Fitting Equity Compensation into Your Financial Plan
The smartest move when granted equity benefits is to plan now, not 10 years down the road.
A growing trend in employee benefits is the inclusion of equity compensation to attract the best talent and to recognize top employees. Equity compensation is a form of non-cash compensation that represents ownership in the company, such as stock options or restricted stock. Depending on the company and the type of compensation they provide, employees will either receive company stock upon joining the team or the option to purchase it at a future date into their employment.
Equity compensation can seem complicated, and it may be tempting to let your benefits sit on autopilot, especially if you plan on staying at the company for a while and don’t have immediate plans to sell the stock. This might not be the best move, however, because equity compensation can come with unique tax rules, tax implications, and liquidity challenges. In order to ensure that you’re making the most of these benefits, it’s important to take a strategic approach to manage them and work to incorporate them into your broader wealth management plan. As you do so, keep the following questions and opportunities in mind.