Tax Planning for Your P&G PST and Savings Plan Distribution

The year you take your distribution from the PST and Savings Plan shapes your taxes for the rest of retirement. That is true whether you use NUA, the Frank Duke rollback, or a straight rollover to an IRA. The decisions you make around the distribution determine how you are taxed as you fund your lifestyle for the next twenty or thirty years.

Putting a 1099-R on a tax return is not the hard part. The hard part is the thinking that comes before it: how many shares to take with NUA treatment, how to handle the cost basis, when to distribute, which accounts to draw from first, when to sell shares, and when to convert to Roth. Each of those choices affects the others. You want the people who help you make those decisions and the people who file your return working together on your behalf.

This article walks through the decisions that matter most in the distribution year and after, and how we coordinate them with our partner CPA. If you want the mechanics of Net Unrealized Appreciation first, start there.

The Decisions That Shape Your Taxes

Consider a hypothetical married couple, both 61, retiring from P&G with $3 million across the PST and Savings Plan. The PST holds $2.1 million, made up of 6,000 preferred shares and $1.23 million in other investments. The Savings Plan holds $900,000. Their home and a taxable brokerage account bring the household to roughly $5 million. At a $6.82 cost basis, the preferred shares carry $40,920 of basis. With P&G at $145, they are worth $870,000.

How many shares receive NUA treatment. Taking the preferred shares with NUA treatment puts $870,000 into a taxable account. Every dollar of that becomes a lifestyle source taxed at long-term capital gains rates when sold, rather than at ordinary income rates the way IRA withdrawals are. The tradeoff is concentration. More shares with NUA treatment means more P&G stock held outside the IRA, where selling it creates a tax bill. Our NUA decision framework covers how we approach that number, including whether any common shares belong in the election.

How to handle the cost basis. The $40,920 is ordinary income in the distribution year unless something offsets it. The Frank Duke rollback returns value at least equal to the basis to an IRA within 60 days and brings that tax to zero. A gift of appreciated shares to a donor-advised fund creates a deduction in the same year, as in our NUA and donor-advised fund case study. Some households simply pay the tax. The right answer depends on what else is on the return that year.

When to distribute. Some retirees distribute soon after separation. Others wait until January so the distribution lands in a new tax year. The right choice depends on how much income is already on the separation-year return from salary and any separation pay, when cash is needed for living expenses, and what else is happening in each year. If the Frank Duke rollback is part of the plan, it removes the tax consideration from the timing decision, because no ordinary income is added in the distribution year. Without a rollback, the basis is taxable in the year of distribution, and choosing that year becomes part of the tax planning.

What the rest of the balance becomes. In this example, $2.13 million rolls to an IRA. That money is taxed as ordinary income when withdrawn and will eventually be subject to required minimum distributions starting at 73, or 75 for those born in 1960 or later. The years between retirement and RMDs are often the best window for Roth conversions. How large those conversions should be depends on how much the household spends each year, where that spending comes from, and how many NUA shares are sold in the same years.

For anyone retiring before 59½, the 10% early withdrawal penalty has to be part of the plan. It can apply to ordinary income taken from the plans before that age, including a cost basis that is not rolled back, though never to the NUA itself. In many cases it can be managed around. The Rule of 55 allows penalty-free withdrawals from the plan for those who separate in or after the year they turn 55, and spending can often be funded from sources the penalty does not reach, such as NUA shares already in a taxable account, until 59½ arrives. Our early withdrawal penalty article covers when it applies.

Why the Advisor and CPA Need to Plan Together

Each of these decisions touches the others. Selling NUA shares to fund living expenses adds capital gains to the year. A Roth conversion adds ordinary income. Both count toward the income that sets Medicare's IRMAA surcharge two years later, and both can reduce the additional $6,000 deduction available to taxpayers 65 and older from 2025 through 2028. Getting one of these right in isolation can mean getting another one wrong.

That is why the planning works best as a team. We are closely involved in the tax planning ourselves: modeling the distribution, projecting income across the retirement years, and testing how share sales, conversions, and spending interact. The CPA brings a preparer's view of the full return: other income, deductions, state tax, carryforwards, estimated payments, and how a given strategy will hold up when it is filed. Each side brings a different perspective and catches things the other might miss.

When both are at the table, the questions get answered before the money moves. How much should be sold from the NUA account this year? Is this a year to convert to Roth, and how much? Does a donor-advised fund gift make sense now or next year? Those decisions determine how much tax a household pays over a retirement, and they are made better by a team working from the same numbers on the client's behalf.

The Execution Is the Straightforward Part

Once everyone is working from the same plan, the filing is routine. It still has to be done carefully, and the Frank Duke rollback is the piece that needs the most attention.

The 1099-R reports the NUA distribution cleanly. Box 1 shows the full market value of the shares, Box 2a shows the cost basis, and Box 6 shows the NUA. The rollback does not appear there. Like any rollover completed within 60 days, it has to be reported on the return by the preparer, who needs the rollback date, the number of shares moved, and their value on that date. The monthly statements showing the shares leaving the taxable account and arriving in the IRA support that reporting. The IRA custodian also reports the rollover on Form 5498, but that form typically arrives in May, after most returns have been filed. A preparer working from the 1099-R alone will tax the full basis.

A few other items follow from the plan. The shares arrive with no tax withheld, because withholding on a plan distribution is limited to cash and non-stock property, so any tax due needs to be covered by estimated payments. The custodian needs the correct basis on file for the shares that stay in the taxable account: essentially zero after a Frank Duke rollback, or the basis taxed as ordinary income, $6.82 per preferred share, if no rollback was done. The other plan assets go by direct rollover so they never touch taxable income.

