What to do with my ESOP distribution?

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What to do with my ESOP distribution?

Post by mevans154 »


I have been working for a steady well established company for the past 12 years. In 2015, the company became an "employee owned" company and an ESOP account was created for each employee. Fast forward to 2021, our company has been acquired by a larger corporation and the ESOP program has been ended. The final balance in my ESOP account is roughly $136K. We have a distribution window until November 15th do do something with the money if we wish.

The options are:
1. Cash out (This would be a taxable event)
2. Roll over into my company's 401K plan (Non-taxable event)
3. Roll over into my existing personal Vanguard IRA account (Non-taxable event)
4. Do nothing and let the money sit idle until the next distribution window in 2023.

I am 54 years old and do not need the money right now and intend to work for about another 5 years at my company if all goes to plan and then retire at 59. I think options #1 and #4 are not the right choice for me, so it comes down to options #2 or #3.

My questions:
1. What would be the pros and cons of rolling over to my company's 401K versus a roll-over to my existing Vanguard IRA account?
2. What are the pros and cons of rolling over to my existing Vanguard IRA account versus a roll-over to my company's 401K account?
3. What would you do?

As always, looking forward to great advice from my fellow Bogleheads!

Cheers! :sharebeer
"Be greedy when everyone is panicking, and panic when everyone else is greedy"... Couldn't agree more!!!
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Re: What to do with my ESOP distribution?

Post by mhc »

Since you say you have an existing IRA, I take this to mean you are not doing a back door Roth. If that is correct, I would put it in the 401k if it has better options than your IRA, taking into account cost. The 401k can have better protection against creditors.

If the 401k is not as good, go with the IRA. Keep in mind that 401k investment options and fees could change (e.g., get acquired by another company) for the better or worse. Putting the money in your IRA protects against this risk.
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David Jay
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Re: What to do with my ESOP distribution?

Post by David Jay »

I would look at the funds and expense ratios of the 401K plan. If you like what you see, put it in there.

If you aren't comfortable with the 401K options, roll it over into a personal IRA.

My company did not offer a 401K option, all of my ESOP distributions went into a personal IRA.
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