Net Unrealized Appreciation
I am 65 years old and not working any longer. I also have chosen to not collect Social Security payments at this time. I have a 401k account with my old employer that holds company stock along with other mutual funds. The company stock is currently valued at $190,000. My contributions (basis) total $21,000. Would it be a smart move at this time to liquidate and rollover all holdings in the 401k into my personal IRA except for the company stock. I would move the company stock into a taxable account and pay tax on my basis ($21,000) this year so that I could take advantage of NUA when selling shares in the future at the capital gains rate. I currently fall in the 22% tax bracket.
Terry Says
I think you should check with your company HR department and your own accountant. I’m not quite clear on the tax basis for this stock. If held INSIDE the 40l(k) plan, you don’t get a capital gains tax break. Everything inside the 40l(k) comes out as ordinary income. If the stock is held OUTSIDE a qualified plan, there are two possibilities. Either you paid ordinary income tax on the cost at the time the shares were received, thus establishing an after-tax cost basis. Or they were part of a deferred compensation plan, in which case you owe ordinary income tax on all the money when it is withdrawn from the plan.
It’s likely that capital gains tax rates will be raised this year — retroactive to April, when the plan was announced. So without having an idea of your cost basis, and the brackets you will be in when you retire, it’s impossible to give specific advice. that’s what a good financial planner can do foryou -= after you get the costs sorted out.
