What we do / Stock Compensation
An employee’s compensation plan is often more complicated than simply salary plus healthcare. Many companies, startups and established companies alike, offer their employees the option to include equity compensation as part of non-cash pay. For many, it can be confusing to determine how this compensation impacts your financial planning (both short and long term) and how to consider these options when thinking about your overall compensation and planning. That’s where we come in.
Equity compensation can include stock options, restricted stock units (RSUs), performance shares, and employee stock purchase plans (ESPPs). There are many ways for equity to be included in your compensation, and each can impact your financial planning and deserves its own attention. At times, equity compensation many mean taking a lower than market salary, or it may be considered an extra benefit of your new job. Each option will have its own vesting schedule, pricing, and impact on your asset allocation and taxes. The best time to plan is when each equity option is granted to you.
Here are a few things to keep in mind when thinking about equity compensation:
- If equity is part of your compensation package, what is the vesting schedule for your options?
- How will your RSUs be taxed?
- Do you understand your market value and the tradeoff in terms of shares?
- If you are offered access to an ESPP, do you understand the pros and cons of participation? How will this impact your tax burden?
- Are there strategies around exercising and holding stock options that may be beneficial?
Deciding to work with a financial planner can be a daunting process. Here we outline the benefits of working with a trusted financial advisor and firm and how they can impact your planning.
Restricted Stock Units (RSUs) are simple on the surface but can bring surprise tax costs for the unwary. Read on to learn about your choices when it comes to RSUs and your portfolio.