What is Gold IRA Rollover?
A gold IRA rollover is a movement of funds from one eligible retirement account to a gold IRA or precious metals IRA. The eligible retirement accounts are 401(k), 403(b), SEP IRA, 457(b), and SIMPLE IRA. You cannot rollover from a Roth IRA or inherited Roth. The retirement account owner withdraws funds from one retirement account, then deposits those into their gold IRA. A gold IRA rollover is the method used to fund a precious metal IRA with tax-deferred money.
A gold IRA transfer is a movement of funds or precious metal assets from one custodian to another. Both accounts are gold IRAs. The IRA owner does a gold IRA transfer if they want to change custodians or gold IRA companies. There are no tax implications for a gold IRA transfer.
A rollover IRA FBO is a direct IRA rollover. FBO means "for the benefit of". In a direct IRA rollover, the check will be issued in the name of the receiving custodian but marked FBO to the account owner.
Types of Gold IRA Rollover
Direct gold IRA rollover is a movement of retirement funds between two IRA custodians. The retirement account administrator of the source IRA sends the check directly to the gold IRA custodian. The IRA owner never touches the funds, and the tax-deferred status of the funds is preserved. A direct rollover is convenient, has fewer chances for mistakes, and is not subject to withholding tax. A direct rollover is also called a trustee-to-trustee transfer.
Indirect gold IRA rollover is a movement of retirement funds facilitated by the account owner. The retirement account administrator of the source IRA sends the check to the account owner. The account owner has 60 days to deposit the funds into the gold IRA. If the owner cannot do that within 60 days, the funds will be considered a distribution and become subject to taxes and an early withdrawal penalty of 10% if the owner is less 59½ years old.
What is the Difference between a Gold IRA Transfer and a Gold IRA Rollover?
The difference between a gold IRA transfer and a gold IRA rollover is the source of funds. Both move funds to a gold IRA. But in a gold IRA transfer, the funds come from another precious metal IRA handled by a different custodian. In a gold IRA rollover, the funds come from an eligible retirement account like a 401(k) or a traditional IRA.
What is the Process for Setting Up a Gold IRA Rollover?
Step 2 - Decide the type of gold IRA rollover – direct or indirect rollover. Work with the gold IRA company and retirement plan administrator if doing a direct gold IRA rollover. Request the check from the eligible retirement account then deposit it to the gold IRA for an indirect gold IRA rollover.
Step 3 - Once the funds are clear, you can start your gold investing and buy your preferred IRS-approved physical gold and other precious metals.
How Long Does It Take to Rollover an Existing Traditional IRA to a Gold IRA?
A direct rollover of an existing traditional IRA to a gold IRA can take an average of 5 business days. It depends on how quickly the funds can be transferred from the source retirement account to the gold IRA.
An indirect rollover can take longer depending on when the owner deposits the funds to the target gold IRA. The owner has 60 days to deposit the funds. If the owner is not able to deposit within 60 days, they can still try to complete the rollover by qualifying for a waiver of the 60-day requirement.
The 60-day requirement can be waived if you:
- Qualify for an automatic waiver,
- Request and get a private letter ruling,
- Qualify for self-certification.
You avoid the 60-day deadline with a direct rollover.
How To Qualify for an Automatic Waiver?
To qualify for an automatic waiver, every effort should’ve been made before the 60-day period elapsed. All the following conditions should be met:
- The gold IRA provider received the funds before the 60-day rollover period ended.
- All procedures for transferring the funds within the 60-day rollover period were followed.
- The funds were not transferred within the 60-day rollover period because the gold IRA company made a mistake.
- The funds are deposited into a gold IRA within 1 year from the beginning of the 60-day rollover period.
- It would have been a valid rollover if the gold IRA company had deposited the funds.
If you cannot qualify for an automatic waiver, there are still two options – request a private letter ruling or qualify for self-certification. But these options cost more (the fee for requesting a private letter ruling is $10,000) and require more steps as detailed in the IRS revenue procedures.
