Finances advise

[Kitzka]

I apologize in advance if this is long:

About 3.5 years ago i left my old job and rolled my 401K and my pension disbursement into a rollover IRA. Also as part of my retirement package i was given the option to purchase shares of the company, through their employee stock purchase plan. the stock was trading very low at that point ($7 a share) and since i didn't have to move them i opted not to. plus at some point i forgot about them.

Apaprently, they are now doing away with this employee stock purchase plan and the fees with managing it. The shares are now trading at about $16.80 a share and through various stock splits, etc I have 600 shares. So about 10k worth of stock. Since they are doing away with the plan i have the option of either rolling these into a stock certificate, roll it into another retirement account, or cash them out. If I choose to cash them out if i do not roll it into a roth ira or some other type of retirement account i will have to pay taxes on this and a early withdrawl fee. Which i think will amount to about $4000 in fees.

I'm not really sure what to do with this account. both DH and I have well funded 401k, (we do the full company match) and roth iras. i am still working on paying off my student loans and if i cashed out, it would pay a big chunk of it.

anyway, i know i don't have all of the info here but this is most of it. any suggestions or thoughts? I am leaning away from the stock certificate because i wouldn't know what to do with that once i got it.

I also think the taxes and penalties from early withdrawl are a lot and make it not worth withdrawing early. (though i would love to get these student loans paid off).

I plan to call the number provided tomrrow but wanted to see if any in the DIS had some ideas.
thanks!

Lara

 

[mommy2allyandaveri]

I can't tell you what to do but I can share my experience with you. When I left a job years ago I rolled the 401k into a traditional IRA. This year, my investment advisor suggested I roll this into a ROTH, which I did. I knew I was going to have to do it eventually and I knew there would be tax penalties. I chose to do it this year because I might as well get it over with and the longer I wait the worse it will be, also this is the last year we will have a bunch of good deductions.

I have a tax person but I always do the online free version of turbo tax prior to giving all my docs to the professional. I put everthing in (except the 1099) and it said we were getting a refund of about $3k (fed and state combined) yea!!! Then I put in the 1099, now we owe $1k.

I didn't really realize how much this would effect our taxes. The total rolled over was $11500.00

 

[QVCshopper]

I would roll it into an IRA rollover. Unless you roll it into a Roth, you shouldn't owe any taxes. I think $4K is a lot to lose in cashing it out. Instead, I would cut your current 401(k) contribution back to the company's matched amount and use that extra cash to pay off your student loan. Later, raise your 401(k) back up. Unless you already have $1 million or more saved for retirement, I think this is the way to go. I used to work for one of the big mutual fund companies--so glad I did b/c I learned a lot!

Last year alone, we saved $20K into our 401(k)s and the $10K into our Roths. We are big savers for retirement; I'm 34. We will need a lot by the time we retire.

 

[Cheshire Figment]

I would contact a discount brokerage and check with them about opening a rollover IRA. They you would have the stock transferred directly from the ESPP to the IRA and there would be no tax consequences at the time.

If you did anything else, and you are less than 59½ years old you would have the full $10,000 taxed at your current rate as well as about $1,000 as early witrhdrawl penalty.

 

[crisi]

I'd roll it as well.

And then, if you feel strongly about those student loans and feel like you are already on track for retirement, reduce your 401k contributions by the same amount or until you get the student loans paid off.

That way, no penalty.

 

[Kitzka]

Thanks everyone:

i too was leaning towards rolling into a new rollover ira or the exsisting one i have.

I never thought about lowering my 401K to help pay the student loan down. not sure why that never occured to me but that's a great suggestion!

thanks!

Lara

 

[crisi]

Thanks everyone:

i too was leaning towards rolling into a new rollover ira or the exsisting one i have.

I never thought about lowering my 401K to help pay the student loan down. not sure why that never occured to me but that's a great suggestion!

thanks!

Lara

Make sure to keep any employer contributed capture. (i.e. if they match the first 3%, keep that match).