Taking It With You, Or Not

Jordan has 2 questions for Dave about his employee stock option plan.

QUESTION: Jordan works for an employee-owned company and is in their employee stock option plan. Is there any danger in participating in that? Also, if he leaves the company before he’s vested, can he transfer it to his wife’s 401k?

ANSWER: There’s no danger in it. If you’re not vested or put any money in it, you won’t take any money with you. When you leave, you roll it to an IRA. The employee stock option plan is under a retirement plan umbrella, so it’s not rained on by taxes. You roll it to another retirement account, the IRA. Open one with a mutual fund company and they send the paperwork to your employer, and they will transfer it directly over. If you cash it out, they are required to withhold taxes when you take it out.