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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19021  
Subject: Re: 401(k) company stock Date: 4/5/2000 2:05 PM
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Lindy914 asks:

<<I asked and was kindly told by other, smarter fools than I that on retirement, I can roll over my 401(k) to an IRA, except the company stock in the 401(k), which should be placed in a taxable brokerage account. Will I be taxed for an early withdrawal of the stock from the 401(k)? I will be retiring at age 54.I don't plan to sell the stock for another five years or longer after I retire. I know the business about how the capital gains will be treated in this scenario, but I am unsure about the early withdrawl penalty.>>

You will be taxed on the basis (or cost) of the stock you take. If you are younger than age 55 at retirement, then you will also be assessed a 10% early withdrawal penalty on that basis. OTOH, if you will be age 55 in the year you retire and take the lump sum distribution from that plan, then the 10% penalty will not apply.

For additional details on taking stock, see my article at http://www.fool.com/retirement/manageretirement/manageretirement4.htm.

Regards..Pixy
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