At a prior employer, DH received an ESOP entitlement. Its worth approximately $8k (according to a statement we recently received). We are uneducated/ignorant as to what this exactly means. Is this something that can be cashed/paid out? Are there benefits to maintaining it/not cashing it out? Basically, what the hell should we do with it.
At a prior employer, DH received an ESOP entitlement. Its worth approximately $8k (according to a statement we recently received). We are uneducated/ignorant as to what this exactly means. Is this something that can be cashed/paid out? Are there benefits to maintaining it/not cashing it out? Basically, what the hell should we do with it.
It will depend on how your ESOP is set up. I currently work for an ESOP and if I were to leave (now that I am vested) the company has 5 years to pay me out. At that time it would have to be rolled over into an IRA or I would have to pay taxes and penalties. This gives the ESOP time to plan accordingly as some of our bigger stockholders retire. One thing about our ESOP (and a lot of ESOPs) is that our ESOP fund is made up 50% of company stock and 50% of investment funds. This allows the investment to be diversified so if worst case the company goes under, people are not left with nothing, they instead would have 50% of their retirement fund.
Probably more information than you wanted but I would encourage you to reach out to the company and find out the steps you need to take to cash out the account so you can roll it over to another retirement fund so that you can have some control over it. Right now the worth will be tied to how the company does so that may be something you want to avoid (depending on the company). There may also be guidelines they have which you need to be informed of. Hope this helps.
Carramrod - thank you so much. This is exactly the type of information I was hoping for. Gives me a much better understanding of the structure, limitations and additional questions we need to be asking. Thanks!