Can You Transfer Stock to a 401(k)? A Complete Guide to Stock Rollovers

Have you ever wondered if you can move those individual stocks you own into your 401(k) account? Maybe you’ve got some company shares or a brokerage account full of stocks that you’d rather have growing tax-deferred in your retirement account I get this question from readers frequently, and the answer isn’t as straightforward as you might think.

The Short Answer

No you typically cannot directly transfer stocks from a regular brokerage account into a 401(k). However you can transfer stocks from other qualified retirement accounts into a 401(k) if your plan allows it.

Let me walk you through the details of what’s actually possible when it comes to moving stocks into your 401(k), the tax implications, and some smart alternatives to consider.

What Stocks Can Be Transferred to a 401(k)?

While you can’t move stocks from a regular taxable brokerage account to a 401(k), there are times when you can move stocks to a 401(k).

Eligible Stock Transfers:

• Stock from another qualified retirement plan: You can roll over stocks from another 401(k), 403(b), or 457 plan into your current 401(k) if your plan allows it.
• Stock from an IRA: Some 401(k) plans accept rollovers of stocks held in traditional or Roth IRAs.

Ineligible Stock Transfers:

• Stocks from personal brokerage accounts: These cannot be directly transferred to a 401(k).
• Privately held stocks: Most 401(k) plans don’t accept these.
• Stocks you received as gifts or inheritance: These cannot be directly moved into a 401(k).

As Fidelity Investments vice president Mitch Pomerance explains, “With NUA, you can effectively pay lower capital gains rates on a portion of your tax-deferred assets instead of paying the typically higher ordinary income rates when assets are withdrawn from the tax-deferred account when you have company stock in your qualified retirement plan.”

Why Can’t I Transfer Stocks Directly from My Brokerage Account?

The IRS has strict rules about what can go into a 401(k). The main issue is that:

1. 401(k) contributions must be made with cash through payroll deductions or employer contributions
2. Annual contribution limits apply ($23,000 for 2024, plus $7,500 catch-up if you’re over 50)
3. Tax reporting issues make direct stock transfers problematic

To move stocks from your brokerage account to your 401(k), you’d have to sell them first, which could result in capital gains taxes. Then, you could put money into your 401(k) through payroll deductions up to the annual limit, and finally, if your plan allows it, you could buy back similar stocks in your 401(k).

Qualified Retirement Plan Rollovers

If you have stocks in another retirement account, you might be able to roll them over. Here’s how that works:

Direct Rollovers (Recommended Method)

When you do a direct rollover, the stocks go from one retirement account to another without you having to take possession of them. This is the safest way to avoid tax penalties.

1. Check if your 401(k) plan accepts “in-kind” rollovers (many don’t)
2. Complete the required paperwork from both financial institutions
3. The stocks transfer directly without being sold

Indirect Rollovers (Riskier Option)

When you do an indirect rollover, you get the stocks from the old account and have 60 days to put them in the new account.

⚠️ Warning: This method is risky because:

• You must complete the rollover within 60 days or face taxes and penalties
• 20% is typically withheld for taxes, which you must make up from other funds
• You’re limited to one indirect rollover per 12-month period

Understanding Net Unrealized Appreciation (NUA)

If you have company stock in your 401(k), you should definitely know about Net Unrealized Appreciation (NUA). This is a special tax strategy that might save you significant money.

NUA is the difference between what you paid for your company stock (cost basis) and its current market value. For example:

• You buy 100 shares at $20 each ($2,000 total)
• Five years later, they’re worth $35 each ($3,500 total)
• Your NUA would be $1,500 ($3,500 – $2,000)

The NUA Tax Advantage

When distributing company stock from a 401(k), you have two options:

1. Roll everything into an IRA: All future withdrawals are taxed as ordinary income (potentially 22-37%).
2. Use the NUA strategy: Pay ordinary income tax now on just the cost basis, then pay long-term capital gains tax (typically 15-20%) on the appreciation when you sell.

As one expert notes, “it may make sense to take the tax hit now rather than later on the full amount if the cost basis is low, relative to the size of the stock position in your 401(k).”

When Does the NUA Strategy Make Sense?

The NUA strategy works best when:

• Your company stock has appreciated significantly
• The cost basis is low compared to current value
• You’re currently in a lower tax bracket than you expect in retirement
• You don’t need immediate access to all the funds

However, it might NOT make sense if:

• Your tax bracket will be lower in retirement
• The appreciation on the stock is minimal
• You plan to hold the stock for many more years

Alternatives to Transferring Stock to a 401(k)

Since directly transferring stocks from a brokerage account to a 401(k) isn’t allowed, here are some alternatives:

1. Sell and Contribute

Sell your stocks in the brokerage account, pay any capital gains taxes due, and then increase your 401(k) payroll contributions (up to annual limits).

2. Consider an IRA Rollover

If you’re looking to consolidate retirement accounts, consider rolling over your 401(k) to an IRA instead, which typically offers more investment options.

3. Self-Directed 401(k)

Some 401(k) plans offer self-directed brokerage windows that allow you to invest in individual stocks. If yours does, you could potentially buy the same stocks you currently own in your brokerage account.

4. Solo 401(k) for Self-Employed

If you’re self-employed, a Solo 401(k) might offer more flexibility with investments, but even these plans generally require cash contributions rather than direct stock transfers.

Tax Implications to Consider

Whenever you’re moving money between accounts, taxes are a crucial consideration:

• Selling stocks in a brokerage account can trigger capital gains taxes
• Early withdrawals from retirement accounts (before age 59½) typically incur a 10% penalty plus income tax
• Company stock distributions have special NUA tax treatment options
• Rollovers between qualified accounts are generally tax-free if done correctly

Common Questions About Transferring Stock to a 401(k)

Can I transfer stocks from my Robinhood account to my 401(k)?

No, you cannot directly transfer stocks from Robinhood or any brokerage account to a 401(k). You would need to sell the stocks, pay any capital gains taxes, and then contribute cash to your 401(k) through payroll deductions.

Can I buy individual stocks in my 401(k)?

It depends on your plan. Most employer 401(k) plans limit investment options to mutual funds and ETFs, but some offer self-directed brokerage windows that allow individual stock purchases.

Can I day trade stocks in my 401(k)?

Technically yes, if your plan offers a self-directed brokerage option. However, frequent trading in retirement accounts is generally discouraged, and some plans may have restrictions on trading frequency.

Should I move my 401(k) out of stocks as I near retirement?

Many financial advisors recommend gradually shifting your 401(k) to more conservative investments as you approach retirement. This helps protect your savings from market downturns when you have less time to recover.

What happens to my 401(k) if the stock market crashes?

If your 401(k) is heavily invested in stocks and the market crashes, your account value will likely decrease. This is why diversification and age-appropriate asset allocation are important.

Final Thoughts

While you can’t directly transfer stocks from a regular brokerage account to a 401(k), understanding your options for retirement account rollovers and tax strategies like NUA can help you make smarter decisions about your investments.

If you’re considering any of these moves, I’d recommend talking to a financial advisor who can help you navigate the specific rules that apply to your situation and develop a strategy that maximizes your retirement savings while minimizing your tax burden.

Remember, retirement planning isn’t just about growing your money—it’s also about being strategic about how and when you’ll pay taxes on those funds. A little planning now can save you thousands of dollars down the road!

Have you ever tried to rollover retirement accounts or used the NUA strategy? I’d love to hear about your experiences in the comments!