Company stock in 401(k) plan with Traditional and Roth portions
Question. Retired employee has 401(k) with both pre-tax and Roth 401(k) in which he has some company stock under each. He started 401(k) Roth contributions 10 years ago. With the company stock portion in Roth 401(k) if he wants to keep would the best way to handle would to be have that rolled over in kind into a Roth? I know there is typically NUA with traditional contributions when it makes sense to do so. Thank you for your help.
Permalink Submitted by Alan - IRA critic on Sat, 2024-05-18 21:16
Yes, a direct rollover of the Roth 401k balance to a Roth IRA would result in no tax at all on that balance when distributed from the Roth IRA and that’s certainly preferable to paying cap gains taxes on the NUA. Once in the Roth IRA he can diversify out of the Roth company shares. When the Roth IRA is qualified (age 59.5 and 5 years) all subsequent gains would also be non taxable. He could still utilize NUA on the pre tax 401k balance if desired with a qualified LSD.