Taxation of Retirement Distributions

What this video covers

• The golden tax rule of retirement accounts: pre-tax money in means ordinary income out, after-tax money in means tax-free out to the extent of basis
• How the pro-rata rule blends deductible and non-deductible traditional individual retirement account (IRA) dollars into one proportional mix across all traditional, simplified employee pension (SEP), and savings incentive match plan for employees (SIMPLE) IRAs
• Why you cannot cherry-pick after-tax basis from a traditional IRA, and how this torpedos backdoor Roth conversions when pre-tax IRA money exists
• What net unrealized appreciation (NUA) is and why it matters for employer stock distributed from a qualified plan
• The three strict NUA requirements: lump-sum distribution, qualifying triggering event, and in-kind stock transfer to a brokerage account
• How NUA dollars are split at taxation: original cost basis taxed as ordinary income at distribution, appreciation taxed at long-term capital gains rates when sold
• Why selling employer stock inside the plan and distributing cash destroys NUA treatment and triggers full ordinary income taxation