Gold IRA Transfer vs. Rollover: Which One Should You Use?

There are three ways to move retirement money into a gold IRA. Two of them send the money straight from one company to another. The third pays the money to you first and trusts you to finish the job on time.

The names are confusing, and companies don't always use them the same way. This page explains each one in plain words, shows them side by side, and explains why most people avoid the third.

What is the difference between a transfer and a rollover?

A transfer moves money between two IRAs, from one custodian directly to another. A rollover moves money out of one retirement account and into another, either directly or by paying it to you first.

The words come from the IRS. A few terms to know:

• Custodian (or trustee): the company that holds your IRA and keeps the records.
• Trustee-to-trustee transfer: your current IRA custodian sends the money straight to your new IRA custodian.
• Direct rollover: your 401(k) or other workplace plan sends the money straight to your IRA custodian.
• Indirect rollover: the money is paid to you, and you deposit it into the new account yourself before the deadline.

How do the three ways compare?

Here is a side-by-side view, based on IRS Publication 590-A and the IRS rollovers page.

The first two are the routes most custodians expect when you open a gold IRA. The third works, but it puts the risk on you.

Why is a direct transfer usually the safest?

Because the money never comes to you, nothing is withheld, there is no deadline to miss and there is no yearly limit.

The IRS says a transfer from one IRA trustee directly to another "isn't a rollover." Since there is no distribution to you, the transfer is tax free. The same is true if the old custodian writes a check made out to the new custodian and hands it to you to deliver.

For workplace plans, the direct rollover does the same job. IRS Publication 590-A says that if you roll over any part of a plan payout, the direct rollover option "will generally be to your advantage." Our step-by-step guide covers how to request one: how to roll over a 401(k) into a gold IRA.

What goes wrong with an indirect rollover?

Two things: withholding and the deadline.

Withholding. When a 401(k) or other workplace plan pays the money to you, it must withhold 20% for federal income tax, even if you plan to roll it over. To roll over the full amount, you have to make up the withheld part from other savings. Any part you don't deposit counts as a withdrawal.

The deadline. You have 60 days from the day you receive the money to deposit it. If you miss it, the IRS treats the money as a taxable distribution. If you are under 59½, the 10% additional tax may also apply.

The IRS can waive the deadline in some cases, such as an error by the financial institution, a serious illness or a disaster. But the automatic waiver covers only narrow cases, and it is far simpler not to need one.

What is the once-a-year IRA rollover rule?

You can make only one IRA-to-IRA rollover in any 12-month period, no matter how many IRAs you own. This applies only to indirect rollovers between IRAs.

Publication 590-A explains the details:

• All your IRAs count together. Traditional, Roth and SIMPLE IRAs are treated as one IRA for this limit.
• The clock starts when you receive the money, not when you deposit it.
• Transfers are not limited. Trustee-to-trustee transfers between IRAs don't count.
• Roth conversions are not limited. Moving money from a traditional IRA to a Roth IRA doesn't count.
• Workplace plan rollovers are not limited. The once-a-year rule doesn't apply to rollovers from a 401(k) or similar plan.

The IRS also says it "can't waive the IRA one-rollover-per-year rule." If you make a second indirect rollover within the period, it isn't a tax-free rollover. This is one more reason people moving an IRA into gold usually ask for a direct transfer.

Which accounts can move into a gold IRA?

Most common retirement accounts can, according to the IRS rollover chart. A few combinations have special conditions.

• Traditional IRA to traditional IRA: yes, by transfer or rollover.
• 401(k), 403(b) or government 457(b) (pre-tax) to traditional IRA: yes.
• Pre-tax plan money or a traditional IRA to a Roth IRA: yes, but the chart says the amount must be included in your income. This is a Roth conversion.
• Roth 401(k) to Roth IRA: yes.
• Roth IRA to a traditional IRA: no.
• SIMPLE IRA: generally only after two years in the plan, except into another SIMPLE IRA.

If you still work for the employer, your plan may or may not let you move money out. See moving your 401(k) to gold while you still work there.

Can I move gold I already hold in an IRA?

Often, yes. If you already own metal in an IRA and want a different custodian, some custodians can move the metal itself by transfer, without selling it. Ask both custodians whether they do this, what each one charges to close or open the account, and whether the depository changes.

If metal is ever paid out to you and you roll it into another IRA, the IRS rule is strict. Your rollover is tax free "only if the property you contribute is the same property that was distributed to you." You can't keep the coins and deposit cash instead.

What can't a gold IRA do?

Moving money the safe way doesn't change what gold itself can and can't do:

• It pays no income. No interest, no dividends.
• It costs money to hold. Storage and custodian fees come due every year.
• Its price swings. Gold can rise or fall sharply, and it has gone through long flat stretches.
• It is slower to sell than a fund, and a dealer buys it back below what you paid.

That is why most retirement plans hold metals as a small part of the mix, if at all. See how to protect your retirement savings after 50 and how much of your portfolio should be in gold.

Before you move any money

Get the custodian's fees in writing and know who the dealer and depository are. Our pages on gold IRA fees and what a gold IRA custodian does explain what to ask.

The CFTC and FINRA also warn that "it might not make sense for you to roll over an existing retirement account" into a self-directed IRA to buy metals. People in this situation often consider talking to a fee-only fiduciary or a tax professional before the money moves.