Oct 6, 2026 · 9 min · 8 segments
Many investors unknowingly roll company stock from a 401(k) into an IRA, potentially missing one of the most valuable tax strategies available. In this episode, Dave and Ken break down Net Unrealized…
Let's set the stage, okay? NUA only applies in one very specific situation, and it's when you own shares of your employer's stock within your 401k or another employer retirement plan.
If that describes you, listen up because here's one of the biggest tax breaks hiding in the tax code.
Normally, when you take money out of your 401k, every dollar comes out as ordinary income taxed at your top marginal tax rate, potentially 32, 35, 37% for our higher net worth listeners or income earners.
NUA lets you take this company stock portion out of your 401k and move it into a regular brokerage account, not an IRA, okay? When you do that, You pay ordinary income tax only on the cost basis, what the stock was worth.
And then what I mean is what the stock was worth when you originally bought it, not what it's worth today.
So all the growth on top of the basis, all the appreciation, that gets taxed at long-term capital gains rates whenever you actually sell the shares, but not when you move it, okay? So let me make that concrete.
Without NUA, if you roll over everything into an IRA and then you later take the money out and distribute it, you're taxed on the full million dollars at ordinary income rates.
With NUA done correctly, however, you're taxed only on the 200,000 at ordinary income rates, but that is taxed today.
And the 800,000 on top of that, all that growth is deferred until you sell it, but it's not taxed at ordinary income.
It's only taxed at the long-term capital gains rates, which top out at 20% instead of 37.
So on a million dollar position, that spread can be a quarter million dollar tax savings and sometimes even more.
Let's set the stage, okay? NUA only applies in one very specific situation, and it's when you own shares of your employer's stock within your 401k or another employer retirement plan.
If that describes you, listen up because here's one of the biggest tax breaks hiding in the tax code.
Normally, when you take money out of your 401k, every dollar comes out as ordinary income taxed at your top marginal tax rate, potentially 32, 35, 37% for our higher net worth listeners or income earners.
NUA lets you take this company stock portion out of your 401k and move it into a regular brokerage account, not an IRA, okay? When you do that, You pay ordinary income tax only on the cost basis, what the stock was worth.
And then what I mean is what the stock was worth when you originally bought it, not what it's worth today.
So all the growth on top of the basis, all the appreciation, that gets taxed at long-term capital gains rates whenever you actually sell the shares, but not when you move it, okay? So let me make that concrete.
Without NUA, if you roll over everything into an IRA and then you later take the money out and distribute it, you're taxed on the full million dollars at ordinary income rates.
With NUA done correctly, however, you're taxed only on the 200,000 at ordinary income rates, but that is taxed today.
And the 800,000 on top of that, all that growth is deferred until you sell it, but it's not taxed at ordinary income.
It's only taxed at the long-term capital gains rates, which top out at 20% instead of 37.
So on a million dollar position, that spread can be a quarter million dollar tax savings and sometimes even more.
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