How to Convert a 457B Government Plan to a Gold IRA?


Do you own a 457(b) retirement plan? These plans were set up in 1978 as an alternative to other pension plans, specially designed for governmental employers and certain non-governmental employers, like charities and hospitals.

A rollover to a gold IRA is feasible in 457(b) government plans for investors who wish to diversify their assets.

Here is everything you need to know about converting a 457B retirement plan to a gold IRA if interested in a fund transfer.

What is a 457 (b)?

A 457(b) government plan is a retirement plan with tax advantages meant for municipal employees, civil servants, public safety personnel, and law enforcement officers. Other participants in a 457(b) include charity, hospital, and union executives, along with independent contractors hired by local government and state bodies.

Just like other retirement plans sponsored by employers, this one allows retirement savings growth due to tax efficiency. Investors aren’t required to pay taxes on capital gains on the investments in their accounts. Contributions are taxed in two ways, depending on whether your 457(b) is traditional or Roth. With the former, contributions are deducted from your payroll check prior to taxes, which reduces one’s current tax bill. Nevertheless, you’ll be taxed on withdrawals in retirement.

With the latter, your account is funded with taxed money to enjoy tax-free withdrawals once you become a pensioner. These funds include any earnings your funds make while in this account. It’s worth remembering that some organizations permit no Roth contributions. As far as contribution limits are concerned, the limit for 2022 on an annual basis is $20,500, including the contributions made by both employees and employers.

Employees who are fifty or older may contribute an additional $6,500, which increases the limit to $27,000. Regarding withdrawals, investors are allowed to withdraw money from their accounts while paying no penalties prior to reaching 59 ½ years of age, provided they left their employers.

Those who haven’t left their employers aren’t allowed to withdraw funds for longer than in other accounts. Sometimes, withdrawals are permitted in the event of financial hardship. Find out what makes a 457(b) different.

Can you roll over a 457(b) to a gold IRA retirement plan?

The answer depends on whether your plan is provided by the government or not. If the plan is government-provided, then you can definitely convert it to a gold IRA. In general, employees of the government remain employed longer than non-government workers. Consequently, they aren’t likely to have a bunch of other plans, such as 401k and 403(b).

In case you have a 457(b) and wish to make an investment in a gold IRA, the most hassle-free way of doing so is through a direct rollover. You can also consolidate the rest of your savings by opening other IRAs for handling different investments. Nevertheless, you wouldn’t need more than two plans, one designed for precious metals and another for the rest of the investments.

A gold IRA allows investors to invest money in precious metals. In contrast, a general IRA enables individuals to invest in a more extensive asset portfolio, like property, stocks, bonds, etc. By investing in two plans, you will have a variety of assets in your portfolio, which will keep your retirement funds secure. A direct rollover is highly recommended, as the transfer of funds is performed without paying any tax.

Why opt for a rollover?

The assets in 457(b) retirement plans are mainly stocks. Investors collaborate with financial advisors who help them invest in stocks with good performance throughout history in order to reduce the level of risk. As an investor, you should always be aware of the risk level you are about to take. Nevertheless, a rollover of some of your assets into a gold or precious metals IRA reduces the risk even further.

When the stock market experiences a crash, investors search for safe places to invest their funds. For years, the safe havens for investors have been gold, platinum, palladium, and silver. The performance of gold throughout history has proven to be much better than that of the S&P 500. Gold investments provide the much necessary diversification in portfolios, as you’ll be investing your money in physical assets, which are likely to become scarcer as time goes by.

As already mentioned, investors are advised against holding all their funds into a single asset, such as stocks. The same goes for gold and other precious metals if thinking about converting your 457(b) plan into a gold IRA. You should invest no more than a portion of your funds in precious metals, in fact, a maximum of thirty percent.

Individuals interested in extra diversification are encouraged to invest some of their precious metals in bullion and precious metal coins. The value of these coins is expected to become higher, as they are likely to become even rarer in the future.

Physical vs. paper gold

The majority of investors hesitate whether to invest in physical or paper gold. The former refers to gold stocks of companies mining and producing this precious metal. However, these stocks are considered riskier compared to bullion, as their value is dictated by the spot price of this commodity. When the spot price rises, the value of the stocks appreciates immediately.

Other types of risks are also associated with gold stocks. For instance, there is regulatory risk, as mining companies are usually required to pay higher taxes. The production cost risk is present due to the depreciation of mining equipment and the increase in labor costs. Additionally, there is a management risk, as companies that are improperly managed tend to go bankrupt.

Last but not least, we shouldn’t neglect the fiat currency risk. When gold stocks and shares are sold, investors receive their payment in fiat currency. If this currency collapses, the paper will be worth nothing.

A final note

Such a rollover enables individuals to build wealth for the future.

It’s ideal for those wishing to grow their nest eggs!


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