easy · Certified Financial Planner General Principles
The Brennan household has reached out for retirement advice. Mr. Brennan, age 64, is retiring and has $800,000 in his 401(k), including employer stock with a cost basis of $250,000 and a current FMV of $700,000. He is considering the Net Unrealized Appreciation (NUA) strategy.
What is the most significant constraint on the viability of this strategy for Mr. Brennan?
- Mr. Brennan is under age 72 and cannot take a lump-sum distribution.
- The NUA portion will be subject to a 10% early withdrawal penalty.
- NUA is only available for S-Corporation ESOP plans.
- The cost basis is too high relative to the total value.
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