Downsides of a 401k to IRA Rollover You Should Know

Downsides of a 401k to IRA Rollover You Should Know

Disclaimer: We are reader supported. We may be compensated from the links in this post, if you use products or services based on our expert recommendations. Please read our Advertising Disclosure.

It is possible to roll over the funds from your 401(k) to another account without paying any taxes, based on your specific circumstances. Investors may get several benefits from holding gold in their IRA.

One way to safeguard one's retirement savings is to put money into precious metals like gold and silver via a traditional 401(k) or other individual retirement accounts.

You may set your retirement savings into real gold with a Gold IRA, but not a regular 401(k). However, there are disadvantages to rolling over 401(k) to IRA.

Protect Your Wealth & Get Huge Tax Saving!

Downsides of a 401k to IRA Rollover You Should Know

The Following Things Are Considered Disadvantages:

1. Lack of Flexibility Withdrawals

Many investors are interested in the flexibility they get when they withdraw cash from their retirement plans when they want and how much they need. IRA accounts are only available to those who have worked for at least five years for their employer or at least 20 years if self-employed.

You should not expect to withdraw from an IRA account at any time. If you want to withdraw from your IRA, you must apply for a distribution and submit a withdrawal request. There are limits on how much money you can take out in a given year.

2. Higher Fees

When you roll over a 401(k) into an IRA, you cannot make withdrawals without paying extra fees that will be deducted from each withdrawal. In addition, you will incur the same taxes, if any, that would have been withheld.

You will also have to pay a 10 percent early withdrawal penalty should you withdraw your funds before age 59 ½. Also, many of the investment options available in retirement plans are not available in IRAs.

Also, because many investors like to transfer funds across banks and companies within a short period when they transfer 401(k) money into an IRA, chances are that the fees may increase when you rolle over into an IRA.

3. No Tax Benefits

The only tax benefits you would derive from rolling over your 401(k) savings to an IRA is that the funds will now be grandfathered in and will not be taxed.

The tax-deferred property is considered a "non-deductible" item and, therefore, non-taxable, like dividends, interest or capital gains. The most beneficial thing about this feature is that because of it, people in the higher tax bracket tend to save more for retirement.

4. Eliminating The 401(K) Plan

When you roll over the funds into an IRA, you will lose all rights to the funds in your 401(k) plan account. You will also be losing some benefits if you had a choice of investing your money in a plan that your employer may offer and any matching contributions they may have offered up to some extent.

Once an account is rolled over into an IRA, it becomes unavailable for any other purpose and is lost forever.

Downsides of a 401k to IRA Rollover You Should Know

Changing Your 401k into A Gold IRA

The term "Gold IRA rollover" describes establishing a Gold IRA and funding it via transferring funds from another retirement account. Essentially, you are moving funds from one retirement plan to another.

Unlike traditional IRAs, self-directed Gold IRAs are subject to more stringent requirements from the Internal Revenue Service (IRS) regarding account setup, account management and the types of investments you may keep inside the account.

A 401(k) is an employer's qualified retirement savings plan. You may have a certain percentage of your paycheck automatically deducted and transferred to your 401(k) account, making it easy to accumulate money and invest in your pension.

The money you put into your 401(k) grows tax-deferred, a nice bonus. Not until you take the money out of the account will you have to worry about taxes.

Why Should You Do It?

When comparing the investment options available via a 401(k) and those accessible through a self-directed IRA, many individuals decide it is better to move at least part of their money out of the 401(k) and into the IRA.

Most 401(k) plans limit participants to a small number of mutual funds or a Guaranteed Investment Contract (GIC) as investment options. When it comes to interest, a GIC is like a low-interest money market account.

It is part of 401(k) plans, so very risk-averse savers may still put some of their money to work since some people feel uneasy about putting their money in even a low-risk mutual fund like an index fund.

A 401(k) could be great if your risk tolerance is relatively low, but it will leave you feeling somewhat let down if you're hoping to make significant returns on your investments.