The best gold IRA rollover strategy is to do a direct rollover. This is the option that has the least chance of making mistakes on your gold investment and little to no cost involved.
Can You Rollover a 401k to a Gold IRA While Still Employed?
You can rollover some or all funds in a 401k to a gold IRA while still employed through an in-service rollover. This rollover option is not available for all 401k plans, so it needs to be confirmed with the plan provider. Check also with the plan provider for any specific requirements and drawbacks of doing an in-service rollover. Some plans impose a temporary ban on contributions when an employee withdraws funds.
The best way to transfer a 401k to a gold IRA without penalty is through a direct rollover. Transferring directly between custodians lessens the chance for making a mistake.
What are the IRS rules for a gold IRA rollover?
There are a few additional IRS rules to follow for a gold IRA rollover that have not been covered.
- One-rollover-per-year rule: The IRS generally allows you to perform one tax-free rollover between IRAs within a 12-month period. This limitation does not apply to:
- Rollovers from a traditional IRA to a Roth IRA
- qualified plan, such as a 401(k), to IRA.
- Trustee-to-trustee transfers
- Direct rollover: You can avoid the 60-day rule by executing a direct rollover. In this process, the funds are transferred directly from your existing retirement account to the gold IRA account without passing through your hands.
- IRS-approved precious metals: The IRS has specific requirements for the types of physical gold and other precious metals allowed in a gold IRA rollover.
- Coin specifications: gold, silver, or platinum coins must meet the exact specification of Section 5112 of Title 31 of the United States Code, or a coin issued under the laws of any State. Examples are the American Eagle gold coin, American Buffalo silver coins, and Canadian Maple Leaf platinum coin.
- Bullion fineness requirement: 99.5% fine for gold, 99.9% fine for silver, 99.95% fine for platinum, or 99.95% fine for palladium. The gold bullion is usually in the form of gold bars and rounds.
- Storage: The physical precious metals in a gold IRA investment must be stored in an IRS-approved depository. You cannot store the metals at home or in a personal safe deposit box.
- Required Minimum Distributions (RMDs): Like traditional IRAs, gold IRAs are subject to Required Minimum Distributions (RMDs) when you reach age 72. You must withdraw a specific amount each year based on your life expectancy and the value of your account. The distribution can be taken in the form of precious metals or cash.
- Taxes: a rollover allows for tax-free transfers of retirement funds. In most cases, no taxes are paid on rollovers and funds retain their tax-deferred status.
- However, when a rollover exceeds the 60-day deadline, it will be considered a distribution and become subject to income taxes and an early withdrawal penalty of 10% if withdrawn before age 59 ½.
- A rollover to a Roth IRA will be considered a conversion and subject to ordinary income taxes.
- An indirect rollover will be subject to 20% withholding tax. The amount withheld can be replaced by the plan owner and returned by the IRS when the rollover is completed.
What are the fees involved in a gold IRA rollover?
In general, there are no fees involved in a gold IRA rollover, except possibly a wire transfer fee. However, these are the fees involved in opening a gold IRA.
- Setup fee. This is a fee for the initial account setup. Some gold IRA companies waive the setup fee.
- Custodian fee. This is the annual maintenance fee paid to the custodian.
- Storage fee. The annual fee for storing physical gold and precious metals paid to the depository.
- Insurance fee. The insurance cost for storing gold. Some depositories already include this in the storage fee.
- Delivery fee. Charged for the delivery of precious metals from the seller to the depository. Often waived by the gold IRA company.
A gold IRA rollover is the recommended way of funding an IRA with tax-deferred funds. This allows the owner to own physical gold and other precious metals, have protection against currency devaluation, and have great investment diversification of their retirement funds without paying taxes. You need to be careful and aware of the steps to avoid making costly mistakes. Check out this gold IRA rollover guide for a detailed step-by-step on how to do it properly.