How to Convert a 401(k) Plan Into Gold Bullion

If you're still employed, talk to your employer to find out what your plan's rules are. Usually, you need to leave your job, become disabled, reach retirement age or have your plan terminated to be able to take money out of a 401(k). If you don't have rollover-eligible money, you probably won't be able to buy bullion with your 401(k) money unless you make a withdrawal and pay taxes and penalties on it.

A self-directed IRA doesn't have the same limitations as a regular IRA. While most IRA custodians limit you to buying traditional investments, self-directed account trustees generally let you choose from additional investments that meet Internal Revenue Service rules, including gold bullion. To buy bullion, open an account with a custodian that specifically allows you to hold precious metals and will arrange storage of it. Under IRS rules, you can't take possession of physical gold in an IRA.

If you have rollover-eligible funds, contact your plan administrator and let it know you will be rolling over funds to your self-directed IRA. It will usually send you paperwork to fill out and forward the money to your IRA account. If the money goes to you, it's important to put it in your self-directed IRA in less than 60 days. The IRS will still consider it a tax-free rollover as long as it gets redirected to the new account within that period.

Once your funds are in your self-directed account, you can buy your bullion. Your gold should be at least 99.5 percent pure, in the form of bars or IRS-approved, non-collectible coins like the gold American Eagle or Canadian Maple Leaf. Let your gold dealer know you're buying the bullion for your self-directed IRA and direct your custodian to pay the dealer out of the funds in your IRA. Once the funds clear, the dealer will ship your gold to your custodian's secure storage facility.

If you want to invest in gold without holding the physical metal, you can buy "paper gold." This includes mutual funds and exchange-traded funds that own physical gold or stock in mining companies. If your employer's 401(k) lets you choose your own funds, you can do this without rolling your money over. You can also hold these securities in most regular IRAs, saving you from having to open a self-directed account.