Quick Read – NUA converts employer stock appreciation from ordinary income taxed up to 37% into long-term capital gains taxed at no more than 20%. – Rolling employer shares into an IRA permanently destroys the NUA benefit, and the tax code offers no way to reverse that decision….
Clark Howard warns company stock should never exceed 10% of a 401(k), since NUA only changes tax treatment without reducing concentration risk. – Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today
Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; learn more here. Company stock held inside a 401(k) sits in an unusual corner of the tax code.
When an employee separates from service or reaches retirement age, the shares can leave the plan under a rule that treats them differently from every other dollar in the account. The rule is called Net Unrealized Appreciation, or NUA. It converts most of the gain on those shares from ordinary income into long-term capital gain.