None of that is difficult for a preparer who knows the plan. It goes wrong when the preparer first learns about the distribution from a stack of 1099-Rs in March.

How Vaultis Works with Our Partner CPA

We work alongside a partner CPA through an annual tax cycle: a Mid-Year Strategy Meeting, a Year-End Action Meeting, and preparation and filing. We plan together in both meetings, and the CPA prepares and files the return. In a distribution year, the share count, the basis decision, the rollover, and the return are all handled by the same team.

When clients work with our partner CPA, the tax advisory and preparation work is included in the Vaultis fee. It sits within our Dynamic Advisory Fee, which caps what a household pays Vaultis.

Clients who prefer to keep their current CPA are welcome to, and we are glad to coordinate with them. Not every CPA has the time or the interest to work as closely as our partner does, with planning meetings during the year and decisions made before the money moves, so how deep that coordination goes depends on the CPA.

Managing the Years After the Distribution

The distribution year sets up the plan. The years that follow are where most of the tax is saved or lost, one decision at a time.

After a rollback, the NUA shares in the taxable account carry essentially no basis, so nearly every dollar sold is long-term capital gain. Spreading sales across years can keep each year in a lower capital gains bracket and under the IRMAA thresholds, while the concentration in P&G stock comes down over time. Our article on concentration risk after NUA covers how we approach unwinding the position.

Roth conversions are sized each year around the household's spending needs and the NUA sales planned for that year, since all of them draw on the same income picture. Charitable giving has two main tools: gifts of appreciated NUA shares to a donor-advised fund, which avoid the capital gain and tend to fit higher-income years, and qualified charitable distributions from an IRA starting at 70½, which count toward RMDs once they begin without adding to income. The senior deduction phases out once modified adjusted gross income exceeds $75,000 for single filers and $150,000 for joint filers, so it belongs in the same calculation. Our OBBBA summary covers the rest of the law.

The order in which the household draws from the taxable account, the IRA, and any Roth balance usually changes from year to year. Our distribution strategies article covers that sequencing. We revisit it with the CPA at every Mid-Year Strategy Meeting and Year-End Action Meeting.

What This Means for P&G Retirees

The distribution is a heavy, one-time planning effort. The share count, the basis, the timing, and the rollovers are decided once, and those decisions are hard to undo. That is why the coordination on the front end matters so much.

What follows is an ongoing process. Investments are managed, the financial plan is updated, and the tax plan is revisited every year as shares are sold, conversions are made, RMDs approach, and life changes. The same coordination that makes the distribution work keeps the rest of retirement on track.

Whoever you work with, the people helping you plan and the person preparing your return should be working from the same plan before the money leaves the PST, and every year after. For our clients, that coordination is built in. We are based in Cincinnati, where P&G is headquartered, and we work with P&G retirees here and across the country.

Frequently Asked Questions

Does this matter if I am rolling everything to an IRA and not using NUA?

Yes. A straight rollover avoids tax in the distribution year, but every dollar withdrawn later is ordinary income. When you convert to Roth, how much you withdraw each year, and how your RMDs are managed all benefit from the same coordination between your advisor and CPA.

What decisions should I make before my P&G distribution?

The main ones are how many shares receive NUA treatment, how to handle the cost basis, when to distribute, and how the rest of the balance will fund retirement. Each affects your taxes for years afterward.

Is tax withheld when I take my P&G shares in kind from the PST?

No. Withholding is limited to the cash and non-stock property in a distribution, so shares distributed in kind have nothing withheld. Any tax due on the cost basis needs to be covered by estimated payments.

How is the Frank Duke rollback reported on my tax return?

The rollback does not appear on your 1099-R. Like any 60-day rollover, your preparer reports it on the return using the rollback date, the number of shares, and their value, supported by the monthly statements showing the shares moving into your IRA.

Will my distribution or later share sales raise my Medicare premiums?

They can. IRMAA is based on income from two years earlier, so 2026 income sets 2028 premiums. For 2026, the surcharge begins above $218,000 for joint filers and $109,000 for single filers, and both NUA share sales and Roth conversions count toward that income.

Can I keep my current CPA?

Yes. We are glad to coordinate with your current CPA. When you work with our partner CPA, the tax advisory and preparation work is included in the Vaultis fee.

Disclaimer: The information in this article is for educational purposes only and is not intended as personalized financial, investment, tax, or legal advice. The household described is hypothetical and does not represent an actual Vaultis Private Wealth client, but reflects common planning considerations for Procter & Gamble employees. The strategies discussed may not be suitable for everyone, as individual financial goals, risk tolerance, and circumstances differ. Consult a qualified financial advisor, tax professional, or legal advisor before acting to evaluate your specific situation. Past performance does not guarantee future results, and all investments involve risks, including the potential loss of principal. Tax laws and regulations may change, potentially affecting the strategies described; this content reflects laws as of October 9, 2026. This content reflects PST and Savings Plan details as understood by Vaultis Private Wealth and may change; refer to official P&G plan documents for the most accurate, up-to-date information. Tax planning and preparation services are provided by an independent CPA firm, are elective, and are described in the Vaultis Private Wealth Form ADV Part 2A. Vaultis Private Wealth does not guarantee the accuracy, completeness, or outcome of this information and is not affiliated with Procter & Gamble, which does not endorse this content.