Consequences of Not Rolling Over 401K in 60 Days

Consequences of not rolling over 401k in 60 days

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You can use your retirement savings to buy gold, but doing so requires rolling some or all of your 401k funds over into a self-directed IRA. This is a complex process and, depending on how you process your rollover, you may have to deal with the IRS' 60-day rule. Before you begin, it can help to learn more about how the IRS handles rollovers and how they penalize investors for failing to meet the 60-day deadline. Learning more about the rollover process can help you avoid those penalties and ensure your rollover is processed as quickly as possible.

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Consequences of Not Rolling Over 401K in 60 Days

There Are Two Types of Rollovers

Before you worry about violating the IRS' 60-day rule for 401k rollovers, it's important to recognize that the rule doesn't apply to all rollovers. There are two ways you can conduct a 401k rollover in your self-directed IRA. The first and most common method is to schedule a wire transfer. You can choose the amount of the transfer just as you would choose the amount in the second type of rollover. Once you submit the rollover request with your 401k fund manager, the amount will be wired from the 401k account to your self-directed IRA. The IRA custodian will verify that the rollover has been processed. Since the wire transfer takes mere minutes and it doesn't involve physically withdrawing the funds, the 60-day rule doesn't apply.

The second type of rollover involves more steps and doesn't use a wire transfer to complete the process. This type of rollover involves requesting a check for the funds from your 401k administrator. Once you receive the paper check, you will have 60 days to deposit it into your self-directed IRA and notify the IRS that the rollover is complete. Any error or delay that causes you to miss the 60-day deadline will result in the IRS charging you with early withdrawal penalties. Essentially, the IRS will view the transaction as an intended withdrawal rather than a rollover. Since any number of issues could delay the process in this type of rollover, this is not a method recommended by most retirement planners.

There are some advantages to the indirect rollover. For the most part, these advantages involve giving the investor the peace of mind that comes with knowing the rollover funds were received. While depositing a paper check might alleviate concern, it also increases the chances of a problem arising. If the check is lost or stolen, you could be faced with a significant financial burden. A direct rollover eliminates these concerns, and there will be a record of the transaction to provide verification of the rollover.

Consequences of Not Rolling Over 401K in 60 Days

How Does the 60-Day Rule Apply?

When you receive a distribution in the form of a paper check, the IRS gives you 60 days to deposit the full amount into another retirement account. This can be a traditional IRA or a self-directed IRA. That 60-day countdown begins on the day you receive the distribution check, and that time frame can pass very quickly. Weekends and bank holidays can limit the amount of time you have to complete the rollover within the 60-day window.

What happens if you don't meet the deadline with your 401k rollover? In that situation, you'll be faced with financial penalties. To begin, you will have to pay income taxes on the full amount of the distribution. The IRS will also charge you with early withdrawal fees equivalent to 10% of the withdrawal amount. You may have a defense against these charges if you asked the 401k administrator to make the check out to your self-directed IRA custodian rather than addressing it to you directly.

As a side note, be aware that borrowing against your 401k or IRA is treated the same as an early withdrawal. As long as you repay the loan within the 60 days, you won't be charged taxes and penalties. However, if this is an option you're considering, make sure you can fully repay the loan within 60 days.

Consequences of Not Rolling Over 401K in 60 Days

What Can You Do After Missing the 60-Day Deadline?

In the past, the custodian of the IRA or self-directed IRA would refuse the deposit if the individual missed the 60-day deadline. The only option would have been to request a letter from the IRS that authorized the transaction and allowed the individual to deposit the rollover amount into the IRA.

Today, the IRS allows the individual to write their own letter that self-certifies the late deposit. The letter must assert that there were reasons for missing the deadline that the IRS deems acceptable. The IRS-authorized reasons for violating the 60-day rule are listed below:

  • Errors committed by the 401k or self-directed IRA administrator
  • Displaced distribution check that was never cashed
  • Full distribution amount was deposited into an account that the individual thought was an authorized IRA
  • Significant damage to the individual's primary residence
  • Death of a family member
  • Serious illness that has affected the individual or a member of their family
  • Imprisonment
  • Error committed by the United States Postal Service
  • A foreign country's restrictions delayed the deposit

Another stipulation of qualifying for self-certification requires that the deposit must be made as soon as the qualifying event has been resolved. Any additional delay will disqualify the individual from making the deposit and completing the rollover. Typically, the IRS will grant an additional 30 days after the resolution of the event to process the deposit.

Consequences of Not Rolling Over 401K in 60 Days

Which Gold IRA Companies Offer Rollover Help?

Whether you decide to do a direct or indirect rollover, choosing a high-quality gold IRA company can help simplify this process. A reputable and established company will have the customer support to assist you with the rollover. Since this type of company has the experience and infrastructure in place, they can help you process your rollover faster. The following companies offer that type of support and maintain consistent A+ ratings with the BBB (Better Business Bureau).

Augusta Precious Metals

This company was founded with traditional family values and they maintain that old world integrity to this day. To that end, they offer transparent pricing that accompanies the in-depth customer support they provide to both new and experienced investors. In addition to their high BBB rating, they have also generated a large number of positive customer reviews on a variety of other consumer advocacy websites.

Augusta Precious Metals is a great choice for first-time precious metals investors because they go further in generating consumer trust. They do this by offering a money-back guarantee to ensure every customer is satisfied with their services. They also offer price protection to new customers.

#2. Goldco


Another company that's great for newer gold and silver investors is Goldco. This company stands out by offering educational resources that make it easy to learn about the gold and silver markets. From their initial start-up kit, which they provide free of charge, to their more extensive educational materials, they make it easy for any investor to make informed decisions.

As soon as a new customer opens an account with them, Goldco assigns an account representative to work with them. Your representative will help you set up your account, complete your rollover, and choose the best precious metals to help you meet your wealth-growing goals. While their fees are not publicly posted on their website, they are happy to inform you about specific fees when you contact them directly. Your representative will provide you with any information that you might request.

American Hartford Gold

Like the other top gold IRA companies in the modern market, American Hartford Gold offers a broad range of gold, silver, and platinum products. They also provide a wealth of informational materials to help educate investors. While these factors help the company maintain excellent customer ratings, they really stand out for providing superior customer support. Every company receives its share of complaints, but few put as much time and effort into addressing those concerns as this company.

They take every complaint seriously and offer actionable solutions to address the customer's issue. In itself, this is enough to help American Hartford Gold stand out among the less personable companies in the market. They go further in establishing strong relationships with all of their customers. They also offer customer support that's helpful in outlining your goals for growing retirement wealth and using precious metals to expediently reach those goals. In a society in which retirees frequently fail to save enough, this level of customer service is invaluable.

Final Thoughts

Work with your gold IRA company to process your rollover as efficiently as possible. Their assistance will help you shorten the time it takes to set up your self-directed gold IRA and reduce the chances of making costly mistakes. You'll be able to buy gold sooner, and that can make a big difference in the time it takes to grow enough wealth it takes to meet the investing goals you have for your retirement.