Author Topic: Should I sell my Amazon stock to put in my 401k?  (Read 1073 times)

amazinglyandrew

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Should I sell my Amazon stock to put in my 401k?
« on: July 14, 2017, 09:18:46 AM »
I work for Amazon and received 10 shares of stock recently. I don't make a ton of money (I'm not a programmer) but in the last six months since discovering the concept of FIRE I have turned some things around and will be putting about $13k in my 401k this year (vs. $2.5k last year). I would love to max out my $18k limit on the 401k, and if I sell some stock I could. Is that the right call?

Other options would be to leave it alone, or to move it into an index fund separate from the 401k. A complicating factor is that we are hoping to build a house in the next couple years (we have an empty lot in a great area so it will be an amazing return on investment) so it kind of makes sense to hold on to some liquid funds for a down payment, though there will be more stock vesting in the future, and the timeline on that is hard to pin down since the city is making it hard for us. We have paid off all debt except our mortgage (3.3%) and our car loan (0%) so there is no high-interest debt to repay (yes we could sell our Forester and get a cheaper used car it's true).

I hope this isn't a dumb question--obviously I wouldn't lower my 401k deduction to go out and buy Amazon stock, so maybe it's clear that I should sell the stock and raise the 401k, but I think because this whole "smart investing" thing is new to me I'm not confident about it. Maybe I'm missing some info about taxes and capital gains or something, you know? Thanks!

amazinglyandrew

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Re: Should I sell my Amazon stock to put in my 401k?
« Reply #1 on: July 14, 2017, 09:30:29 AM »
p.s. I'm wondering if this should have been posted in the Ask a Mustachian board--can someone move it for me if so? Thanks.

L.A.S.

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Re: Should I sell my Amazon stock to put in my 401k?
« Reply #2 on: July 14, 2017, 10:04:56 AM »
Amazon seems to have had a charmed existence so far.  Generally, people who have bought or acquired Amazon stock and held on to it have done very well.  But, if it were me, I'd sell it. Past performance is not indicative of future results.  Ask yourself this: If you had been given the cash instead, would you have bought the 10 shares? If the answer is no, then you should probably sell them and reinvest or use the cash according to your plan.  Will you kick yourself later on when if/when Amazon continues to go through the roof? Perhaps, but it doesn't mean that selling is not the most prudent decision now.

seattlecyclone

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Re: Should I sell my Amazon stock to put in my 401k?
« Reply #3 on: July 14, 2017, 10:39:27 AM »
I think putting that money in your 401(k) is a great idea. Having any significant amount of your net worth in employer stock is not such a great idea.
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Livewell

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Re: Should I sell my Amazon stock to put in my 401k?
« Reply #4 on: July 14, 2017, 10:51:09 AM »
I think putting that money in your 401(k) is a great idea. Having any significant amount of your net worth in employer stock is not such a great idea.

Agree with this

If the company is successful you work there and will benefit in multiple ways, including additional stock vehicles (espp, options, rsu).  So better to reduce leverage imo by selling stock and moving into more diversified holdings like vanguard funds.  Have your cake and eat it too.

I know many folks that were really screwed in 2000 by holding too much company stock and being too greedy.  Worse examples exercised options but did not sell looking to capitalize on taxes, instead they were burned badly when the stock price crashed.

Raeon

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Re: Should I sell my Amazon stock to put in my 401k?
« Reply #5 on: July 18, 2017, 10:11:16 PM »
I think perhaps the question in my mind is more about the tax implications... I don't know exactly how it would work or the loopholes as I'm inexperienced myself, but I'll take a stab at it.  Professionals out there PLEASE correct me as this is just conjecture on my part.

I'll base the following on the assumption they are a year old and the value from this time last year (750ish) to now (1000ish) x10 stocks is now at $10,000.

If you sell you'll owe taxes on the gains (unless you had them over a year and are currently in the 15% tax bracket...[0 capital gains tax]).  If you had them for only a year, value would have increased from 750 a share to 1000 a share (roughly). Capital gains at current value would be about $2500. (250/share x10 shares) for a tax liability of $375 (2500x15%).  If you are in the 20% tax bracket, the additional 5k you can put in your 401k saves you $1000 in taxes.  By selling you pay 375-400 in capital gains taxes vs 1000 in ordinary income tax.  Difference of $600 or so, not counting state tax or any effects this may have on ACA subsidies and the like. You would also be sitting on the other $3500 from your stock sale ($10,000- $5000 401k - $1500 taxes) which you could use to help fund your IRA contributions for the year.  If you put it in a Roth IRA you could later use it penalty free towards your 1st time home buyer purchase.  (Roth account must be 5 years old or older for this perk).

The tax code makes my head spin, but I believe the above to all be true.  You should do your own due diligence or consult an actual tax professional for real advice, as I'm an internet nobody, but these are some ideas to think about.
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