Met with a FInancial Planner the other day.

[chinaco]

DW has access to one from the company that manages her companies 401k, PST,ESOP, etc. (it was free, no charge. We can use him again if we feel the need.)

It was helpful mainly for some tax advice. He saw the portfolio allocation for our assets. He had no problems with it. He made a few insightful suggestions. The only thing he was less enthusiastic about was indexing... naturally he was an active fund proponent.

It was good to get some reflection on the basic plan... and great to have a little independent confirmation about my approach.

In the end... he was espousing the same general stuff anyone would read in a general investment/retirement planning book. Except for a few tax related thoughts (which I already about).

[LOL!]

OK, you teased us with a mention of 'insightful suggestions' and 'tax advice'. What were they? Could we benefit from them?

[chinaco]

The suggestions were very specific to our situation. DW has some company equity that can utilize the NUA provision. I was aware of it, but did not know much about details. He was familiar with the details. It is not something that many people would be aware existed. Plus, if you qualify and do it... it would likely be a one-time event. So the details and variations on issues are likely to only be know by planners that run into it a lot or accountants that are tax specialist.


FPA Journal - Contribution: Revisiting Net Unrealized Appreciation: A Tax-Wise Strategy That May Realize More Benefits Than Ever

[dbr]

I'm curious what perspective you may have gotten on the trade-off between holding for NUA tax benefit and the risk of investing in an undiversified position in your employer's stock.

Was there any comment in particular?

It is to be noted that 401K plans have recently been required to allow employees much more latitude to diversify out of company contributions in stock to 401K's since Enron.

[mickeyd]

Quote:

It was good to get some reflection on the basic plan... and great to have a little independent confirmation about my approach.

This is the main thing that I place a value on when I use the CFP @ Vanguard to review my plan. It is always good to get a second party to peek at your plan (ideas) in order to possibly expose a potential problem. Even a criticism of my plan is appreciated, though I will probably not act on it.

[walkinwood]

Quote:

Originally Posted by chinaco DW has some company equity that can utilize the NUA provision.

If you're retiring early, you'll need to leave your 401-K where it is (ie. not roll it over into an IRA) to get the benefit of the NUA. I sincerely hope that my understanding of the above is correct - because I acted on it.

In my case, I decided to liquidate my company stock even though I knew about NUA (brought to my attention by the Vanguard Financial Consultant), because it will be some 11 years before I can move the company stock using the NUA provision, and I thought the risk/return of a single stock holding for that period of time was not worth the tax savings.

[Spanky]

Quote:

Originally Posted by walkinwood If you're retiring early, you'll need to leave your 401-K where it is (ie. not roll it over into an IRA) to get the benefit of the NUA. I sincerely hope that my understanding of the above is correct - because I acted on it. In my case, I decided to liquidate my company stock even though I knew about NUA (brought to my attention by the Vanguard Financial Consultant), because it will be some 11 years before I can move the company stock using the NUA provision, and I thought the risk/return of a single stock holding for that period of time was not worth the tax savings.

I liquidated all my company stocks from the 401K plan and rolled the proceeds to an IRA a year ago when I left the company. It was a good move since the value of the stock has since declined over 60%. I do not see the big advantage of holding on to a stock just for tax savings which may not be any better than paying taxes for the gain as ordinary income as opposed to long-term capital gain.

[chinaco]

Quote:

Originally Posted by walkinwood If you're retiring early, you'll need to leave your 401-K where it is (ie. not roll it over into an IRA) to get the benefit of the NUA. I sincerely hope that my understanding of the above is correct - because I acted on it.

I understand the rules. We are studying the options and the implications.