By Doug Young

The 401k Plan was not a brainchild of either the Internal Revenue Service or the United States Government. It was conceptualized and created by a person named Ted Benna, a benefits consultant. When the Section 401(k) of the IRS was added in 1978, Benna saw that it could be used to create a simple retirement plan for employees and offer them tax advantages.

The first plans of this kind were offered in 1980. In just one decade, almost 50 million employees had 401ks from their employers. At present, about 95% of employers have a 401k option available in their benefits package. In fact, this is the most popular retirement plan in the US today.

The 401k is primarily funded by the pre-tax paycheck deductions of the employee. In some cases, employers offer programs to match the amount. This is the most important feature of the 401k plan. This allows investors to get free contributions and give more than the standard contribution limits. However, it is important to note that almost all of the responsibility for the 401k funding falls upon the individual account holder.

The organizations who are most likely to have 401k plans are for-profit private employers. Non-profit companies might have 403(b) plans. Government employers are more likely to offer 457(b) plans.

Limitations of the 401k

There are some limitations to the 401k. Investment options are limited to the offerings of the plan provider. Thus, you will be unable to invest in precious metals and real estate. A majority of the 401k money is invested in mutual funds.

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The 401k Plan Rollover to Gold Procedures & Conditions

If you have a 401k plan, I’m pleased to be able to inform you that can shift to an Individual Retirement Account or other qualified plans without any tax penalties. If you are interested in a 401k rollover to gold, here are some rules that you should know:

  • As soon as you get your 401k funds for the rollover, you are given 60 days to complete this process. Failure to do so during the allotted time will lead to penalties. If you have not yet reached the age of 59½, there is a 10% penalty for the withdrawal, aside from the usual income taxation.
  • There is a limit of one rollover per year from your 401k to an IRA. The one-year period starts exactly on the day you get the 401k distribution. Please note that this applies to a single IRA.
  • You are not allowed to use cash from the distribution to buy investments during the period that falls between receiving the 401k distribution and the establishment of your IRA.

It would be best to do a direct rollover with regard to 401k funds. This process is preferred by many, as you do not receive a check. The provider will transfer the money directly to the IRA fund of your choice instead.

Gold Investments For 401k Plans

Although the options are limited, these are the types of investments you can make with your 401k plan:

  • individual bonds (corporate and government)
  • certificates of deposit (CDs)
  • individual stocks
  • mutual funds
  • exchange-traded funds (ETFs)

This demonstrates that you are unable to invest in gold bullion or other precious metal through your 401k.

However, you can invest in gold mining companies’ stocks or in mutual funds comprising of stocks for mining establishments. This is termed as ‘paper gold’ investments. You might also consider mining or gold ETFs.

Physical Gold vs. Paper Gold

Paper gold stocks are shares from companies that explore, mine and produce gold. There are a multitude of gold mining companies’ stocks to choose from. The largest ones can usually be found in the GDX (Gold Miners Index) or the HUI (BUGS Index).

This can be a lucrative venture, yet more risky that buying physical gold. There are many risks involved, and here are some of them:

  • Risk Associated with Regulations — companies dealing with exploration and mining are subject to higher regulation and taxes.
  • Cost of Production Risk — increased property values, equipment depreciation and labor costs can impact a mining company in a negative way.
  • Management Risk — overly leveraged or mismanaged companies could declare bankruptcy.
  • Fiat Currency Risk – when someone sells investments such as gold stocks or even shares held in a gold based mutual fund, he or she will be paid with fiat currency. If a currency collapse were to occur, one may be left with just worthless paper.

Benefits of a 401K Rollover to Gold

A 401k rollover allows you to control the direction of your investment and open new tax-free ones. They are not vulnerable to business risks made by your employer and are not limited either.

By dedicating a percentage of your investment into precious metals, you could protect your portfolio from market volatility and inflation.

Companies That Offer This Service

There are many Gold IRA Companies that will help you set up a Precious Metals IRA and assist you with a transfer or rollover of your 401k.

You can check out my Reviews of the leading Precious Metals IRA Companies here.

EXPOSED! The Truth About Retirement


About the Author: Doug Young
Doug YoungDoug is a highly experienced professional and widely trusted authority in financial investing, commodity trading, and precious metals. With over 20 years of expertise, he helps others make informed decisions by sharing a combination of personal experience, extensive knowledge and meticulously researched information on gold IRAs, precious metals investing and retirement planning. He regularly writes news items on these topics. He has considerable experience of evaluating Gold IRA and Precious Metals Companies, gained over a period spanning more than a decade.

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