What To do with your ESOP.

What are your options?

Maybe you're wondering "What to to with your ESOP" as you approach retirement.  You have only 3 options.  Your decision requires strategy depending on your age.  Some prefer to retire early, others will wait.  In either case, here are some tips to help with your decision, but first let's answer this common misconception.

Can You Leave Your ESOP Forever?

There are misconceptions about how long you can keep your ESOP.  You've perhaps heard it's possible to leave it there for life.  This isn't true, though you can keep it there for a while if you retire before the age of 62.  For those who are retired, you are required to make a decision by the end of February the year after you turn 62.  

3 ESOP Options

  1. Keep the stock by moving it to an IRA
  2. Sell the stock and take as cash - not advisable due to taxes & potential penalties.  Consult a tax professional
  3. Sell the stock and rollover to an IRA.  If properly managed & diversified this is a safer option.  I can help with this option.  If you want to know more, click www.chatwithsac.com

FAQ's

Can I move my ESOP while still working?

Yes. For associates between the ages of 55 to 61 who worked at least a decade, you can start taking distributions while working. They call this the “Diversification Election”. You have the opportunity to take 25% of your ESOP. I strongly suggest a rollover to an IRA to avoid taxes & potential penalties. Packets are mailed in January & must be completed and returned by end of March. Checks are sent regular mail by middle of May.

Why would I use the Diversification Election?

The name gives you one of the two reason. To diversify. Diversification reduces investment risk. The second reason is investment choices. You have significantly more investment choices in an IRA that may be more appropriate for you financial situation.

Can I take part of my ESOP when I retire?

No, you are required to take your entire ESOP when you make your decision.

How do I avoid the 10% early withdrawal penalty if I'm under 59 1/2

IRS code 72t allows you to avoid the 10% penalty. You must take equal payments for 5 years or reaching age 59 1/2 which ever is longer. This is also know as SEPP - Substantially Equal Periodic Payments

I will answer all of your questions & advise what's in your best interest.   

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