This article was produced independently by our editorial team. Goldco provided a partnership fee to support our coverage; however, all opinions, research, and recommendations are our own.

Looking to diversify your retirement investments? One option is a gold IRA, which is especially popular among those that have concerns about inflation, a weak U.S. dollar, and market volatility. Gold has long been used to preserve wealth, as its value is often seen as more resilient than stocks during economic uncertainty.

It’s possible to direct funds from your 401(k) into a gold IRA in just a few steps. But there are some things to consider before you do. Here’s what to know about rolling a 401(k) over to a gold IRA.

Before you roll over a 401(k) to a gold IRA

Before you open a gold IRA account, there are a few things to quickly check to understand exactly how the process works—and to learn whether your specific 401(k) is even eligible.

Check whether your 401(k) is eligible for a rollover

Rollover eligibility can depend on your company’s specific plan—and whether or not you’re still working at the same company.

If you’ve since quit your job, the retirement savings you’ve accumulated in your 401(k) balance can typically be fully rolled into an IRA. If you’re still with the company, you’ll have to check the details of the plan. You can often perform a rollover at age 59 ½, though employees under that age may still be able to roll certain money (such as after-tax contributions) into an IRA.

Take a look at your plan’s documents or ask your administrator for guidance. You may find that the restrictions are based not just on your age, but also how long you’ve worked at the company, whether the employer’s contributions have vested, and more.

Compare a direct rollover vs. an indirect rollover

A “direct” rollover means that your 401(k) funds are sent directly to your gold IRA custodian. You don’t ever touch the money yourself. It’s a simple, streamlined process.

An “indirect” rollover is more complicated. The money is paid to you first, with your plan withholding 20% for federal taxes. You’ll then have to deposit the entire original amount (even though your balance is light by 20%) into your new IRA within 60 days. That means digging into your own pocket to make up the difference. Once tax time comes, you’ll receive that money back—but if you fail to repay during that 60-day window, the difference could be taxable and even come with an early withdrawal penalty of 10% (for those under 59 ½).

All to say, a direct rollover is generally the preferred method.

Step 1. Compare gold IRA custodians and companies

You can’t keep tax-advantaged funds, including gold for a precious metals IRA, at home. In other words, you can’t just buy gold with your 401(k) money and keep it under your bed. A qualified custodian is required to open and manage your account. It’ll handle all the paperwork required to finalize your rollover, keep records, and arrange for storage at an IRS-approved facility.

You’ll have to select a custodian, as well as a gold IRA company. Not all are created equal, as each comes with unique fees, minimums, and gold selections—not to mention customer ratings. Examine the track record of each, including how many complaints they’ve racked up with the Better Business Bureau. Gold companies also typically only work with select custodians (some offer just a single “option”), so make sure you’re satisfied with both the dealer and the custodian when making your choice. Dealers like Goldco offer a sizable list of custodians to work with, which is ideal.

When you’ve narrowed your search, ask each company for a full fee schedule covering setup, annual maintenance, and storage costs.

Step 2. Open your account and request a direct rollover

Once you’ve chosen a gold IRA company and a custodian, it’s time to open a self-directed traditional gold IRA. You should do this before you contact your old 401(k) provider, as you’ll need a destination for that money once the direct rollover is initiated. Your custodian will give you the necessary info regarding the transfer (wiring instructions, account number, etc.).

With your IRA awaiting a deposit, you can call your employer, present or former, and ask to rollover the funds. This can entail a wire transfer to your new account or a check made out to the custodian. It shouldn’t be payable to you, as this would be an indirect rollover.

In short, make sure this distribution is coded correctly. Getting that part correct should keep you from having to temporarily come up with the aforementioned 20% out of pocket that you’ll get back at tax time.

Step 3. Select IRS-approved gold

Not all gold is eligible to be deposited into an IRA. Bullion generally needs to be at least 99.5% pure to qualify. Products such as the American Gold Buffalo, Gold Maple Leaf, and Gold Australian Sea Turtle are examples of IRA-eligible coins. A notable exception to the purity rule is the Gold American Eagle, which is just 91.67% fine. Your custodian can help you with this.

It’s also wise to confirm the product’s total price, its dealer markup, and its buyback terms with the dealer or your custodian.

Step 4. Confirm storage at an approved depository

Your custodian will purchase the metal according to your instructions. It’ll then get shipped directly to a qualified depository. Again, at no point will it make its way into your hands. The depository will credit your account accordingly, and you’ll get confirmation that you in fact received what you paid for.

Ask your custodian whether your gold will be stored “segregated” or “commingled.” This is important, because the specific storage arrangements can affect your costs and the exact products you receive when you eventually take distribution.

Put simply, segregated storage means that the exact bars and coins you purchased are kept apart and clearly marked as yours. Commingled storage means your metals are pooled with other investors’ metals of the same type and purity. This second option is cheaper, but taking delivery means they’ll just pull metal of equal value for you—not necessarily the products you bought.

Gold IRA rollover rules, taxes and potential penalties

A direct rollover to a traditional gold IRA from a traditional 401(k) doesn’t generally result in a tax bill. The money remains tax-deferred, even though that move will be reported on your tax forms.

Opening a Roth IRA is a different story. Putting funds into a Roth gold IRA requires that you pay taxes upfront, meaning that any funds you deposit will immediately be taxed. The upside is that any growth won’t be taxed when you withdraw at least five years later (and when you reach retirement age). If you’re rolling over from a Roth 401(k), you won’t be taxed again—but otherwise, prepare to pay income taxes on whatever pre-tax amount you convert.

Additionally, if you’re of age that the IRS requires you to start taking money out of your retirement accounts (called required minimum distributions), it’s got to come out before you move anything. You can roll the rest of the funds over, but not before you take out the required minimum distribution.

The takeaway

Initiating a 401(k) rollover to a gold IRA can be a straightforward process—especially if you opt for a direct rollover. Choose a gold IRA company and custodian, open a gold IRA account, and put in a request with your 401(k) that the funds be moved. You can use that money to buy IRS-approved gold products, and it’ll be stored in a qualifying depository. This is a great way to hedge your retirement against inflation and a volatile market.

Frequently asked questions

Can I roll over a 401(k) to a gold IRA while I’m still employed?

You can potentially roll over a 401(k) to a gold IRA while you’re still employed, but it depends on the rules of your specific plan. You’ll need to check with your plan’s administrator.

What is the difference between a gold IRA rollover and a gold IRA transfer?

The term “rollover” usually refers to moving money from a workplace plan—like a 401(k)—into an IRA. A transfer is moving money directly between two IRA custodians.

Will I pay a penalty for rolling a 401(k) into a gold IRA?

You won’t pay a penalty for rolling a 401(k) into a gold IRA if it’s an eligible direct rollover. Taxes and an early withdrawal penalty will only apply if you don’t roll the full amount into an IRA within 60 days.

Can my 401(k) provider mail the rollover check to me?

Your 401(k) provider can mail the rollover check to you as long as it’s payable to your new IRA custodian—not you. If the check is payable to you, it’s typically treated as an indirect rollover. You’ll have to redeposit the funds into your IRA within 60 days, or it’ll count as a distribution.

Do I need a self-directed IRA to hold physical gold?

Yes, gold IRAs are “self-directed” accounts. Many regular IRAs at mainstream brokerages can’t hold physical gold.