401K to Gold Rollover

How can I protect my 401K retirement account with gold investment?


Gold has been one of the most sought-after commodities since ancient times, long being used to trade and to store wealth. Today, gold still remains extremely popular, with its glittering beauty being in great demand in the jewelry trade. It is also extensively traded by central banks, mutual funds, and investors as it is regarded as a hedge against the volatility of financial markets. Gold in the form of coins, medals, bars, and bullion are commonly kept in banks and serves as a repository of wealth.


Investors have long viewed gold as a safe investment that will keep its value even in the event of a stock market crash or an economic downturn. As you look to expand the portfolio of your 401K retirement account, gold may seem like an attractive investment option. Read on to discover the benefits of investing in gold and the pitfalls that you should bear in mind.


Different ways of investing in gold


There are myriad ways of investing in this precious metal. Here are the main ones:


  • Jewelry


Gold jewelry may seem like an attractive way to invest in gold. However, jewelers charge a large markup to craft and sell jewelry so resale values are poor, making this a poor investment option


  • Physical gold


Gold can be purchased in the form of coins, bars, and bullion, and is the best way to own the gold physically. However, it is not without markups as well, with the cost of producing and selling the gold typically being passed on to the buyer.


  • Gold certificates


Gold certificates are basically paper representations of gold where a company certifies that it has the amount of gold stated in the certificate. This gold is usually unallocated, but the company indicates that it has enough gold to match all certificates.


  • Exchange-traded funds (ETF)


Much like buying gold certificates, you can also invest in an exchange-traded fund that directly buys gold. This is a great way to directly invest in a liquid asset as the fund deals directly in physical gold.



  • Future contracts


A futures contract is an agreement between a buyer and seller to exchange a specified amount of gold at a future date. The date and price will be stipulated in the contract. As these contracts are highly leveraged and risky, they are not recommended for new investors.


  • Gold mining stock


Investing in the stock of reputed gold mining companies is an excellent option for investors seeking to enjoy the stability that gold prices bring. Furthermore, you will also be able to reap the benefits of company growth. However, natural disasters, striking workers, and other issues can all affect a mining company’s bottom line.


  • Mutual funds


You can own stock in a portfolio of mining companies by investing in a mutual fund that includes gold mining companies. However, most mutual funds have exposure to many precious metals. Also, the fees of these mutual funds can vary and be quite high.


IRA to Gold

Benefits of investing in gold


  • Holds its value


Since the ancient Egyptians began to make jewelry, gold has been coveted for its exceptional qualities. Its beauty, coupled with the fact that it doesn’t corrode and can be melted and fashioned into different forms, has made it a much sought-after precious metal. It still functions as a repository of wealth whose value continues to grow.


  • Hedge against economic uncertainty


Gold is an excellent hedge against inflation as its price rises along with the cost of living during periods of high inflation. Even during times when stock markets crash and countries go into recession, the price of gold has continued to rise. This is partly a result of people turning to gold at a time when money begins to lose its value.


  • Limited supply


Gold is very limited in supply, as the process of extracting it and refining it is an expensive and arduous one. It can also take many years for a new mine to go into production. Consequently, the value of gold has been assured and regularly rises due to demand outstripping supply.


  • Increased demand


The value of gold continues to rise, thanks to a greater appetite for gold, particularly in countries such as China where gold bars are a traditional form of savings. Gold jewelry is also extremely popular during the Indian wedding season. Demand for gold has grown among investors who see it as a safe, stable commodity.


  • Diversified portfolio


For 401K investors, gold is an excellent option as its value has no correlation with stock values and economic performance. In fact, demand for gold is strongest when stocks drop and economies go into recession, causing investors to seek safety in gold. As a hedge against economic uncertainties that continue to grow in value, gold remains an extremely attractive option.



Is it a good idea to invest in gold?


In order to decide if it is worthwhile using some of your 401K retirement funds to invest in gold, consider that, over the 10-year time period from November 2002 to October 2012, gold appreciated 441.5% while the S&P 500 increased 58%. In the past 5 years, however, the opposite was true – the S&P 500 increased 100% compared to the 42.5% increases in gold.


We can see, consequently, that sometimes stocks outperform gold. In the long term, however, gold remains a very attractive alternative, especially as a stable commodity that acts as a hedge against financial volatility. In fact, gold offers a valuable counterbalance when stock markets take a dive.


As more people turn to gold when currencies devalue and stock prices plummet, gold investors enjoy excellent returns even during recessions. Consequently, if you incorporate it into your portfolio, you can expect to greatly mitigate the loss that you would typically have to face during such times.


Investing in gold with a 401K


Most 401K accounts do not allow you to directly purchase physical gold or other gold-related derivatives such as futures contracts. But don’t worry – it is possible for you to add this valuable commodity to your 401K portfolio through mutual funds and exchange-traded funds.


You will be given a selection of funds with your 401K plan. Go through it to find out which mutual funds have significant stock in gold mining companies. Choosing these mutual funds will allow you to reap the benefits of trading in this valuable commodity. From the available options, opt for a reputed low-cost fund that will offer you enhanced value.


If your 401k plan does not allow you to select a mutual fund that invests in gold mining companies, you can rollover your 401K account into an investment retirement account (IRA) that will give you unconstrained access to any type of gold investment, such as stocks, ETFs, mutual funds and futures.


You can even select a Gold IRA that specifically allows you to add physical gold such as coins and bullion as qualified investments. If you are leaving your job, you can simply rollover the 401K account money into an IRA. If you are still employed, request an in-service withdrawal to obtain your 401K funds.


These options will allow you to stabilize your retirement investment account while enjoying the benefits of investing in a precious metal that has appreciated steadily over time.

By cduteam