How to Cash Out an ESOP After Quitting

by David Rodeck, Demand Media
    Your ESOP statement lists the number of vested shares you own.

    Your ESOP statement lists the number of vested shares you own.

    As a member of an Employee Stock Ownership Plan, you receive free shares of your company's stock as a retirement bonus. If you quit before retirement, your company might restrict the number of shares you can cash out. An ESOP uses a vesting schedule to measure the number of shares you've fully earned. If you quit your job before the end of the vesting schedule, you forfeit some or all of your shares. Your company could also force you to delay the sale of your vested shares for up to six years. Once you meet these requirements, you can sell off your shares and move your money into another account.

    Items you will need

    • ESOP statement

    Step 1

    Review your most recent ESOP statement for the number of vested shares in your account. This is the number of shares you'll be able to keep after quitting.

    Step 2

    Contact your human resources department and ask if you need to wait before you can sell your ESOP shares. Even if your ESOP shares are vested, your company can restrict you from selling them for up to six years after you quit. If so, wait until your ESOP shares are unrestricted.

    Step 3

    Multiply your total number of unrestricted shares by your company's current share price. This calculates what you'll get for selling off your stock.

    Step 4

    Sell off your unrestricted shares to complete your ESOP withdrawal.

    Step 5

    Transfer the money from your sale to another retirement account like an IRA. If you keep the cash in a regular bank account, you'll owe the IRS income tax plus a 10 percent early withdrawal penalty on the entire sale. You can withdraw your ESOP money penalty-free after you turn 59 1/2. However, you'll still owe income tax on the withdrawal.

    About the Author

    David Rodeck has been writing professionally since 2011. He specializes in insurance, investment management and retirement planning for various websites. He graduated with a Bachelor of Science in economics from McGill University.

    Photo Credits

    • Creatas/Creatas/Getty Images