Using Your 401k to Invest in Gold

A 401K gold investment may be an attractive option for some investors. These investors seek to diversify and add stability to their portfolios. Gold is the asset often used to achieve these goals. Investing in gold is not available for all 401k participants due to IRS rules. The IRS has regulations that govern all retirement plans. Some of these rules may restrict a participant’s ability to reposition assets. Each 401k plan, within certain parameters, can restrict and regulate the types of investment available to its participants. In cases where investors are restricted by the IRS rules, the plan investments may be the only available option.

Eligibility and 401k Transfers

When you leave employment, you are generally eligible to move all or part of your 401k to other outside investments without penalties and taxes. However, if you are still actively employed, you may not be eligible to transfer funds to outside investments. An exception to this rule occurs when you reach the age of 59 ½. At age 59 ½, you are permitted to make in-service distributions and rollovers.


If you are eligible to move your 401k, a rollover is the best way to do it. Rollovers can be done in two ways. You can instruct your 401k providers to send your funds directly to the new investment company. A company-to-company transfer is a non-taxable event. Tax withholding is not required. Alternatively, you can have the funds sent to you and then forward them to your new provider within sixty days. If you receive funds, you will be required to certify they were rolled over when you file your taxes. 401k providers are required to withhold taxes when a distribution is sent to an individual. Also, the rolled over investment must be equal to the gross distribution. Therefore, you would need to add the amount withheld for taxes from personal funds to the new account to avoid a taxable distribution.

Taxes and Penalties

Distributions are considered as taxable income in the year received. For example, an individual who withdraws $10,000 from a 401k would be required to report an additional $10,000 of income at tax time. Participants under the age of 59 ½ are also subject to a 10 percent penalty, in addition to taxes. Although, 401k providers are required to withhold 20 percent for taxes, the actual liability is determined when the tax returns are filed. In most cases, taxes and penalties exceed the amount withheld. If your situation involves taxes and early withdrawal penalties, you can expect a large tax bill when you file.

Investing in a Gold 401k

There are companies which specialize in gold 401k accounts. If you take physical possession of gold designated for your 401k, it will be considered a distribution. Therefore, you can identify a company to serve as a custodian and provide safekeeping for your investment. These companies also track the value of your account and provide you with reports of investment returns.

You can get started by researching and identifying a reputable company. A number of companies can be located on the web. After you have selected a company, be sure to transfer the funds as a rollover. Taxes and penalties can erode potential profits on an improperly transferred account.

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