Gold IRA vs 401 K: What’s The Best Retirement Investment?


Gold IRA and 401 K are retirement investments that provide investors with tax benefits. The difference between these two investments is that employers offer a 401 (K) retirement plan. At the same time, Gold IRAs are created by opening an account through a broker or a gold IRA company. Both investments can help diversify and secure your retirement account. If you want to have more offers in investments, a gold Individual Retirement Account is the best option, while if you want to achieve higher annual contributions, a 401 (k) is what you need. 

Here's a more brief description of Gold IRA vs 401 K:

Key Differences of a 401(k) and Gold IRA


The contribution for a 401(K) account in 2023 is $22,500.

401(k) investments cannot hold physical gold or any precious metals.

Investors can make withdrawals for 401(k) investments at 59 and a half years of age.

401(k) account includes two investment types: Traditional 401(k) and Roth 401(k).

Has minimum options for investment selections.

Gold IRA

The contribution for a Gold IRA account in 2023 is $6,500.

Gold IRA allows you to invest in physical gold bars, gold coins, silver coins and bars, platinum and palladium.

Investors can make withdrawals for Gold IRAs at 59 and a half years of age.

Gold IRAs includes three investment types: Traditional Gold IRA, Roth Gold IRA and SEP Gold IRA

Has wide range of investment selections.

What is a 401(K)?

A 401k is a retirement investment that employers offer for their employees with tax advantages. When signing, the employee agrees to accumulate a percentage of each paycheck directly transferred to their investment account. The employee will get to choose what type of investment options they prefer.

Types of 401(K) Investments

Traditional 401 (k)

This 401(k) investment type is sponsored by a company's employer, which allows employees to have opportunities for any investment options. Any earnings and employee contributions in a traditional 401(k) are tax-deferred. This means you will only be subjected to taxes once you withdraw from your investment.

Roth 401(k)

The company employers offer both Traditional and Roth 401(K). The difference between a traditional 401(k) from a Roth 401(k) is that contributions in Roth 401(k) are made after taxes are taken out of your paycheck. This means that the money you invest in your Roth 401(k) grows tax-free, and you can have tax-free withdrawals once you withdraw.

Pros and Cons of a 401(K) Investment


  • Enforces Investment Discipline
  • Employer Match
  • High contribution limits ($19,500 or $26,000 over the age of 50)
  • Income tax benefits include investing with pretax dollars and tax-deferred growth
  • Access to lower-cost institutional fund share classes
  • Access to stable-value funds
  • Free Investing Advice
  • Loans during an emergency or financial crisis


  • Limit Investment Choices
  • Investments can have high expense ratios
  • Fees can be high, especially in smaller company plans
  • Administrative costs can make a plan expensive
  • Lesser bond funds to choose from
  • Early withdrawal penalties of 10% if withdrawn under the age of 59 and a half

How is 401(K) Taxed?

Almost all 401(k) plans are tax-deferred. This means that you won't have to pay taxes for your contributions or gains interests and dividends until you wish to withdraw from your account.

What is a Gold IRA?

A gold IRA allows a safety net for any economic crises that may occur in the future because it will enable you to hold physical gold, silver, and other physical precious metals as alternative assets in your retirement portfolio with Internal Revenue Service regulations.

Types of Gold IRA Investments

The types of Gold IRA investments are similar to that of 401(k), which also include a traditional IRA and Roth IRA but with an addition of the SEP gold IRA investment.

Traditional Gold IRA

Traditional Gold IRAs are pre-taxed retirement accounts, meaning that all their investments and earnings grow on a tax-deferred basis. Your gold and other precious metals are only taxed upon withdrawal.

Roth Gold IRA

Investments made under a Roth Gold IRA are funded after tax fees. This means that there will be no immediate tax advantage. Tax payments will begin upon taking distributions at retirement.


SEP IRA is directed at employees for small businesses or self-employed individuals. Investors are only taxed on their withdrawals during retirement compared to any contributions they make.

Pros and Cons of a Gold IRA Investment


  • Hedge against inflation
  • Tax benefits
  • Full control of investments
  • Retirement portfolio diversification
  • Store Value (Price of gold can never be zero)


  • Risk of Loss (Possibility of being stolen or lost to unforeseen circumstances)
  • Higher Fees (Includes one-time account setup, yearly account maintenance fees, seller's fees, brokerage fees, storage fees, insurance fees, and cash-out fees).

How is a Gold IRA Taxed?

Gold is taxed similarly to collectibles, with a maximum tax rate of 28%. But for gold IRAs, you won't have to pay the collectible tax rate. But you will be subjected to the marginal tax rate, which you can pay for over 28% in taxes if your account falls under a high-income tax bracket. Gold IRAs typically face additional fees and taxes. If you withdraw from your gold IRA investment, you will pay taxes on your gains shortly after the transaction. Withdrawing earlier than 59 and a half years will subject you to a penalty fee of 10%.

Does a Gold IRA Increase in Value?

Yes! Gold has been an inflation hedge for many wise investors since the value of gold tends to increase whenever there is any economic crisis inevitable in our society today. Additionally, the value of gold always retains, so you wouldn't have to worry about losses on your retirement savings plan.

