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

Nersesian, John A.; Potter, Frances L.
February 2004
Journal of Financial Planning;Feb2004, Vol. 17 Issue 2, p50
Academic Journal
The tax strategy of taking employer stock out of the employer's retirement plan and paying taxes on it instead of rolling it over to an individual retirement account makes increased sense in light of tax law changes and the long-term runup of stock values in the U.S. The tax strategy of net unrealized appreciation (NUA) is a more practical option because of the lower capital gains rates, the increased use of company stock in defined contribution plans, and the long-term gains of the stock market. An important factor in deciding whether to use NUA for employer stock is the future plan for the assets. The NUA on shares purchased with after-tax employee contributions is also eligible for the NUA strategy. Individuals who plan to use the NUA strategy must notify their plan administration in advance to obtain the specific documentation required. Factors affecting decisions about NUA include: size of retirement account, time horizon, marginal tax benefit, risk tolerance, estate plan and diversification. Choosing to focus NUA educational efforts on these individuals should prove to be most beneficial: retiring corporate executives, younger executives, executives holding depressed stock and human resource executives.


Related Articles

  • CALCULATING A SUSTAINABLE WITHDRAWAL RATE: A COMPREHENSIVE LITERATURE REVIEW. Salter, John R.; Evensky, Harold // Journal of Personal Finance;2008, Vol. 6 Issue 4, p118 

    Current trends in retirement savings exhibit a movement away from traditional employer-sponsored defined benefit pension plans to defined contribution plans. Of great issue to retirees and financial planners is the answer to the question, "how much can be withdrawn from a retirement account...

  • Retirement Account Ownership Down, Values Up. Moore, Rebecca // Plan Advisor News;2014, p36 

    The article discusses the U.S. Federal Reserve's Survey of Consumer Finances (SCF) which noted the decline in ownership of retirement accounts in 2013. Topics discussed include an increase in the median and mean values of retirement accounts attributed to resurgent stock markets and the rise of...

  • Don't expect a flood of Roth conversions. Steyer, Robert // Pensions & Investments;2/4/2013, Vol. 41 Issue 3, p41 

    The article considers a change in U.S. pensions law allowing more opportunity for participants in a defined contribution pension plans such as 401(k) plans to select the Roth after-tax contribution option rather than the customary pre-tax contribution plan. The likelihood that relatively few...

  • Retirement Planning After the New Law.  // Accounting Technology;Aug2001, Vol. 17 Issue 7, pSR-14 

    Discusses the effect of the United States tax cut law called the Economic Growth and Tax Relief Reconciliation Act of 2001 on qualified retirement plans and individual retirement accounts (IRA). Increase of limits on contributions that may be made to an IRA and a defined contribution plan;...

  • We're Glad You Asked! - Required Minimum Distributions.  // Retirement News for Employers;Spring2012, p10 

    The article offers information on required minimum distribution for 2012 and the remaining account to employees' 401(k) plan. It states that the 401(k) plan has to make required minimum distribution to employee depending on the terms of the plan and whether the employee owns 5% or more of the...

  • How to get an instant retirement raise. Carosa, Christopher // Benefits Selling;Jun2014, Vol. 12 Issue 6, p52 

    The article offers advice on how to motivate people to save for their retirement and contributing to their 401(k) retirement plan. According to the author, the best way to motivate savings is by appealing to their greed, asking 401(k) participants if they want an instant raise, and asking if...

  • Annuities offer tool to deal with post-accumulation period. Kugelmass, Rachel D.; Saccente, Durando J. // Employee Benefit Adviser;Jun2007, Vol. 5 Issue 6, p18 

    The article offers information about defined contribution (DC) plans. According to the authors, DC plans, which were usually regarded as support to defined benefit plans, are now considered as a retirement funding solution. DC plans offer asset accumulation opportunity subject to market...

  • Study reveals uptick in retirement-plan participation: Unstable economy, automatic enrollment boost pool of contributors. Tampone, Kevin // Business Journal (Central New York);10/28/2005, Vol. 19 Issue 43, p15 

    The article reports that their is an increase in retirement plan by employees. In most companies, defined-contribution plans like 401(k)s are now a standard practice. More workers are also taking advantage of them. Participation rates still float below 50 percent, but are rising quietly....

  • Golden years or decades of dross? Williams, Gordon // FW;1/2/96, Vol. 165 Issue 1, p70 

    Offers two basic rules to prepare for retirement. The preparation to do more with less and to take risk; The four great institutional bulwarks upon which retirement planning rests; Social security; Individual retirement accounts (IRA) and Keogh plans; Company defined-benefit pension plans;...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics