I’m 70 years old this year and retired in 2017. I keep my company stock in my 401K saving plan. I’m planning to move all these company stocks to an retail brokerage NUA account next year. Will all dollars among of my new NUA account is totally excluded from RMD calculation when I reach 73 years old(2026)?
Yes, the sale of NUA shares in future years will generate LT cap gains but with no affect on your RMD from remaining assets in a qualified plan or IRA. Another option to consider is waiting until you are 73 (2026), which is your first RMD year. That first RMD can be deferred to 4/1/2027, and if you deferred that first RMD to 2027 you could do your LSD for NUA purposes in early 2027, and the total value of the share distribution (both cost basis and NUA) would be applied against your RMDs for both 2026 and 2027. You would only owe tax on the cost basis of the NUA shares, while the total value would be applied to your RMDs. Of course, the downside is 4 more years of not being able to diversify out of the employer shares but the upside might be additional gains that will eventually be taxed at the lower cap gain rate.
Permalink Submitted by Alan - IRA critic on Thu, 2023-04-20 22:42
Employer stock used for NUA will be held in a taxable brokerage account, not a retirement account. There will be no RMDs required from these shares. Be sure you are eligible for NUA and did not take any distributions from the plan after you retired through the end of this year, as such distributions would disqualify the plan for NUA purposes. Also, be sure to get a cost basis quote from the plan before having the shares distributed. NUA is only beneficial if the cost basis is low, roughly 30% or less of the current value of the shares.
Permalink Submitted by Jimbon on Thu, 2023-04-20 23:53
your response and suggestions/remiders are very appreciated. Based on on the same consequence, it will not satisfy as part of RMD if I sell any share of company stock under brokerage NUA account when I reach 73 yrs old. Is correct ?