When to convert employee shares in an RRSP into cash, even if there is a penalty?
The cost to you for selling is 3/8% of a years salary, this is what you won't get if you sell. Tough to calculate the what-if scenarios beyond this, since I can't quantify the risk of a price drop. Once the amount in he stock is say,10%, of a years salary, if you know a drop is coming, a sale is probably worth it, for a steep drop.  My stronger focus would be on how much of your wealth is concentrated in that one stock, Enron, and all.
"I would say yes: it's worth building additional retirement savings on top of a defined benefit pension plan (plans that pay set annual income).  Here are a couple of reasons: Don't put all your eggs in one basket.  While OTPP is probably in good shape, things can and do happen to pension plans.  While there is a provincial system in place to guarantee some of your pension income ($1000/mo) if your plan goes bust, your benefits are not 100% guaranteed. Defined benefit pension plans are designed to provide recurring annual income, like your paycheck when you are employed.  You can't ""take more out"" from your defined benefit pension plan when an emergency comes up.  Whereas, your RRSP (and eventually RRIF, in retirement) are accounts from which you can take out extra in any given year, if necessary. That being said, Canada Revenue Agency (CRA) won't let you save as much in your RRSP as other people who don't have pension plans: Normally, individuals in Canada are entitled to save 18% of their earned income, up to a limit ($21000 in 2009) in an RRSP each year.  However, to level the playing field, individuals who are in a pension plan get a ""Pension Adjustment"" (PA) number on their T4 which reduces their available RRSP contribution room.  Otherwise, they'd be able to tax-shelter more income for retirement than others. So, I would suggest if you have the RRSP room, consider using it.  I'd also suggest you look at a Tax Free Savings Account (TFSA), especially if you don't have much RRSP room due to the pension adjustment.  If you're not sure whether to use an RRSP or a TFSA, consider both." "I was told if I moved my 401k into a Roth IRA that school purposes is one reasons you can withdraw money without having to pay a tax. Incorrect.  You will need to pay tax on the amount converted, since a 401(k) is pre-tax and a Roth IRA is after-tax.  It will be added to your regular income, so you will pay tax at your marginal tax rate. is there any hidden tax or fee at all for withdrawing money from a Roth IRA for educational purposes?  You still will need to pay the tax on the amount converted, but you'll avoid the 10% penalty for early withdrawal. I know that tuition, books and fees are covered for educational purposes. Can I take out of my Roth IRA for living expenses while I'm attending school? Rent, gas, food, etc... Room and board, yes, so long as you are half-time, but not gas/food  Possibly only room and board for staying on-campus, but I'm not certain, although I doubt you could call your normal house payment ""education expense"" with my 401k being smaller, would it just be better to go ahead and cash the whole thing and just pay the tax and use it for whatever I need it for? What is the tax if I just decide to cash the whole thing in?  You pay your marginal tax rate PLUS a 10% penalty for early withdrawal.  So no, this is probably not a wise move financially unless you're on the verge of bankruptcy or foreclosure (where distress costs are much higher then the 10% penalty) I can't answer the other questions regarding grants; I would talk to the financial aid department at your school. Bottom line, transferring your 401(k) is very likely a bad idea unless you can afford to pay the tax in cash (meaning without borrowing).  My advice would be to leave your 401(k) alone (it's meant for retirement not for school or living expenses) Ideally, you should pay for as much as you can out of cash flow, and don't take out more student loans. That may mean taking fewer classes, getting another part time job, finding a different (cheaper) school, applying for more grants and scholarships, etc.  I would not in ANY circumstance cash out your 401(k) to pay for school.  You'll be much worse off in the long run, and there are much cheaper ways to get money." This question is very open ended. But I'll try to answer parts of it. An employer can offer shares as part of a compensation package. Instead of paying cash the employer can use the money to buy up shares and give them to the employees. This is done to keep employees for longer periods of time and the employer may also want to create more insider ownership for a number of reasons. Another possibility is issuance of secondary offerings that are partially given to employees. Secondary offerings often lower the price of the shares in the market and create an incentive for employees to stay until the stock price rises. All of these conditions can be stipulated, look up golden handcuffs. Usually stock gifts are only given to a few high level employees and as part of a bonus package. It is very unusual to see a mature company regularly give away large amounts of stock, as this is a frowned upon practice. Start ups often pay their employees with stock up until the company is acquired or goes public. No. Income inside an RRSP is sheltered from income tax until you withdraw it. That is, indeed, the major benefit of RRSPs. Note that you will eventually declare this as income. Consider the following case: - in 2015, you make $1000 in income. - in 2015, you contribute $100 to your RRSPs. You store this in an account that pays interest, rather than investing it in stocks, bonds, or mutual funds. - between 2015 