Your partially correct. When you retire (or otherwise leave your company) if your 401(k) has publicly traded company stock in it, you can withdraw some or all of your company stock and put it in a taxable brokerage account. By doing so you will receive some favorable tax advantages. The difference between the stock's value when you acquired it and its current value, known as the Net Unrealized Appreciaiton (NUA), is then subject to only capital gains tax, as opposed to higher income tax. The only part of your company stock that is subject to ordinary income taxes is the value of the stock when it was first purchased in your 401(k). That amount is taxable in the year you make the withdrawal. You only pay the capital gains tax on the NUA of your company stock if and when you sell it. If you sell your company stock immediately, it is subject to long term capital gains.
This strategy works best if you have large gains in your company stock.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
