Over the years, I’ve worked with many clients who’ve built up company stock inside a 401(k) or other workplace retirement plan — often without realizing there may be different ways that stock could be taxed when they eventually take it out.
One of the most common questions that comes up is:
“How will that company stock be taxed when you take it out of your retirement plan?”
The answer can make a meaningful difference in how much you ultimately keep.
Why This Matters
In many cases, people assume the next step is to simply roll everything into an IRA. And sometimes that is the right move.
But when company stock is involved — especially if it has appreciated over time — it’s worth slowing down and understanding all of your options first.
Once a distribution happens, the tax treatment is generally locked in. So, it’s one of those decisions where a little extra clarity up front can go a long way.
A Strategy You May Hear About: NUA
One concept that may apply in certain situations is called Net Unrealized Appreciation (NUA).
While the rules can be complex - At a high level, NUA can allow a portion of the growth in your company stock to be taxed differently than a typical retirement account withdrawal.
In simple terms:
- Part of the stock may be taxed as ordinary income- While the growth above that amount could be taxed at capital gains rates, depending on how and when it’s sold
Whether this is beneficial depends on things like:
- Your cost basis- How much the stock has grown- Your broader tax situation
Using the Calculator as a Starting Point
If you want to get a sense of how this might apply to your situation, I’ve added a Company Stock Distribution Analysis Calculator to my website:
https://www.ameripriseadvisors.com/laura.parker/financial-calculators/company-stock-distribution-analysis-calculator/
The tool lets you explore different distribution scenarios and how they may be taxed. It’s not meant to give you a final answer, but it can help highlight where it may be worth taking a closer look.
A Few Things the Calculator Doesn’t Capture:
- How concentrated your portfolio is in one stock- Your broader retirement income needs- Timing around when you need the funds- How this fits into your overall tax picture
My Perspective
This is one of those areas where I’ve seen small decisions lead to meaningful differences over time.
Some people benefit from strategies like NUA. Others are better off keeping things simpler. The key is understanding what applies to your situation before making a move.
Take the Next Step
If you have company stock in a 401(k), ESOP, or similar plan, it’s worth taking a few minutes to run the numbers:
https://www.ameripriseadvisors.com/laura.parker/financial-calculators/company-stock-distribution-analysis-calculator/
And if you’d like help walking through the results or understanding how this fits into your broader plan, I’m always happy to talk it through with you.
Because the goal isn’t just understanding how it works — it’s helping make sure it works for you.
Read more articles by Laura Parker