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Old 06-05-2014, 06:17 AM
 
Location: Central Massachusetts
4,800 posts, read 4,842,106 times
Reputation: 6377

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http://www.chicagotribune.com/busine...,4091415.story

Interesting points made here are these.

1. Capital-gains rates for the wealthy are up.

2. Short-term sales will cost you.

3. You get a break on company stock in a 401(k).

4. Your heirs get a break on taxable accounts.


The one I am most interested in talking about is this as I quote from the article. It is number three in the list.
Quote:
Most money that comes out of retirement plans is taxed at ordinary income tax rates. But if you take a lump-sum distribution of the employer shares, you are taxed (at ordinary income rates) only on your "basis" -- what you paid for the shares. You will pay tax on the appreciation when the shares are sold, but at gentler capital-gains rates. Advice: If you have the option, this is a simple way to permanently lower the tax rate on some retirement savings.
The way I read this and I hope some of you very smart people out there can tell me is if I take the amount of money deposited from my employer as a lump sum to say convert it to Roth that I might make a good move by avoiding taxes or in different terms by paying less in taxes?

So if that is true then I can ask the plan to take only the company matching funds? I am sure they have records of the transactions. I also think they are talking just the contribution and not the gains that the contributions made. So we are looking at an amount of say maybe a quarter of the total. Just a rough guess on my account.

The other points are up for discussion as well.
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Old 06-05-2014, 06:41 AM
 
Location: Northern panhandle WV
3,007 posts, read 2,167,665 times
Reputation: 6691
It looks to me like they are talking about actual shares in company stock. Even Stock Options. I know that is the way stock options work you are taxed on the basis of what you paid for them.

I don't see that is says anything to indicate Company matching funds in a 401K.

I am sure others will come along with more info for you.
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Old 06-06-2014, 05:21 AM
 
Location: Central Massachusetts
4,800 posts, read 4,842,106 times
Reputation: 6377
Dont everyone speak up at once!


<Sounds of Silence>
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Old 06-06-2014, 05:52 AM
 
Location: Baltimore, MD
3,745 posts, read 4,214,395 times
Reputation: 6866
Quote:
Originally Posted by golfingduo View Post
Dont everyone speak up at once!


<Sounds of Silence>
What is there to say? As Arwenmark observed, the tip is directed to those former employees who hold shares of their former company's stock in their retirement portfolio. IOW, you misunderstood the article and your idea will not fly.
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Old 06-06-2014, 10:44 AM
 
Location: Florida
4,356 posts, read 3,689,532 times
Reputation: 4084
You have to have been given the actual shares of stock. Thus the company had to credit you with shares of stock and not money that you could allocate to to any investment. If you got stock then the transaction has to happen within 12 months. Don't remember when the 12 mo's starts. Your use of the words matching funds indicates that you might not haven gotten stock but you company HR dept could clarify.
This is a good deal if you qualify and want to keep the stock.
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Old 06-08-2014, 10:35 AM
 
Location: Maryland
282 posts, read 305,695 times
Reputation: 338
I don't like the risk of owning large amounts of stock in the company you work for. If the company goes broke, you lose both your job (income) and your savings (company stock). So taking it out and selling the stock to buy other retirement investments is what I would do.

But you will pay taxes on it. The way I understand it, you will pay taxes on the basis when you take it out, and pay capital gains when you sell the shares. If you put it in a Roth, I believe you will pay taxes on the current value even if you don't sell. But I am not too sure on the conversion details of stock.
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Old 06-10-2014, 07:04 PM
 
Location: Los Angeles area
14,018 posts, read 17,723,738 times
Reputation: 32304
Quote:
Originally Posted by CSRSJim View Post
I don't like the risk of owning large amounts of stock in the company you work for. If the company goes broke, you lose both your job (income) and your savings (company stock). So taking it out and selling the stock to buy other retirement investments is what I would do.
Yep think of Enron and pity the employees who were heavily invested in their company stock.
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Old 06-10-2014, 07:57 PM
 
14,255 posts, read 23,974,521 times
Reputation: 20038
Quote:
Originally Posted by CSRSJim View Post
I don't like the risk of owning large amounts of stock in the company you work for. If the company goes broke, you lose both your job (income) and your savings (company stock). So taking it out and selling the stock to buy other retirement investments is what I would do.

That is wise decision. I do believe that noone should invest over 5% of their portfolio in a single company, ESPECIALLY their company stock. Period. Do realize that in many companies, managers are expected to purchase and hold company stock as terms of their employment.

Escort Rider - You are right about Enron. What you might NOT know about Enron is that their employees were like missionaries for the company. When they would go around the country to their prospective customers, they would always mention the "great opportunity" that Enron stock was.

They came to my location to offer their services to help us reduce our electricity costs by 20%. We signed up and achieved the savings. The ONE QUESTION that I always asked - and they NEVER answered - was "How do you make YOUR money on this deal?" They would dodge that question. I did not purchase Enron stock. Three or four of my colleagues did.
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Old 06-11-2014, 12:05 AM
 
466 posts, read 290,214 times
Reputation: 1809
Quote:
Originally Posted by CSRSJim View Post
I don't like the risk of owning large amounts of stock in the company you work for. If the company goes broke, you lose both your job (income) and your savings (company stock). So taking it out and selling the stock to buy other retirement investments is what I would do.
Yes, this happened to me. My company put all of our retirement funds into stock of the company. When they went bankrupt our retirement was basically worthless. Lost 15 years of retirement. Kept my job with the new company, at least, but had to start over at pretty much zero. Many people didn't get brought into the new company, so I guess it could have been worse. Still, a major bummer. We didn't have an option, though - they were free to invest it in whatever they wanted.
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Old 06-11-2014, 03:21 AM
 
71,463 posts, read 71,652,652 times
Reputation: 49027
not only do i not recommend investing much where you work but i never invest in my industry ,period. being in the industry i see great things by companies all the time . only problem is the rest of the world couldn't care any less about what i see being in the business.
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