Options for voluntary savings
My husband must decide how he wants to receive his company-sponsored savings plan when he retires. He contributed two-thirds and the company added one-third. He can take a lump sum, company (utility) stock, or installments over a maximum payout period of 10 years. The total amounts to about $40,000. We own our home, will get $650 a month from social security, a pension of $900 a month from the company pension plan plus another $1,000 a month from investments. We have considerable stock in my husband's company already. --
As long as your company's stock is valued as of the day the settlement is made, I suggest taking a lump-sum settlement of the stock. Right now, utility income stocks are in a good buying range. Even if you took a lump sum in cash, you might want to invest in utility stocks for income and for a capital gain when interest rates decline, as they may within two years. Generally, I would avoid concentrating investments in one company, but getting the stock without a broker's fee and signing up for automatic dividend reinvestment will save considerable cash.
Since the settlement will be in 1981, a different calendar year than your husband's retirement, taxes will be less. You will pay no taxes on two-thirds of contributed cash because that represents a return of capital.You will be liable for taxes at ordinary rates on the company's contribution and earnings accumulated from the full fund. An installment payout might save taxes, but you could miss current low prices. But, he prepared to sell your stock when the share prices rise in response to lower long-term int erest rates.