UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next
Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76078  
Subject: Re: Removing Stock from 401K Date: 1/20/2000 12:10 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TMFPixy: "For the shares to be distributed to you for taxation at their basis, you must have a lump sum distribution of all the 401k proceeds. Therefore, as long as you leave the entire balance in the plan, then you could wait until age 59 1/2 to take the lump sum, keep the stock, and roll the rest to an IRA."

Pixy, I want to rephrase and re-ask this question to be absolutely certain that I understand the issue.

The only way to take advantage of NUA of company stock is to take a complete distribution of the enitrety of the 401-k. Income tax on stock would be on its basis. Income tax on balance of plan would be at marginal tax rate; income tax on balance of plan could be postponed by rollover into a new (or another) regular IRA. Once balance is in an IRA usual rules for transfer to Roth IRA would apply.

In addition, the only ways to avoid the 10% penalty are either (i) to be retiring, or have retired, from the company in the calendar year in which one turns 55, or (ii) if one left the company long before 55, wait until after reaching 59 1/2 to receive distribution.

WRT to the company stock, the date of distribution serves as the start of a new holding periof for measuring STCG v. LTCG, so company stock would need to be held for one year after distribution and then subsequently sold in order to receive LTCG treatment.

Sorry for the mouthful, but did I recite that correctly? Or am I misunderstanding something?

Thanks, JAFO

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Value Hounds

Netflix Riles Investors
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement