401(k) Plan with Employer Stock
When you retire or change employers, consider distributing the employer stock you own inside your 401(k) plan to a regular brokerage account rather than rolling it over into an IRA account. A tax provision allows employees to take possession of company stock and roll the remainder of the 401(k) assets to an IRA. Although you pay tax up front based on the amount the plan paid for the shares as an IRA distribution, the increase in value is not taxed until you sell the shares. Once you hold the stock for one year outside the retirement account it qualifies for the lower Federal long- term capital gains rate, instead of ordinary income tax rates of up to 39.6% paid on IRA distributions. Consider contacting your financial advisor to assist you in making your decision.