and 2025, your money makes an additional $100 in interest. - in 2025, you are retired and pull out the entire amount in your RRSP, i.e. $200. Now, between 2015 and 2025, you did not declare the income from interest. You'd have had to do this if the money was in a regular bank account (instead of an RRSP or a TFSA). Indeed, your bank would have issued tax forms in that case. But you don't report income sheltered in an RRSP. This is good, as it increases the power of compounding. In 2015, you pay tax on only $900 rather than the full $1000. In 2025, you pull out the entire $200. You report all $200 as income (or, actually, as a withdrawal from your RRSP, but it's the same thing). You pay tax on the initial $100 investment (which you did not do in 2015), and you also pay tax on the $100 that your investment has made (and which you are now pulling out). The hope is that your income is now lower, as you are retired. So you'll end up paying less income tax. Plus, your investment has had many years of opportunity to compound, tax-free. TL;DNR: You don't pay tax on, or report gains in, an RRSP account. The bank or investment house won't even issue tax forms, not until you withdraw the money. If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future. I assume US as mhoran_psprep edited, although I'm not sure IRS necessarily means US. (It definitely used to also include Britain's Inland Revenue, but they changed.)  (US) Stockbrokers do not normally withhold on either dividends/interest/distributions or realized capital gains, especially since gains might be reduced or eliminated by later losses. (They can be required to apply backup withholding to dividends and interest; don't ask how I know :-) You are normally required to pay most of your tax during the year, defined as within 10% or $1000 whichever is more, by withholding and/or estimated payments. Thus if the tax on your income including your recent gain will exceed your withholding by 10% and $1000, you should either adjust your withholding or make an estimated payment or some combination, although even if you have a job the last week of December is too late for you to adjust withholding significantly, or even to make a timely estimated payment if 'earlier in the year' means in an earlier quarter as defined for tax (Jan-Mar, Apr-May, June-Aug, Sept-Dec). See https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes and for details its link to Publication 505. But a 'safe harbor' may apply since you say this is your first time to have capital gains. If you did not owe any income tax for last year (and were a citizen or resident), or (except very high earners) if you did owe tax and your withholding plus estimated payments this year is enough to pay last year's tax, you are exempt from the Form 2210 penalty and you have until the filing deadline (normally April 15 but this year April 18 due to weekend and holiday) to pay. The latter is likely if your job and therefore payroll income and withholding this year was the same or nearly the same as last year and there was no other big change other than the new capital gain. Also note that gains on investments held more than one year are classified as long-term and taxed at lower rates, which reduces the tax you will owe (all else equal) and thus the payments you need to make. But your wording 'bought and sold ... earlier this year' suggests your holding was not long-term, and short-term gains are taxed as 'ordinary' income. Added: if the state you live in has a state income tax similar considerations apply but to smaller amounts. TTBOMK all states tax capital gains (and other investment income, other than interest on exempt bonds), and don't necessarily give the lower rates for long-term gains. And all states I have lived in have 'must have withholding or estimated payments' rules generally similar to the Federal ones, though not identical. If you withdraw money from an RRSP, you are taxed on that money as ordinary income and will have to pay withholding taxes, and potentially more income tax when you file. Additionally, you lose that contribution amount. If you subsequently deposit the same gross amount into another RRSP at a different bank, that will lower your taxable income for the year and you'll subsequently be able to recover the withholding taxes, but you will have permanently lost the contribution room. For example, you have $100,000 in RRSP contribution room. You buy $1,000 in RRSPs from Bank A. This leaves you with $99,000 in RRSP contribution room. Next year, you withdraw that $1,000 and deposit it in Bank B in an RRSP account. Now, you have $98,000 in RRSP contribution room. Chances are good that Bank A withheld 15% for taxes, but when you file your tax return, you'll get that back. Your withdrawal and subsequent purchase of RRSPs in the tax year cancel out. Far better is to transfer the RRSP from Bank A to Bank B. That has no tax implications and would not affect your RRSP contribution limit. Not all banks are willing to do this, though. I've never heard of an employer offering this kind of arrangement before, so my  answer assumes there is no special tax treatment that I'm not aware of. Utilizing the clause is probably equivalent to exercising some of your options, selling the shares back to your employer at FMV, and then exercising more options with the proceeds. In this case if you exercise 7500 shares and sell them back at FMV, your proceeds would be 7500 x $5 = $37,500, with which you could exercise the remaining 12,500 options. The tax implications would be (1) short-term capital gains of 7500 x ($5 - $3) = $15,000 and (2) AMT income of 12,500 x ($5 - $3) = $25,000, assuming you don't sell the shares within the calendar year.