401K Rollover

[buckeyebri]

In companies that I have worked for and left in the past that had ESOP plans, I always rolled them out. I believe, if I remember correctly, that there were some rules regarding that movement and it needing to occur once you left the organization. I also know that some companies absorb costs of the fund management for employees, but pass on costs to non employees who leave money there.

 

[OneBuckeye]

Risk and reward. Your singular company stock may appreciate considerably higher than a basket of mutual funds, but may also Enron. I personally like to take the car over the cliff disaster off the table. I have no problems with investing a small percentage in your own company, but salary plus your retirement is too much skin in the game for me. not knowing of course what lies outside that arena.

As for how to figure it out - buckeye planet of course. Or find a good financial planner!

No doubt. I'm only 28 and don't really have much money. Fortunately my new job comes with financial planning services. But BP never fails to deliver the goods. I appreciate all the opinions.

I have been told that I can keep my ESOP in my current 401k as long as a want after I leave. I'm not sure about the fees.

 

[Fungo Squiggly]

One - not giving advice either, but if you think there is potential upside, probably better to let it ride rather than lock in a loss (unless you want a tax shield - make sure its an appropriate realized loss with an accountant, HR BLock, tax advisor, etc. first though).

Unless I'm misreading or misunderstanding something, there is no tax shield factor from taking the loss here - all of this is going on in the pre-tax world. The loss in a deferred account never hits the 1040.

 

[PlanetFrnd]

Unless I'm misreading or misunderstanding something, there is no tax shield factor from taking the loss here - all of this is going on in the pre-tax world. The loss in a deferred account never hits the 1040.

Maybe you're right... is there not a realized capital loss if you cash out of an ESOP investment that's down XX%? You've still lost money. Maybe I'm doing this wrong.

 

[Fungo Squiggly]

Maybe you're right... is there not a realized capital loss if you cash out of an ESOP investment that's down XX%? You've still lost money. Maybe I'm doing this wrong.

I don't think there would be if it's in a tax deferred account.

 

[PlanetFrnd]

I don't think there would be if it's in a tax deferred account.

That's strange. I believe you, but that's strange. I would have guessed there is a measurable basis (whatever you put in), so a loss would be easy to book. I understand that if you cash out (depending on when) you are subject to the payroll taxes, penalties, etc. that might apply, but figured you'd at least get to net against capital losses... but, hey, this is why I don't do people's taxes for a living.

So, lesson learned, whatever you do, don't cash out, roll into something that's also tax deferred (IRA, 401k, etc.)

 

[Fungo Squiggly]

That's strange. I believe you, but that's strange. I would have guessed there is a measurable basis (whatever you put in), so a loss would be easy to book. I understand that if you cash out (depending on when) you are subject to the payroll taxes, penalties, etc. that might apply, but figured you'd at least get to net against capital losses... but, hey, this is why I don't do people's taxes for a living.

So, lesson learned, whatever you do, don't cash out, roll into something that's also tax deferred (IRA, 401k, etc.)

Let's say you've had $4,000 payroll deducted pre-tax to purchase your company stock and hold it in your 401k. It is now worth $3,000. You cash out.

If you cash out, you pay tax on the $3,000.

You do get to realize the $1,000 loss because you never have to pay tax on it. But cashing out will still increase your tax burden for the year because you still have to pay tax on the $3,000.

Forgive me if you are picturing a different scenario. Everyone uses different jargon and it's always a challenge to interpret each other correctly.

 

[BuckStocksHere]

No doubt. I'm only 28 and don't really have much money. Fortunately my new job comes with financial planning services. But BP never fails to deliver the goods. I appreciate all the opinions.

I have been told that I can keep my ESOP in my current 401k as long as a want after I leave. I'm not sure about the fees.

I thought that distribution of the ESOP HAD to begin at the very latest by the end of six years. ?

I'm not sure that I'm right now that I think about it. I know that you CAN roll it out into a non qual acct and pay taxes but I believe there is a 59 1/2 age req. most will choose to roll it into a qual acct and not pay.

 

[NJ-Buckeye]

Going back to the original issue.. the paperwork is not a product of Wells Fargo.. or any entity giving up the funds... it's a function of the IRS validating your pre-tax 401K didn't somehow get diverted into your hands, per se, without the IRS getting their tax haircut... you don't cross the Ts and you could end up taxed

Depending on your financial situation... might make a lot of sense to convert it to a Roth... pay the tax hit now... and never pay taxes on the growth going forward...

For $79.95 I will ensure your 401K earns 25% a year.. guaranteed every year forever.. and I'll throw in a baptism

BuckStocks is a licensed financial advisor BTW

 

[Fungo Squiggly]

Going back to the original issue.. the paperwork is not a product of Wells Fargo.. or any entity giving up the funds... it's a function of the IRS validating your pre-tax 401K didn't somehow get diverted into your hands, per se, without the IRS getting their tax haircut... you don't cross the Ts and you could end up taxed

This, too. If the money passes through your hands on it's way from one account to another, you have 60 days to get it into the new account. You do NOT want to miss that deadline.

 

[PlanetFrnd]

Let's say you've had $4,000 payroll deducted pre-tax to purchase your company stock and hold it in your 401k. It is now worth $3,000. You cash out.

If you cash out, you pay tax on the $3,000.

You do get to realize the $1,000 loss because you never have to pay tax on it. But cashing out will still increase your tax burden for the year because you still have to pay tax on the $3,000.

Forgive me if you are picturing a different scenario. Everyone uses different jargon and it's always a challenge to interpret each other correctly.

Yep.

I think I was envisioning a different scenario, one which may or may not have recorded a basis and had some other non-deferred stuff moving in and out of it, but you're absolutely correct with the above.

2nd time you've tax-knowledged the board... great answer previously on the "which dollar gets taxed twice" point you made a while back... want some tax work? Wait, you aren't my accountant are you... Dave, is that you?

 

[PlanetFrnd]

This, too. If the money passes through your hands on it's way from one account to another, you have 60 days to get it into the new account. You do NOT want to miss that deadline.

THIS THIS THIS THIS THIS... the person handling your Wells account should tell you this, but if not... THIS.

 

[Fungo Squiggly]

Yep.

I think I was envisioning a different scenario, one which may or may not have recorded a basis and had some other non-deferred stuff moving in and out of it, but you're absolutely correct with the above.

2nd time you've tax-knowledged the board... great answer previously on the "which dollar gets taxed twice" point you made a while back... want some tax work? Wait, you aren't my accountant are you... Dave, is that you?

Dave? Dave not here, man.

 

[muffler dragon]

Those are extreme examples, and its good to participate in the upside if you truly believe in your company, but you already rely on your job for salary and healthcare, so if something goes bad at a macro level at work, you're already in trouble... why worsen the situation with being all-in on the stock?

Makes perfect sense. Just another level of distribution, so to say. Thanks.

There are other such reasons that related to illiquidity if you can be considered an "insider," but those are typically just for top-brass types.

What makes you think I'm not?!!! Elit_ist pricks always misjudging and shit.















... or being dead on the money.

 

[TexasBuck]

As someone that worked for Enron and Huntington Bank, I would recommend you have as little company stock as possible. My advice: Go with mutual funds for a 401K whenever possible. In this day and age, there's just too much risk in single company stock to put your retirement nest-egg at stake.