Can You Have Both 401(K) and IRA?

Yes, you can have both retirement investment accounts. It is common for investors to obtain both 401(K) and gold IRAs. However, depending on your situation, you may or may not be qualified for tax-advantaged contributions to both in any given tax year.

Can You Hold Physical Gold in Your 401(K)?

Most 401(k) plans do not allow investors to purchase physical gold and precious metals. But if you really want to invest in gold, other options are still available. Some 401(k) plans allow you to invest in gold through mutual funds or exchange-traded funds (ETFs).

Helpful Tips When Investing in 401(k)

Tip Number 1

If your employer provides you with a 401(k) with a company match, you should invest enough money in your 401(k) account to get the maximum match. The match may offer a 100% return on your investments, depending on your 401(k) plan.

Tip Number 2

If your company employer does not offer a company match, you can skip the 401(k) investment and start with a Gold IRA retirement account if you prefer a secured investment.

Tip Number 3

Suppose you already have an existing 401(k) account and want to invest in gold and other physical precious metal for your retirement account. In that case, you can ask a gold IRA custodian how to have a gold IRA rollover.

Tip Number 4

Some 401(k) plans do not allow investors to make any direct transfer of investments into precious metals. But if you really want to invest in gold and other precious metals, other options exist, such as mutual funds or exchange-traded funds (ETFs).

What are Gold Mutual Funds?

Mutual funds are also known as "paper gold" because investors usually invest in these types of assets if they can't put their money into physical gold or other precious metals. You can invest in gold mutual funds by looking at the fund description of your 401(k) account. You can find a potential mutual fund that offers exposure to gold by holding stocks of companies in gold mining industries.

What are Gold ETFs? 

A regular brokerage account with your 401 (k) plan can allow you to invest in a broader range of assets. This will enable you to have access to all types of gold investments. One of the lowest costs of gold investments is through gold exchange-traded funds (ETFs). Gold ETFs allow investors to invest in fund shares that hold actual gold bullion.

What is a Gold IRA Rollover?

A gold IRA rollover involves transferring an investor's retirement funds from an existing retirement savings plan. This retirement savings plan can either be from a regular IRA, Roth IRA, or 401(k). Your retirement funds must be transferred to your new gold IRA account within 60 days to complete the rollover process. This process involves purchasing physical gold or physical precious metals from your retirement portfolio as a way of safekeeping your assets against inflation or any economic crises.

What are the Benefits of a Gold IRA Rollover?

A gold IRA rollover involves transferring your funds from an existing retirement account to a new gold IRA account. The benefit of a gold IRA rollover is that this process allows you to invest in gold, silver, and other IRS-approved precious metals and store them in a precious metals depository for the insured safekeeping of your properties.

How to Rollover From 401 k to Gold IRA?

The first thing you need to do to initiate a rollover process is open a gold IRA account. Here are some of the best Gold IRA companies, according to client reviews, that you might be interested in investing in: 

  • Augusta Precious Metals
  • American Hartford Gold
  • Birch Gold Group
  • Noble Gold
  • Regal Assets
  • Oxford Gold Group
  • Lear Capital
  • Advantage Gold

After creating your gold IRA account, call the company handling your 401(k) to start the rollover process. You can choose between a direct or indirect rollover. 

Direct IRA Rollover

With a direct IRA rollover, your funds move directly from one account to another; choosing a direct rollover is more convenient and will spare you the worries of IRS penalties, such as a 10% penalty fee for early withdrawals (below the age of 59.5 years).

Indirect IRA Rollover

You will need to withdraw your funds from one account and deposit them into another for an indirect rollover. You will have 60 days from the date you receive your funds to transfer the money to your Gold IRA custodian or the Gold IRA company itself. The funds turn into a taxable withdrawal if the transfer is unsuccessful within 60 days.

What are the 401(k) Contribution Limits?

The current contribution limit for a 401(k) account is $20,500 and is said to increase to $22,500 in the year 2023. If you have an existing 401(k) plan, you can contribute an additional $7,500 for 2023. 

How Long Does a Gold IRA Rollover Take?

For a direct gold IRA rollover, the process will only take a few days to transfer your funds into your gold IRA account. While if you choose to transfer your funds from your 401(k) account to a gold IRA account manually or through an indirect rollover, this can take you a couple of weeks. Take note that you must ensure to transfer your funds within 60 days.

Is Gold a Better Investment Than Savings Account?

Yes, investing in gold is better than a savings account. Investing in gold secures your finances so that its value will not diminish whenever there is inflation, unlike paper money. In addition, investing in gold may bring higher returns than keeping it in your savings account.

Is it Smart To Move Your 401(k) to a Gold IRA? 

Any investment that allows you to have a secured retirement fund surpassing any economic turmoil is wise. This is timely since some parts of the world are experiencing inflation due to the Covid-19 incident that has contributed to our economy's downfall. Such experiences have pushed many investors to invest in assets that will not lower their value even after many years. If you're thinking about switching your 401(k) to a physical precious metals IRA, talk to your custodian about the options available on your plan to help you get your hands on physical precious metals.

About the author 

Rosebel Lacastesantos

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