The vast majority of 401(k) plans do not allow individuals to directly invest in gold, such as purchasing gold bullion or gold coins. However, most of them do allow enough flexibility to invest in gold through exchange-traded funds (ETFs) or mutual funds. Even if a person's 401(k) does not offer ready access to investments in gold, there are still available options available.
The Basics of a 401(k)
A 401(k) plan is an employee retirement savings plan, one that commonly offers the advantage of the employer making partial or even 100% matching contributions to the money the employee invests in the plan. These plans are typically handled by a fund manager that usually offers plan enrollees the ability to diversify their investments, at least across a selection of mutual funds offered through the plan.
A 401(k) plan is an important investment vehicle for individuals enrolled in such plans and can be utilized to take advantage of major market opportunities. Gold and silver are two of the hottest investments midway through 2016, and investors may well be interested in shifting a portion of their 401(k) investment portfolio assets to profit from the boom in precious metals prices and the gold industry.
Gold Investing Options
Although very few 401(k) plans offer investors the choice of investing directly in physical gold, many offer an array of mutual fund choices. Investors can easily, by looking through the fund descriptions provided with their 401(k) plan, potentially find one or more mutual funds that offer significant exposure to gold by virtue of holding stocks of companies engaged in the gold mining industry.
One choice is the Fidelity Select Gold Fund ("FSAGX") from mutual fund provider Fidelity Investments; this is an actively managed, low-cost, value-oriented fund primarily invested in major gold mining firms such as Goldcorp Inc. (NYSE: GG) and Randgold Resources Ltd. (NASDAQ: GOLD). Another mutual fund option is the First Eagle Gold A Fund ("SGGDX") from First Eagle.
A 401(k) plan with a brokerage option gives individual investors the freedom to invest in a much wider range of assets through a regular brokerage account, thus providing access to all types of gold investments. For employees enrolled in such a plan, one of the simplest, lowest-cost means of getting exposure to gold is by investing in ETFs.
ETFs offer investors the ability to invest in shares of a fund that holds actual gold bullion, such as the iShares Gold Trust ETF (NYSEARCA: IAU) from BlackRock Inc. (NYSE: BLK), or a fund that invests in gold industry stocks, such as the Sprott Gold Miners ETF (NYSEARCA: SGDM). Employees enrolled in a 401(k) with the brokerage option also have the choice of investing in individual stocks of gold industry firms.
Self-Directed IRA Rollover
Employees whose 401(k) plan does not offer the kind of free access to gold investing that meets their investment goals can opt out of their 401(k) into a self-directed investment retirement account (IRA) that enables them to access virtually any type of investment in gold, including stocks, mutual funds, ETFs, commodity futures and options.
For employees with a 401(k) plan account at a previous employer, as in the case of a retired employee, there is the option to simply roll over the 401(k) money into an IRA. If the 401(k) plan is with a current employer, the employee can ask the employer for the option to take what is termed an in-service withdrawal, where the employee can obtain his 401(k) funds prior to retirement or another triggering event. There is no tax penalty as long as the employee re-invests the funds in either an IRA or alternate 401(k) plan within 60 days. Traditional IRAs do not usually allow investments in physical gold; only gold stocks or funds. For investors who wish to hold physical gold, self-directed IRAs allow this type of investment.