the following are options to consider - talk with us before making permanent decisions. 


Option 1: rolling your partner stock plan into an IRa and diversifying

Benefits

• Eliminates single-stock concentration risk inside a tax shelter

• Can rebalance freely within the IRA with no immediate tax consequence

• Simpler than managing a taxable brokerage account alongside retirement accounts

 
Costs & Risks

• Critical Issue: NUA (Net Unrealized appreciation) opportunity is permanently lost (talk with us about what this means)

• All future distributions taxed as ordinary income, including the diversified gains

• You're trading a potentially significant tax advantage for simplicity
   

Tax Implications

• No tax on the rollover itself

• No tax on the internal rebalancing/diversification

• All distributions taxed as ordinary income
   

Key Decision Point: If the stock has meaningful appreciation, run the NUA calculation before choosing this path. The tax savings from NUA can far exceed the convenience of managing everything inside an IRA.


Option 2: rolling your partner stock plan into an IRa and holding

Benefits

• Defers any tax on the stock's appreciation

• Stock continues growing inside the tax shelter

• Simple — no selling required
   

Costs & Risks

• You lose the Net Unrealized Appreciation (NUA) strategy — talk with us and see "nUA strategy" below

• NUA allows you to pay only long-term capital gains rates on appreciation of employer stock taken as an in-kind distribution — potentially a much lower rate than ordinary income

• Once the stock is inside an IRA, all future distributions are taxed as ordinary income, including the appreciated portion

• Concentration risk: holding a large single position in one company is genuine risk, even a company you know well
   

Tax Implications

• No immediate tax event on the rollover

• All distributions later taxed as ordinary income — even the gain portion, which would have qualified for preferential capital gains rates under NUA

• NUA opportunity is permanently forfeited once the stock enters an IRA
   

Key Decision Point: Before rolling employer stock into an IRA, consult a tax professional about NUA. If your stock has significant unrealized appreciation, the NUA strategy could save you tens of thousands of dollars in taxes. Rolling it in without checking is one of the most common and costly retirement mistakes.


Option 3: Not rolling your partner stock plan - selling and diversifying in a taxable account

Benefits

• Eliminates concentration risk immediately

• Capital gains rates apply to appreciation (vs. ordinary income inside an IRA)

• Proceeds can be reinvested in a diversified, low-cost portfolio in a taxable account

• Full liquidity with no distribution rules
   

Costs & Risks

• Triggering a taxable event — the sale of the stock produces a capital gain

• If not done as NUA, the entire distribution from the plan may be taxed as ordinary income first

• Losing the tax-deferred compounding advantage of an IRA going forward

• Requires active investment management in a taxable account
   

Tax Implications

• Depends heavily on mechanism: NUA distribution → cost basis at ordinary income rates + long-term gains on NUA at sale

• Non-NUA distribution → full value taxed as ordinary income, then reinvested in taxable account where future gains are capital gains

• Step-up in basis at death does apply to taxable accounts — a meaningful estate planning consideration

• Harvesting losses in the taxable account can offset gains over time
   

Key Decision Point: This path makes the most sense when (a) diversification is urgent, (b) the NUA strategy has been evaluated and applied where beneficial, and (c) you have a plan for the tax liability. Don't sell reactively — sequence the distribution and diversification intentionally.


Option 4: Not rolling your partner stock plan into an IRa and holding in-kind (NUA Strategy)

Benefits

• The NUA strategy: take the stock as an in-kind lump sum distribution, pay ordinary income tax only on the cost basis, then pay long-term capital gains rates on all the appreciation when you eventually sell

• Long-term capital gains rates (0%, 15%, or 20%) are almost always lower than ordinary income rates (up to 37%)

• You gain flexibility — the stock is in a taxable brokerage account, accessible without the IRA distribution rules
   

Costs & Risks

• You pay ordinary income tax on the cost basis immediately at distribution

• Must be a qualifying lump sum distribution (full plan balance in one tax year, triggered by a qualifying event: separation from service, age 59½, death, or disability)

• The stock is now in a taxable account — dividends and future gains are taxable annually

• Still concentrated in one stock — holding it means continued single-company exposure
   

Tax Implications

• Cost basis taxed as ordinary income at distribution

• NUA (the gain above cost basis) taxed at long-term capital gains rates when sold — regardless of how long you hold after distribution

• If the stock has very low cost basis and very high appreciation, this is potentially a significant tax savings
   

Key Decision Point: NUA is most powerful when the cost basis is low relative to current value. If the stock was granted at $10/share and is now worth $80, the $70 gain being taxed at 15% vs. 37% is a massive difference. Do the math before making any distribution decision.