Individuals who own highly appreciated company stock in their employer-sponsored retirement plan may be eligible for a strategy called net unrealized appreciation (NUA). This strategy may offer significant tax savings on those assets. Before rolling assets out of an employer-sponsored retirement plan, investors may want to explore NUA as an alternative to rolling company stock over to an IRA along with their other plan assets. See a NUA example or learn more with the NUA Factsheet.
Use this calculator to compare the potential tax implications of an NUA strategy to an IRA rollover.
Based on the information provided, this report compares the NUA option relative to an IRA rollover. This NUA Calculator is intended to serve as an informational tool only, and should not be construed as legal, investment, or tax advice. You should discuss your situation with your financial planner or tax advisor before acting on the information you receive from the NUA Calculator, and to identify specific issues not addressed by the NUA Calculator.
Before deciding whether to retain assets in an old employer plan or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and possession of employer stock. View the FINRA Investor Alert for additional information.
This report has been provided by DST Retirement Solutions, LLC, an SS&C company. SS&C is not affiliated with E*TRADE Financial Corporation. No information on the SS&C site has been endorsed or approved by E*TRADE Financial or its affiliates, and E*TRADE Financial or its affiliates are not responsible for the contents of the SS&C site or any link contained in the SS&C site.
IMPORTANT: The projections or other information generated by the NUA Calculator regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Projections in the Results pages provided are based on the following assumptions:
For those who own highly appreciated company stock in an employer-sponsored retirement plan, transferring the shares to a taxable brokerage account is an alternative strategy to rolling the shares over to an IRA. A net unrealized appreciation (NUA) strategy may enable an investor to take advantage of the long-term capital gains rate, which is often lower than the ordinary income tax rate.
In the example below, an investor's company stock in their 401(k) plan is valued at $100,000 and their cost basis is $20,000. When company stock is transferred to a non-IRA brokerage account, taxes will be owed on the cost basis at the ordinary income tax rate. The NUA, which is the difference between the current value of the company stock and its cost basis, will be taxed at the long-term capital gains rate when the stock is sold in the future.
1. This hypothetical example assumes a 15% long-term capital gains (LTCG) rate and a 28% ordinary income tax rate are applied to this NUA illustration. These assumptions apply to federal income taxes only, however state taxes may also apply.
2. The NUA amount qualifies for LTCG treatment immediately upon distribution of shares from a former employer’s plan, but any subsequent appreciation above the NUA amount realized on shares can be long-term or short-term based on holding period from the original distribution date.
3. An additional 10% early withdrawal penalty on the cost basis amount may apply if distribution occurs before age 59½.