401k Critical Mistake #6: 401k Company Stock Crash Reset

Has your 401k company stock dropped sharply in value? If so, what feels like bad news for your account balance may have created a powerful tax planning opportunity that many executives never realize exists. In this episode of The Critical Mistakes Series™, David Dunn explains 401k Critical Mistake #6: failing to recognize that a sharp decline in 401k company stock may open the door to a valuable tax strategy involving Net Unrealized Appreciation, or NUA. For executives with concentrated company stock positions, understanding this distinction can make a meaningful difference in future taxes. When company stock falls significantly, many investors focus only on the loss. But in some cases, a decline may create an opportunity to reset cost basis in a way that improves the effectiveness of a future NUA strategy. At the same time, using that reset incorrectly can make the tax outcome worse, not better. This episode walks through when a cost basis reset may help, when it can backfire, and why the answer depends on whether the stock is currently at a gain or a loss relative to what was originally paid. Topics covered include: • How a decline in 401k company stock may create a tax planning opportunity • What a cost basis reset means in the context of NUA • Why selling and repurchasing 401k company stock may help in some situations and hurt in others • What executives should evaluate before taking action after a major stock decline The NUA strategy is complex and not appropriate for everyone. It requires careful analysis, correct execution, and an understanding of how cost basis affects future tax treatment. A move that seems logical on the surface may either improve the outcome dramatically or undermine it entirely. This episode is part of The Critical Mistakes Series™, covering some of the most costly and least understood mistakes executives make with company stock inside their 401k. Be sure to watch 401k Critical Mistakes #3, #4, and #5 for additional guidance on preserving and evaluating NUA opportunities. To learn more about David Dunn and The Critical Mistakes Series™, visit DAVIDDUNN.COM. Subscribe for more insights on executive planning, tax efficiency, and strategic wealth coordination. David Dunn Wealth, LLC (DDW) is a member firm of The Fiduciary Alliance, LLC (TFA), a Securities and Exchange Commission registered investment advisor. See full disclosure at www.daviddunn.com. This content is for informational purposes only and should not be construed as investment advice or an offer to buy or sell securities or other financial products. DDW does not provide accounting services. While information is based on sources deemed reliable, its accuracy is not guaranteed. DDW is independent and not affiliated with, endorsed by, or sponsored by Boeing, Microsoft, or their affiliates. Any reference is for illustrative purposes only. Always consult your own advisor before making financial decisions.