Beyond the Basics—How NUA Supports Legacy, RMD Reduction, and Asset Diversification

If you’ve been following our PACCAR NUA series, you already know how Net Unrealized Appreciation (NUA) can unlock powerful tax advantages. But the real beauty of NUA goes far beyond what happens the year you retire.

When used thoughtfully, NUA becomes a long-term planning tool—helping you reduce future RMDs, create more flexible income streams, and build a lasting financial legacy for your family.

In this post, we’ll explore how NUA fits into your post-retirement strategy and why it’s not just a tax move—it’s a tool for lifelong financial confidence.

The Long-Term Advantage: Reducing Future RMDs

Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s begin at age 73. These withdrawals are fully taxable, and depending on your account size, they can push you into a higher tax bracket—just when you’d prefer to keep taxes low.

Using NUA helps address this challenge in a few ways:

• When you distribute PACCAR stock under NUA, only the cost basis enters your ordinary income total.
• The appreciation stays outside of tax-deferred accounts, which means it doesn’t count toward future RMD calculations.
• As you sell the appreciated stock in your taxable account, the gains are taxed at long-term capital gains rates—which may be lower than your RMD income rate.

Why this matters:

• Flexibility in Roth conversions = smaller traditional IRA balances
• Smaller traditional IRA balance = Lower RMDs
• Lower RMDs = lower taxes in your 70s and 80s and avoidance of higher Medicare premiums and Social Security taxation

Creating Tax-Diversified Buckets of Income

One of the key principles of smart retirement planning is tax diversification—having money available in different types of accounts so you can manage your income strategically each year.

The typical tax buckets are:

• Taxable accounts (like a brokerage account)
• Tax-deferred accounts (IRAs, 401(k)s)
• Tax-free accounts (Roth IRAs)

When you use the NUA strategy:

• The PACCAR stock that moves into a brokerage account becomes part of your taxable bucket
• You maintain your traditional IRA for deferred taxable withdrawals
• You can use the low-income years after retirement to convert IRA dollars to Roth, building up your tax-free bucket

This kind of planning gives you multiple levers to pull in retirement. You can sell stock to avoid IRA withdrawals in high-tax years. Or you can combine modest IRA distributions with Roth withdrawals to stay under key tax thresholds. NUA plays a crucial role in giving you this flexibility.

Integrating NUA Into Legacy and Estate Planning

It’s not just about your lifetime. NUA can also help you pass wealth to your heirs in a tax-efficient way—but it’s important to understand the rules.

Here’s how NUA and traditional retirement assets are treated differently at death:

• Traditional IRA
  • Inherited IRAs are subject to the 10-year rule under the SECURE Act. Heirs must fully distribute the account within 10 years and pay income tax on each withdrawal. This could lead to high tax bills—especially if your heirs are still in their peak earning years.
• NUA Stock in a Taxable Account
  • The original NUA treatment remains intact.
  • However, unlike most taxable assets, NUA stock does not receive a full step-up in basis at death. Only the appreciation beyond the original NUA value (i.e., post-transfer growth) receives a step-up.
  • This means your heirs may still owe capital gains tax when they sell the stock, but it’s typically at a much lower rate than what they’d pay on IRA withdrawals.

There are strategic ways to incorporate NUA into your legacy plan:

• You can gift shares during your lifetime to reduce your estate and support charitable goals.
• You can develop a plan that looks at both yours and your heirs’ tax brackets to determine when (and who) to sell the stock.
• You can coordinate your estate plan to prioritize Roth assets and NUA stock for heirs, while using your IRA funds during your lifetime.

At Allworth, we work with you to help ensure these assets are titled correctly and aligned with your overall estate goals.

Real-World Insight: Mark and Lisa’s Integrated NUA Retirement Strategy

Mark and Lisa, ages 65 and 60, retired with:

• $920,000 in Mark’s 401(k), including $340,000 in PACCAR stock (cost basis: $115,000)
• A $3,200/month pension starting immediately
• $40,000 in joint savings

Rather than rolling the entire account into an IRA, they:

• Used NUA to transfer the PACCAR stock to a taxable brokerage account
• Rolled the remaining 401(k) investments into a traditional IRA
• Sold PACCAR shares gradually over three years to minimize capital gains taxes
• Used the proceeds (plus pension income) to cover living expenses
• Converted ~$40,000 per year from the IRA to a Roth while remaining in the 12% bracket

As a result:

• Their IRA balance declined, reducing future RMDs
• Their Roth assets grew, giving them tax-free income later in retirement
• Their NUA stock sales stayed under the IRMAA Medicare surcharge thresholds
• They preserved flexibility for legacy planning with a tax-diversified portfolio

Over three years, their strategy saved tens of thousands of dollars in taxes—and gave them far more control over their retirement cash flow.

Final Thoughts

Too often, financial decisions are made one piece at a time: when to retire, how to take a pension, when to claim Social Security. But these choices don’t exist in silos.

At Allworth, we help PACCAR employees look at the entire puzzle—and NUA is one of the most important pieces.

It’s not just a way to reduce taxes in your first year of retirement. Done right, NUA helps you:

• Reduce future RMDs and keep your tax burden manageable over time
• Create tax-diversified income streams for greater flexibility
• Weave your company stock into a thoughtful estate plan
• Avoid unnecessary income stacking and tax surprises in later years

NUA is about preserving control over your retirement income—and ensuring that the assets you worked hard to build support your lifestyle, your loved ones, and your long-term goals.

Ready to bring all the pieces together?

We’re here to help. At Allworth, we specialize in building fully integrated retirement strategies for PACCAR professionals—combining tax planning, income strategy, and legacy preparation into one seamless plan. In our final blog post for PACCAR employees, Logistics for Carrying Out PACCAR NUA, we provide an overview of the steps that are needed to implement an NUA strategy.

Let’s talk about how your PACCAR stock fits into the bigger picture.