[VIDEO] What You Should Know About Your Employer Stock and Options
If you receive employee stock options or restricted stock units from your employer, congratulations! These forms of equity compensation can create wealth and help you achieve your financial goals. However, this wealth is at risk due to stock price fluctuations and employment changes. To manage these risks, there are 5 things you should know about your employer stock and options that aren’t included in your stock plan education resources.
Number one is Forfeit Value. This is the current equity value lost by leaving your company to work elsewhere prior to retirement. This amount includes the time value of your vested and unvested options and the value of any restricted shares.
Number two is Leverage. This is the upside and downside values of your options and shares at hypothetical price increments. This illustrates potential versus risk.
Number three is Option Ratios. These are the time value of your options as a percentage of the full value. They help determine the order and urgency for exercising and selling your stock options.
Number four would be Concentration. This shows the values and percentages of your company stock and options holdings compared to your diversified investments. This is important because concentrated equity compensation holdings are risky.
And the fifth, Financial Goal Attainment. This is the current status your equity compensation plays in achieving a financial goal. Once you have secured your financial goal in a diversified portfolio, you can take more risk holding your stock and option.
Equity compensation is complicated, but we can provide you with these insights and information that aren’t available from your company. Give us a call today. We’ll help you make informed decisions to get the most out of your company stock and option holdings.
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The views expressed in this commentary are subject to change based on market and other conditions. This video may contain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
Malcolm Ethridge, CFP® is the Managing Partner of Capital Area Planning Group based in Washington, DC. He is also the Managing Partner of Capital Area Tax Consultants.
Malcolm’s areas of expertise include retirement planning, investment portfolio development, tax planning, insurance, equity compensation and other executive benefits.
Disclosures:
The information provided is for educational and informational purposes only, does not constitute investment advice, and should not be relied upon as such. Be sure to consult with your legal advisors before taking any action that could have tax and legal consequences.
Investments in securities and insurance products are:
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE