Maximizing Retirement: Avoiding the IRA Rollover Trap

ARTICLE | February 07, 2025

Authored by Vasquez + Company

Many individuals approaching retirement or transitioning to a new employer rely on the standard recommendation of rolling their qualified retirement plan balances into a traditional IRA. It is an understandable move: consolidating assets into one IRA can simplify your portfolio, and continued tax-deferred growth can be advantageous. However, there is a critical exception to this rule that could save considerable money in taxes, especially if you hold appreciated employer stock in your plan. Properly planning for this appreciated company stock and taking advantage of the so-called "net unrealized appreciation" (NUA) rules could radically lower your tax bill and ultimately benefit not only you, but also your heirs.

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Taking the straightforward path of rolling your entire employer-qualified plan into an IRA seems wise most of the time, but it can obscure a unique tax advantage frequently overlooked in retirement planning. By isolating the gains in your employer’s company stock and leveraging the net unrealized appreciation rules, you can significantly reduce current and future taxes, potentially leaving more for both your retirement needs and your loved ones.

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