How to Roll Over a 401(k) Into a Gold IRA, Step by Step

Most 401(k) plans don't let you buy gold coins or bars. To own physical metal with retirement money, people move part of their 401(k) into a self-directed IRA, which is an IRA that can hold more than stocks and funds. The IRA then buys the metal, and a vault holds it.

The move itself is called a rollover. Done the right way, it is not taxed and nothing is withheld. Done the wrong way, part of the money is withheld up front and you can end up with a tax bill. This page walks through the steps in order and the two traps to avoid.

Can I roll my 401(k) into gold?

Yes, usually once you have left the employer that sponsors the plan. The IRS allows money from a 401(k) to be rolled over into a traditional IRA, and a self-directed traditional IRA can hold certain gold, silver, platinum and palladium.

A few points to know first:

• Pre-tax 401(k) money normally goes into a traditional IRA. You can roll it into a Roth IRA instead, but the IRS rollover chart says that amount must be included in your income.
• Roth 401(k) money can go into a Roth IRA.
• You don't have to move everything. You can roll over part of the account and leave the rest where it is.

If you still work for the employer, the rules are different. Some plans allow a move while you are still employed, often called an in-service rollover, and some don't. We cover that in moving your 401(k) to gold while you still work there.

What are the steps, in order?

Here is the usual order. The key is that the IRA exists before any money leaves your 401(k).

1. Decide how much to move. Many people move only a small share of their savings into metals. Our guide on how much of your portfolio should be in gold explains the common ranges and why putting most of your savings in metals is risky.
2. Pick a custodian. The custodian is the IRA company. It holds the account, keeps the records and reports to the IRS. Not every IRA company handles metals, so look for one that offers self-directed IRAs with precious metals. Get its fee schedule in writing.
3. Open the self-directed IRA. Choose traditional or Roth to match the money you are moving. You will get an account number and the custodian's instructions for receiving a rollover.
4. Ask your 401(k) plan for a direct rollover. Contact the plan administrator (the phone number is usually on your statement). Ask for a direct rollover to your new IRA and give them the custodian's details. Ask that the payment be made out to the new custodian, not to you.
5. Confirm the money arrived. The custodian will show the cash in your new IRA. Nothing has been bought yet.
6. Choose the metal and the dealer. You pick the coins or bars, and the custodian pays the dealer from your IRA. Only certain coins and bullion are allowed. See what gold and silver can go in an IRA.
7. The metal ships to a depository. It goes straight from the dealer to a vault that works with your custodian. It never passes through your hands. Our page on gold IRA storage rules explains why.
8. Check your first statement. Make sure it lists the exact coins or bars, the quantity, the price you paid and where they are stored.

What is a direct rollover, and why does it matter?

A direct rollover means your 401(k) plan pays the money straight to your new IRA custodian. You never receive it yourself.

The IRS says that when you choose the direct rollover option, no tax is withheld from the part paid to the IRA. You also don't need to worry about a deadline, because the money never leaves the retirement system. In Publication 590-A, the IRS says that if you roll over any part of a distribution, the direct rollover option "will generally be to your advantage."

Your plan must offer a direct rollover for eligible amounts. If a form or a phone representative seems to steer you toward a check made out to you, ask again for a direct rollover.

What is the 401(k) withholding trap?

If your 401(k) plan pays the money to you instead of to the IRA, the plan must withhold 20% for federal income tax. This applies even if you plan to roll the money over.

That creates a problem. To roll over the full amount, you have to deposit all of it into the IRA, including the part that was withheld. You would need other money to cover that gap.

Here is a simple example with round numbers:

If you deposit only the $80,000 check, the $20,000 that was withheld counts as a withdrawal. It is taxed as income, and if you are under 59½, a 10% additional tax may apply too. You get the withheld amount back only as a credit when you file your tax return.

A direct rollover avoids all of this.

What happens if I don't finish within the deadline?

When a payment is made to you, you have 60 days from the day you receive it to deposit it into the IRA. This is called an indirect rollover.

If you miss the deadline, the IRS says the money no longer qualifies for tax-free rollover treatment. It is treated as a taxable distribution for the year you received it, and the 10% additional tax may apply if you are under 59½.

The IRS can waive the deadline in some cases, such as a financial institution's error, a serious illness or a disaster. Publication 590-A describes an automatic waiver, a self-certification letter, and a private letter ruling. Waivers are not guaranteed, so it is much simpler not to need one.

How much does a gold IRA rollover cost?

The rollover itself is usually not taxed, but the gold IRA has costs a 401(k) fund often doesn't:

• A setup fee and a yearly custodian fee.
• A yearly storage fee for the depository.
• The dealer's markup when you buy, and a lower price when you sell back.
• Your 401(k) plan may charge a small fee to process the rollover. Ask them.

Get every fee in writing before you sign. Our gold IRA fees guide shows how these add up over the years.

What can't a gold IRA do?

Before you move money, it helps to know the limits of gold:

• No income. Gold pays no interest or dividends. Your 401(k) funds may hold bonds and stocks that do.
• Storage costs every year. You pay to store and insure the metal whether its price rises or not.
• Price swings. Gold prices can rise or fall sharply, and there have been long stretches when gold went nowhere.
• Harder to sell. Selling means going through a dealer at its buyback price, which is lower than what you paid.

For these reasons, most retirement plans treat metals as a small part of the mix, not the whole plan. For the bigger picture, see how to protect your retirement savings after 50.

What should I watch out for?

Watch for anyone who pushes you to move your whole 401(k), or who calls you first and rushes the decision.

The CFTC and FINRA note that money can be rolled from a 401(k) to a self-directed IRA without penalty, but "once that cash is in the SDIRA, you're on your own." The custodian generally doesn't check whether the metal you buy is fairly priced. That job falls to you.

People in this situation often consider talking to a fee-only fiduciary or a tax professional before the money moves, especially if the amount is large. It also helps to read the questions to ask a gold IRA company and the red flags regulators list.

If you already have an IRA and want to move it instead of a 401(k), the steps are similar but the rules are a little different. See gold IRA transfer vs. rollover.