If you cash out your conventional IRA, 401(k), or any other tax-advantaged retirement plan, you will owe taxes and penalties on the money you took out. However, no taxable occurrence to produce if the funds are rolled over into a different tax-advantage-eligible account during the 60 days permitted by the IRS.

Downsides of a 401k to IRA Rollover You Should Know

Rollover Eligibility

Typically, you may roll over IRAs into 401(k) plans. You should check with your plan's administrator to learn more about the specifics of your plan and whether or not a rollover is permitted.

Whether you explain that you want to transfer your 401(k) assets to a Gold IRA, they can tell you if this is possible and what steps you need to take.

It should be possible to roll over your 401(k) into a Gold IRA when you are at least 59 1/2 years old or at least 55 though you are no longer working for the company that sponsored your 401(k).

However, you may not be able to make a tax-free "in-service withdrawal" from your 401(k) if you are under 54 and still employed by the employer that sponsors the plan. You may either save up the money now for when you're older or after you've left your present employment, or you can put off starting your gold IRA.

You could be eligible to get a 401(k) transfer accomplished even if the terms of your plan do not permit such a withdrawal or transfer while the firm still employs you.

Assuming your plan administrator is willing to assist you, you may be able to access your 401(k) savings early under the "hardship withdrawal" provision. The plan administrator has almost absolute discretion over whether or not to approve such an exemption.

The Best Gold IRA Firms to Trust

These companies are the best providers for IRAs and IRA investments. They are the most popular and most well-known.


Augusta Precious Metals is one of the leading gold companies in the US. Its website boasts that they are “Armed with More Than 40 Years of Experience” while “Specializing in Remarkable Customer Service and Exceptional Ingot Quality”.

Augusta Precious Metals can be your choice because it has been in the industry since 1974, making it a veteran of the precious metals industry. It also boasts that its gold, silver and platinum are 100% American-made. The company makes its ingots in-house at its facility in Washington, which the US Mint licenses.

Augusta Precious Metals can provide a full range of precious metals and IRA services. If you are looking for an IRA custodian, check out their list of preferred custodians who are all US based and fully approved to maintain both traditional and self-directed IRAs.

#2. Goldco


Goldco lists top IRA-approved gold companies with its impressive collection of gold, silver, platinum and palladium bullion. It offers coins in various sizes and prices, from $5 fractional to $10 pieces.

Goldco provides a wide range of IRA services for its clients, including redemption services, investment advice, account servicing and recordkeeping. Its website boasts that you can quickly sell your metal from your IRA upon request. It can provide a full range of storage options for its clients.

You can count on Goldco because it has its roots in precious metals. The company was established over 80 years ago and has served customers for many years. Through the years, it has established strong relationships with numerous professionals within the gold industry.

Hartford Gold is the best Gold IRA company in the country and is licensed by the US Department of the Treasury to deal with precious metal IRAs. It also boasts one of the most extensive selections of precious metals available – including gold, silver, platinum bullion bars, coins and other metal products.

American Hartford Gold is a gold coin IRA service provider that provides various financial services to its clients. It offers exclusive American Gold Eagles and 24k gold, which are investment-grade gold coins.

Its IRA services are tax-deductible and you can expect security and liquidity when you invest in its product. You can readily convert your bullion in the IRA account into cash at any time.

Concluding Thoughts

There are disadvantages involved with gold investments that you should weigh carefully. However, individuals who want to diversify their retirement funds and take advantage of the hedging functions, that gold provides against other financial assets, such as paper money and equities, may find a gold IRA an attractive alternative.

One might enjoy substantial tax benefits by investing in a gold IRA. You have much more leeway in investing options with a self-directed IRA (SDIRA).

Furthermore, a "haven" investment in tangible assets may provide a once-in-a-lifetime chance to reap substantial financial rewards in acute economic uncertainty. In addition, unlike paper currency, actual gold is a kind of wealth that is harder for criminals, governments and creditors to get their hands on.