Phillips 66 employees: Are you NUA Qualified?

For Phillips 66 employees wanting to make the most of their retirement savings, using strategies like Net Unrealized Appreciation (NUA) can deliver big tax benefits - 'you get long-term capital gains rates on appreciated employer stock instead of ordinary income tax rates - and it's a strategy you should discuss with your advisor - Tyson Mavar of the Retirement Group.'

I often tell Phillips 66 employees that if NUA lowers tax liabilities on appreciated employer stock, they should talk to an expert like Paul Bergeron of The Retirement Group, 'he said.

In this article, we will discuss:

1. The tax treatment of qualified versus non-qualified accounts.

2. What Net Unrealized Appreciation (NUA) is for eligible employees.

3. Potential tax savings for Phillips 66 employees with the NUA strategy.

We want to help our Phillips 66 clients understand how NUA can be used by first making clear the tax treatment differences between qualified and nonqualified accounts. Those qualified accounts (traditional 401(k)s) exist to provide tax advantages. Contributing pre-tax dollars from your income to a qualified account lowers your tax for the year.

The qualified accounts are like a Traditional 401(k) but with tax advantages added.

And appreciation is not taxed until withdrawals are made. Upon withdrawal (tax penalty for withdrawals before age 59½ and required minimum distributions [RMDs] after age 70½), appreciation and invested amounts are taxed as ordinary income at the time of withdrawal (tax penalty for withdrawals before age 59½ and RMDs after age 70½).

In contrast, we remind our Phillips 66 customers that non-qualified plans (like a standard brokerage account) are not encumbered by tax-deferral benefits. Investments are funded with after-tax money. In the event appreciated shares are liquidated for a gain, any excess of the difference between cost basis (original purchase price) and sales price is taxed at either the short-term or long-term capital gains rate, plus tax on dividends paid in the same year. The funds in non-qualified accounts are not subject to early withdrawal penalties nor required minimum distributions.

Read our e-book here for more:  https://retirekit.theretirementgroup.com/net-unrealized-appreciation-ebook-offer

Added Fact:

Phillips 66 employees holding employer stock in their qualified retirement plans could qualify for a special tax strategy called Net Unrealized Appreciation (NUA). NUA may allow eligible people to receive tax treatment favorable to them on the appreciation of their employer stock distributed from a qualified plan. Utilizing NUA may mean paying higher long-term capital gains tax rates on the stock appreciation than ordinary income tax rates. This can mean big tax savings if the stock has appreciated strongly over the years. Seek advice from a financial advisor or tax professional about eligibility and benefits of the NUA strategy. (Source: IRS.gov, 'Retirement Topics – Net Unrealized Appreciation (NUA),' updated October 15, 2021).

Added Analogy:

Imagine you have been building up a rare antique over years. Your retirement plan as a Phillips 66 employee is sort of like this antique collection. Like the antique, your retirement plan may contain employer stock that has appreciated over time. Imagine now that you have a special tax strategy available to you - Net Unrealized Appreciation (NUA). Finding NUA is like entering a room of hidden tax benefits. You could get tax advantages on the appreciated value of your employer stock through NUA. It's like getting a key that lets you pay long-term capital gains tax rates on the appreciation instead of higher ordinary income tax rates. Exploring NUA as a strategy may be an added benefit to your retirement plan - helping you to protect and grow your money. Just as collectors consider how to protect and leverage their antiques, Phillips 66 employees should consider NUA to optimize retirement savings.

2. SmartAsset. 'Differences of Qualified vs. Nonqualified Retirement Plans.'  SmartAsset , May 2024,  www.smartasset.com/retirement/qualified-vs-nonqualified-retirement-plans?utm_source=chatgpt.com .

Articles you may find interesting:

3. Endeavor Wealth Advisors. 'Net Unrealized Appreciation 'NUA' Tax Strategies in Retirement.'  Endeavor Wealth Advisors , October 2024,  www.endeavorwa.com/nua-tax-strategies-in-retirement/?utm_source=chatgpt.com .

4. Thrivent. 'Tax-qualified Retirement Plans vs. Non-tax-qualified.'  Thrivent , August 2024,  www.thrivent.com/insights/retirement-planning/what-are-the-differences-in-tax-qualified-retirement-plans-and-non-tax-qualified-retirement-plans?utm_source=chatgpt.com .

5. Kiplinger. 'How Net Unrealized Appreciation Helps Save More of Your Retirement Savings.'  Kiplinger , September 2024,  www.kiplinger.com/taxes/how-net-unrealized-appreciation-helps-save-more-of-your-retirement-savings?utm_source=chatgpt.com .