distribution pre-planning
I am working with a client who’s dob is 12/14/48. He is retiring from his employer (Chevron Corp.) on 1/24/08. He needs money from his qualified accounts right away. We are going to do an IRA rollover of his 401(k) and pension plan and use NUA strategy for some of his employer stock in his 401(k).
The plan is to do a withdrawel from his plan after he separates to avoid the 10% penalty, as he is over age 55, then do a partial IRA rollover, leaving the stock that he when do the NUA with after he turns 59 1/2 on 6/14/08. This would then clear out his account in the current tax year.
Does this sound like a sound strategy? I am missing anything that I should be aware of?
Permalink Submitted by Alan Spross on Thu, 2007-08-09 04:45
Sounds fine, except there is no requirement to wait until he is 59.5 for the NUA shares to be transferred out. The LSD in 2008 will be based on separation from service and need not be based on reaching 59.5.
The timing for the NUA distribution might be affected by whether you want to fund his current income needs for 2008 by selling NUA shares and paying LTCG rates or by paying ordinary income on the distribution of other plan assets. That in turn may hinge on getting a cost basis quote to see how much ordinary income he will incur for the cost basis of the NUA shares, and if he will be converting any of the IRA to a Roth before he starts SS.
Permalink Submitted by [email protected] on Wed, 2007-08-15 00:36
Thank you for your response. It has helped.