Hi Reader,
Utilizing the Net Unrealized Appreciation strategy (NUA) can allow for company stock within a 401(k) to be taxed at long-term capital gains rates as opposed to ordinary income rates.
Usually, all pre-tax funds within a 401(k) are taxed at the ordinary income rate when distributed from the account.
However, with Net Unrealized Appreciation, the portion attributable to company stock can qualify for a significantly lower tax rate.
Net Unrealized Appreciation is the difference in the cost basis and value of the employer stock held in a 401(k).
The “unrealized appreciation” means the stock has not been sold. Its appreciated value has not been “realized.”
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David N. Waldrop, CFP®
Owner of Bridgeview Capital Advisors, Inc. a Registered Investment Advisor.
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