ESOP Payout - What to Do?

Question

In December of '21, I rolled over $41k of my 401k into my previous employer's ESOP (had $5k balance at the time). Fast forward to now, and the company has grown exponentially, and was also purchased in June of this year. We received our final statements yesterday and I now have ~$600k in that account (roughly 6x what I should have for retirement at this point). I also have $20k remaining in that company's 401k, along with 20k in my current employer's 401k.

I'm 34 years old, I'm single, I have ~$40k in debt (auto loan). What are my options here? Would it be best to roll over everything into a retirement account to avoid the tax hit? Could I take some of the money and pay off debt and put the rest in my savings that's currently getting 5.05% APY?

Doug Smith · Answer

I'm in my mid-50s, but you are welcome to adopt me. Well done on the retirement account. That's fantastic. I would at least roll it over into something that is Self-Directed for now and take your time about what to do with it. Personally, I would avoid a big stock brokerage or mutual fund company. They are only going to offer their investments (the ones they get paid on). I would consider a SDIRA Custodian. I'll PM you some contacts that can talk you through your options and aswer your questions. That way, you can invest in stocks, bonds, funds, real estate, do private lending, etc. It gives you options. Once again, well done on what you've accomplished. You're way ahead of where I was at your age.

Nikhil Agarwal · Answer

Congrats on surpassing your retirement goals! Given we are on the BP forum, I assume you have some interest in investing in real estate.

I would recommend speaking to your financial advisor / tax advisor about self-directed IRAs. I don't have any personal experience with this, but I understand that you can buy investment real estate with your funds. You just have to be careful not to use it for personal use. In addition, you may need to manage it a bit differently than the average investment property. If you already use professional property management companies, should be a non-issue.

Brian Day · Answer

Taylor,

Thanks for the advice! I have a meeting with a financial advisor next week and will check out the FatTire Facebook group.

Taylor L. · Answer

I'd suggest speaking with a Financial Advisor, a Tax Advisor, and joining the FatFire Facebook group. If anyone DMs you a deal in response to this post, tread very carefully (don't do it)