Net Unrealized Appreciation question

[MN-Investor]

Has anyone here dealt with net unrealized appreciation of employee stock within a 401(k)?

I stopped working in '99, and just left my 401(k) with my former employer. (I know. That's a no-no.) The value of my 401(k) just kept going up, especially the employee stock. Now the stock is worth 9 times what I paid for it. I just turned 58. I guess at this point I'm tempted to leave the 401(k) alone until next year when I turn 59-1/2, then roll over the non-employee stock to an IRA and put the employee stock into a brokerage firm, paying the taxes on the basis (which I can afford to do from other sources).

Does that make sense? Is there something I'm missing?

[commentator]

Keep in mind that distributions from retirement accounts are taxed at ordinary income rates. If you need/want/prefer having a portion of your retirement funds be more accessible I suggest you figure out that dollar amount and only distribute only enough from the 401 plan so that after taxes you will have your target amount available. Dividing that pot by how much of the value is stock in your previous employer and how much is other stuff seems arbitrary.

You should be able to roll the 401 into an IRA now if you wish. Then within the IRA you can allocate investments as you see fit without taking a tax hit now.

[Savoir Faire-Demogague in NJ]

The poster can always lock in the gains but keep the stock in the confines of the 401K or IRA umbrella, without any tax implications.
I would also highly recommend getting the account out of the 401K and into a place like Vanguard for example.

[phil5185]

I agree with the OP's plan, especially if the basis on the employee stock is low compared to the current share value. When you roll the 401k to a Rollover IRA you can 'liberate' the employee stock for a relatively low tax cost - and then place the shares in a taxable account and pay only cap gains tax on profit when/if you sell some in the future.

I don't recall for sure (check me), but if roll the employee stock into the IRA it may become commingled so that you lose the 401k advantage to pay tax on your basis only.

(I did this with my company stock when I retired.)