Cashing out stock

[sterl724]

I don't usually post on this board, but you ladies are always so knowledgable about investments! (I'm dumb with investments, so explain it easy to me.)

H was given some stock shares from a former employer (while he worked there). When he left, they were put in an account with TRowePrice. They are currently worth about $3,200. He texted me today that (for some reason - I'm not sure. I didnt really understand his text and I was busy) we need to cash out/sell the shares.

My question is - what do we do with the money? He has a retirement plan through work. I pay into a retirement fund (teacher pension) and I have a separate 403b. Should we roll the money into a Roth IRA? Put it into DS college plan? Get a check and do something else?

Thanks in advance!

[hocus2]

I am not sure if stock can be rolled into retirement. I would set aside a good portion for taxes and put the rest into what ever savings account you feel would be best served by it. A roth might be fine if you think you're under invested for retirement.

[doggielover]

I just went though this earlier in the week. I talked with the financial advisor and it can't be rolled into a retirement account (regular IRA). My options were to take a cash payout or have a check issued and rolled into a roth IRA. Either way I'm going to get hit with taxes. Since it's going to be a hit for me I took the cash payout and just set aside a certain % for when I file 2020 taxes.

[k3am]

DH had a manditory cash out of his stock when he switched companies last year. We worked with our financial advisor to get an idea of how much of it to hold aside for taxes, and have earmarked it with the knowledge that that portion is never really "ours." (I think he said somewhere between 25-30%, but I'm paranoid so I'm going with 35% just in case.)

We got some interesting stories from him during the process. You'd be surprised how many people get HUGE stock redemptions, spend the whole thing, and then are shocked by the fact that they now owe taxes on it.

You're ahead of the curve just asking the question.

[goldengirlz]

Feb 12, 2020 13:57:58 GMT -5 Cappy said:

I'm no CPA but my understanding is if you cash out, your capital gains (value - cost basis) will just be added to your income for that year and taxed at your normal rate. Unless you are close to a tax bracket threshold I'd cash it out, set aside whatever % you expect to pay tax-wise, and stick the rest in your Roth. At most it would be a $3500 taxable increase (assuming zero cost basis as a worst case) so taxes wouldn't be a huge concern.

This is mostly true, but I think if you’ve held the stock for more than two years, you’d get taxed at the long-term capital gains rate, no? Not as income.

[sterl724]

I was thinking roll over, H wants to get a check. I'm not sure he realizes that it gets taxed as income, and that the tax doesn't come out of the amount prior to receiving the check.
This helps narrow down some options!