retirement

6 reasons not to roll over your 401(k)

Favorable treatment for company stock
Next
5 of 8
Back
text

Is any of your 401(k) invested in company stock? Tread carefully. Here are a couple scenarios:

  • You leave the plan and roll your stock into an IRA. If you choose this option, you'll pay no tax when you move your investments into an IRA if you do a trustee-to-trustee transfer. But when you take the money out at retirement, all of it will be taxed at income tax rates (which could be nearly twice as high as capital gains rates).
  • You leave the plan and roll your stock into a brokerage account, or you stay in the plan and take your lump sum distribution at retirement. In either case, you move all the company stock from your 401(k) into a non-IRA taxable account. When you pay that year's taxes, you'll owe income tax on the total that you actually paid for the stock. But when you take money out of the account at retirement, you'll pay tax on your earnings at capital gains rates (typically less than the income tax rate).

Best move: Consult a knowledgeable, unbiased professional who understands "net unrealized appreciation" if your decision involves company stock, says Slott.


 

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed 4.08%  0.16 4.24%
15 year fixed 3.19%  0.04 3.23%
5/1 ARM 3.36%  0.10 3.46%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.36% --0.00 4.36%
50K FICO-based HELOC 4.06% --0.00 4.06%
100K FICO-based HELOC 3.91% --0.00 3.91%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.79% --0.00 2.79%
48 month used car loan 2.98% --0.00 2.98%
60 month new car loan 3.23% --0.00 3.23%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.94% --0.00 0.94%
2 Year CD 1.13% --0.00 1.13%
5 Year CD 1.76%  0.00 1.76%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.77%  0.06 15.71%
Cash Back Cards 16.48%  0.07 16.41%
Low Interest Cards 10.96%  0.10 10.86%
 
Next
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Jennie Phipps

Work less — ‘It’s a better life’

Retirement actuary Steve Vernon says working less while delaying Social Security is the best way to retire.  ... Read more

advertisement
Partner Center
advertisement

Connect with us