Ask Terry Questions Converting company stock into an annuity

Converting company stock into an annuity

By Terry Savage on September 22, 2019 | Investments

We have about $24k in stock and we will be retiring within the year. How do we convert with getting hit by taxes. We are 59

Terry Says

Eventually, you will get hit by taxes!  BUT, the answer to this question involves knowing how the shares are held.  Are they part of a deferred comp plan?  If so, there is a provision of the tax code that might apply, allowing you to pay taxes at a capital gains tax rate — if you hold the shares for one year after receiving them.  Ask your HR department about this (how the shares are held), and also consult a tax advisor familiar with employee stock plans.

If they are not part of any company plan, then you will be taxed when you sell the shares — and the rate you pay will depend on how long you’ve held the shares.  If they were accumulated over time, you want to sell the earliest purchased shares first.  If shares are held at least one year and one day, you’ll pay the lower “capital gains” tax rate on any profits.  Again, consult your tax advisor.

And though you didn’t ask — how can you afford to retire at age 59 and live perhaps another 40 years?  Espeically if $24,000 in stock (yes, a nice amount) is the most significant asset you have?!!

I suggest you do some financial planning before you quit your jobs!  Try this calculator:



Recent Investments Questions



a personal
finance question