Company Stock in Your 401(k)? You May Be Missing a Major Tax Opportunity

If you’ve built up company stock inside your 401(k), you may have a decision to make that many people never hear about.

It’s called Net Unrealized Appreciation—NUA.

And for the right situation, it can mean:

  • paying significantly less in taxes
  • keeping more of what you’ve earned
  • avoiding a mistake that’s hard to undo

The challenge is:

Most people roll everything into an IRA…
without ever knowing there was another option.

No pressure. Just a conversation to see if we can help.

What is NUA?

NUA stands for Net Unrealized Appreciation.

That’s a complicated way of saying:

  • how much your company stock has grown inside your 401(k)

Here’s the simple idea:

  • You bought (or received) company stock at a lower price
  • It’s now worth more
  • That growth hasn’t been taxed yet

NUA gives you a way to treat that growth differently than the rest of your retirement account.

Why this matters

Normally, when you take money out of a 401(k) or traditional IRA:

  • it’s taxed as ordinary income

That could mean:

  • 12%
  • 22%
  • 24%
  • 32%
  • or higher

But with NUA:

  • part of your company stock can be taxed at capital gains rates instead

Which are most often lower by 7 full percentage points, or more!

That difference—ordinary income vs capital gains—can be meaningful.

A simple NUA example

Let’s say:

  • You have $200,000 of company stock in your 401(k)
  • You originally paid $60,000 for it
  • It has grown by $140,000

Without NUA:

  • the full $200,000 is taxed as ordinary income over time

With NUA (on the full amount):

  • $60,000 → taxed as ordinary income in the year you use NUA
  • $140,000 → taxed as long-term capital gains when you sell

That’s the opportunity. Moving a significant portion of your Traditional 401(k) out of the income tax world to the long-term capital gains world.

But this is where people get tripped up

NUA is not automatically the right move.

In fact, it’s easy to get wrong.

Because once you make the decision:

  • you don’t get a do-over

This is one of those “looks simple on the surface but has layers” decisions.

It affects:

  • your tax bill today
  • your tax bill later, even for your beneficiaries
  • how your portfolio is structured
  • how much risk you’re taking

When NUA might make sense

NUA tends to be worth exploring when:

  • You have significant company stock in your 401(k)
  • The stock has appreciated meaningfully
  • You’re in (or expect to be in) a higher tax bracket
  • You’re retiring or separating from service

It can be especially valuable if:

  • a large portion of your account is company stock with a low cost basis

When NUA may not be the right fit

There are plenty of situations where NUA doesn’t make sense.

For example:

  • The stock hasn’t appreciated much, or has even dropped
  • You want simplicity over strategy
  • The tax tradeoffs don’t work in your favor

Or just as important:

  • the risk of holding that stock is too high

The biggest mistake we see

The most common mistake is simple:

  • rolling company stock into an IRA without reviewing NUA first

Once that happens:

  • the NUA opportunity is gone

Permanently.

No fix. No reset.

That’s why this decision matters before you move your 401(k).

How NUA fits into your retirement plan

We don’t look at Net Unrealized Appreciation in isolation.

It’s part of a bigger set of decisions:

  • How your income will work
  • How your taxes will play out over time
  • How concentrated your investments are
  • What your long-term plan looks like

It’s not about one decision—it’s about how everything fits together.

How we help you think through this decision

If you’re considering NUA, we help you:

  • Understand your specific numbers
  • Compare NUA vs IRA rollover
  • See the tax impact over time
  • Evaluate the investment risk
  • Decide what fits your overall plan

Not just “is this a good strategy”

But “is this the right decision for you”

Before you roll over your 401(k), make sure you’ve looked at this

If you have company stock in your retirement plan, this is worth a conversation.

Even if the answer ends up being “don’t use NUA.”

No pressure. Just a conversation to see if we can help.