If you work for a company that offers a 401k retirement plan, and you participate in it, you may be getting company stocks as part of the deal.
If you are, you could also see those company stocks get special tax treatment. The company stock you have in your 401k plan requires some special consideration should you be moving to a new company, or thinking about rolling over your 401k funds into an IRA.
Companies that offer their stock as part of their employees’ 401k retirement funds do so because the employees will receive special tax treatment for these stocks. So, let’s say you buy $50,000 worth of company stock as part of your 401k. You then decide to rollover your 401k money into an IRA.
If your $50,000 investment has grown to, say, $100,000, then with an IRA you’ll be paying taxes up to the limit of 35%, because the money will be seen as regular income. If you choose to separate these stocks out of your 401k when you roll it over to an IRA, however, you will only pay taxes on the $50,000 as regular income for that year, but the difference of $50,000 (your profit) will not have to be paid until the specific stocks are sold. When that happens they will taxed at a lower capital-gains rate tax of 15%. This could really save you a lot of money in taxes.
To learn more about reallocating employer stocks when doing a rollover, 401ks, IRAs, capital gains taxes and other issues concerning investment and retirement, be sure to consult with a financial adviser. He or she will share their expertise with you and help you craft the best retirement investment strategy possible. After all, when it comes to managing your money and your retirement, getting wise advice will turn out to be invaluable.