Strategies for 401(k) company stock after retirement
Q: I will be retiring soon and wonder how to invest the company stock I’ve accrued over the past 35 years in my 401(k). I have been advised to move it out of the 401(k) and sell the stock, taking advantage of a Net Unrealized Appreciation tax benefit. Would you recommend this? Should I then reinvest it in a Roth IRA?
V.A., Winter Garden
A: If you have company stock in your 401(k) that is highly appreciated, and your tax bracket is relatively high, the NUA option is a wonderful way to reduce taxes. There are many caveats. You cannot convert the stock distribution to a Roth; it must be taken as a taxable distribution. You can convert any other portion of your 401(k) rollover. Please consult a tax professional to assess your options.
Dennis Nolte
Q: My mother is near the maximum loan limit of the reverse mortgage on her home. Without the monthly cash flow of the reverse mortgage, she cannot afford to continue living there. The majority of my net worth is in my IRA. Is it possible to purchase real estate within of my IRA and avoid tax liability to help my mother?
K.G., Casselberry
A: No, this would be a prohibited transaction under IRC 4875. You as the IRA owner, your lineal ascendants, descendants and all spouses are considered “disqualified persons” and not permitted to receive any current personal benefit from the assets in your IRA. So while it is possible for you to buy investment real estate within your IRA, the property would need to be leased to a person or entity that is not a disqualified person.
Larry Breen