Employees working for companies can save a portion of their earnings into a 401(k) plan that’s a vehicle for their retirement. Most of the 401(k)s are usually eligible to have the contributions matched by the employers with a specific amount. These are very convenient for employees because they can save their hard-earned money for years without a hassle.
However, the 401(k) traditional plans have limited choices of investments. If the market is going down, then so is the value of the portfolio. To hedge against inflation or the market downturn, some are looking for diversification tools like gold.
Today, the world is changing, including risks of inflation, the stock market, currency, and geopolitical uncertainties. This is why you may want to consider gold as a hedge against all of these, and the precious metals are safe havens where you can park your money when the market is experiencing turmoil. This happened in the early 2020s when the pandemic began, and many people were buying gold because the stocks were crashing.
What Specifically is a 401(k)?
These plans have a lot of benefits to individuals, such as:
- The savings are automated
- Companies and employers can match the contributions
- Growth and profits are tax-deferred
- There’s the ability to loan against it if the circumstances allowed
- Various investments available
- Convenient and accessible
While the investment choices are going to be limited, some of the plans may offer stable value accounts, money market funds, company stock, bond funds, and mutual funds. The multiple choices available may be enough to diversify one’s 401(k) holdings. You can learn more about 401(k)s on this page. Aside from these, the account owners have the ability to move their money anywhere else when they see that the market is changing.
Today, there are no longer pension plans for many workers as this is a thing of the past. However, most companies contribute funds so the employee can retire comfortably. Companies match the contributions, and this is one of the huge perks for many employees.
Owning Gold in a Standard 401(k)
While 401(k)s offer various choices for investments, mixing another asset class like precious metals may not be allowed. You don’t have the option to own silver or gold into the account. One of the closest things that can happen is to invest in companies that are into gold mining or go with their paper products.
Other buyers may want to add tangible metals and physical gold bars that they can touch. When they retire, the bullions are sent to their houses, and they can store or sell them immediately. This is why a self-directed 401(k) account is opened as a way to own physical metals like gold, silver, platinum, and palladium.
What Happens in a Rollover?
The process of an individual retirement account rollover is transferring some funds from the traditional 401(k) account into another precious metals IRA account. Read info about the IRA account here: https://www.investopedia.com/terms/i/ira.asp. However, things may not be simple as here are some factors to consider:
- If you’re currently employed with a company that is sponsoring the 401(k) account, you will have a smaller chance of rolling over the funds into a gold-backed IRA. There may be exceptions but be sure to check with your employers first.
- You could potentially keep your existing traditional 401(k) plan and buy gold with the use of another self-directed IRA account.
- Accounts from past employers can be used for rolling over into the new silver IRA. The new plan with your current employer can be chased out. However, when you cash out, you should be aware of the penalties and taxes, so this step should be considered carefully.
For this guide, the focus is on the 401(k) plan of a previous employee. Rolling over an old 401(k) account in silver or gold is simple, which can be done in the shortest time possible. Some of the processes are like this:
- Pick a custodian for the new self-directed IRA account
- Complete the paperwork required as well as the transfer of the funds from the old account to the new one
- Once the custodian has received the paperwork, they will facilitate the buying and selling of products that you want to add.
- Shop at the local dealers or international companies that offer precious metals.
- Once you have made your decision, the dealer is going to invoice the custodian for the payment.
- The gold is arranged for shipment in an approved depository
- The custodian will provide you with a statement of accounts on the holdings of your precious metals.
Other things to keep in mind are the following:
- The choice of a trustworthy and dependable custodian
- Depositories should be highly secure
- The silver or gold products that you’re purchasing should be approved by the IRS and genuine
- Annual fees
- Ongoing contributions
Custodians are everywhere, but you can consider someone who is in the business for a considerable amount of time. Their reviews should be mostly positive, and the fees are reasonable. You can compare their services by browsing on the internet and talking to their representatives.
Choose depositories that are near you. They should have insurance, maximum security, and affordable fees. If you’re looking for products that can rise in value in the future, these are the following:
- American Gold Eagle Coins
- British Gold Britannia Coins
- Australian Philharmonic
- Canadian Gold Maple Leaf Coins
- South African Gold Krugerrand Coins
- American Gold Buffalo Coins
- Various bullions
For physical silver, know that there are restrictions if you want them to include in your self-directed IRA account. Others that the IRS approves are the following:
- British Silver Britannia Coins
- Canadian Silver Maple Leaf Coins
- Sunshine Mint Silver Rounds
- American Silver Eagle Coins
- Australian Silver Koala Coins
- Mexican Silver Libertad Coins
- Silver rounds and bars that offer the minimum purity required by the IRA
If you’re concerned with the dollar devaluation or inflation, the precious metals can be an excellent hedge in your portfolio. The price remains stable, or they generally go up when the traditional stocks and bonds are lower. They are a great way to add another layer of diversification into your portfolio.