Author Topic: What percentage of income do you invest in your ESPP?  (Read 291 times)

MVal

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What percentage of income do you invest in your ESPP?
« on: November 14, 2017, 08:21:49 AM »
The window is open right now to invest in my company's ESPP. We've done fairly well in the last few years, so I feel comfortable putting a little money in (we're a REIT). How much of your investing income do you typically allocate to an ESPP? 5%? More? Just curious what most people's approach is.
Proverbs 13:4
The soul of the sluggard craves and gets nothing, but the soul of the diligent is made fat.

Proverbs 13:11
Wealth obtained by fraud dwindles, but the one who gathers by labor increases it.

https://tickers.TickerFactory.com/ezt/t/wGp3WGH/savings.png

seattlecyclone

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Re: What percentage of income do you invest in your ESPP?
« Reply #1 on: November 14, 2017, 08:57:10 AM »
If you get shares at a discount and are allowed to sell immediately, put as much as they'll let you into the plan, take the discount, sell the shares, reinvest the proceeds according to your investment policy statement.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

PlainsWalker

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Re: What percentage of income do you invest in your ESPP?
« Reply #2 on: November 14, 2017, 09:09:34 AM »
The cap on the plan with my employer is 15% and I contribute to the cap. The plan used to be outrageous with a 50% match for employees with a decade at the company and no holding period. Now it's a 25% match with a one year holding requirement. I sell the shares as soon as they meet the holding period requirement and reinvest according to my IPS.
Fireflies owl hoots and a candle and a curse in the darkness -Surly Knard tire sidewall

MVal

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Re: What percentage of income do you invest in your ESPP?
« Reply #3 on: November 14, 2017, 09:15:19 AM »
If you sell the shares immediately, do you then owe capital gains tax since you held the investment less than one year?
Proverbs 13:4
The soul of the sluggard craves and gets nothing, but the soul of the diligent is made fat.

Proverbs 13:11
Wealth obtained by fraud dwindles, but the one who gathers by labor increases it.

https://tickers.TickerFactory.com/ezt/t/wGp3WGH/savings.png

dcozad999

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Re: What percentage of income do you invest in your ESPP?
« Reply #4 on: November 14, 2017, 09:33:44 AM »
My ESPP offers no discount whatsoever, so I'm not sure why they even have one.

PlainsWalker

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Re: What percentage of income do you invest in your ESPP?
« Reply #5 on: November 14, 2017, 09:37:04 AM »
If you sell the shares immediately, do you then owe capital gains tax since you held the investment less than one year?

Anything sold after being held for less than a year gets taxed as a short term capital gain. Short-term capital gains are taxed at the same rate as your ordinary income.

Shares held for longer than a year are taxed as long-term capital gains.

I hold for a year to get the favorable tax treatment. And my plan requires the one year holding period anyway.
Fireflies owl hoots and a candle and a curse in the darkness -Surly Knard tire sidewall

MVal

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Re: What percentage of income do you invest in your ESPP?
« Reply #6 on: November 14, 2017, 09:52:06 AM »
Another aspect of this is we've been told we might be laid off at my particular office sometime this year, so I may not even get the shares purchased if we get let go in the next six months. But I know I'll get my money back if that happens, so I guess it's okay.
Proverbs 13:4
The soul of the sluggard craves and gets nothing, but the soul of the diligent is made fat.

Proverbs 13:11
Wealth obtained by fraud dwindles, but the one who gathers by labor increases it.

https://tickers.TickerFactory.com/ezt/t/wGp3WGH/savings.png

RetirementDreaming

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Re: What percentage of income do you invest in your ESPP?
« Reply #7 on: November 14, 2017, 10:02:29 AM »
The cap of my employers plan is 5% with a 15% discount.  We max it and hold for 2 years to reduce the tax impact. 

Spitfire

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Re: What percentage of income do you invest in your ESPP?
« Reply #8 on: November 14, 2017, 10:31:20 AM »
If you get shares at a discount and are allowed to sell immediately, put as much as they'll let you into the plan, take the discount, sell the shares, reinvest the proceeds according to your investment policy statement.

This is what I do.

seattlecyclone

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Re: What percentage of income do you invest in your ESPP?
« Reply #9 on: November 14, 2017, 11:24:46 AM »
If you sell the shares immediately, do you then owe capital gains tax since you held the investment less than one year?

ESPP taxation is a bit complicated. Some of the profit counts as regular wage income, and some counts as capital gains (either short term or long term depending on how long you hold the stock), and the 1099 you get from your brokerage will be wrong. See this thread for more details.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

Car Jack

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Re: What percentage of income do you invest in your ESPP?
« Reply #10 on: November 14, 2017, 11:31:45 AM »
Our company ESPP allows up to 10% and gives us at least 15% off from the price over the last 2 years.  Very cool buying at $38 when the market is at $91!

Ours is set up with eTrade and there's an option to "sell at vesting" which I always do.  I was with a company once where the price went from my buy price of $48 to $12 when I wasn't paying attention, just 6 months later.  I NEVER hold stock now.


JumpInTheFIRE

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Re: What percentage of income do you invest in your ESPP?
« Reply #11 on: November 14, 2017, 11:43:28 AM »
I contribute 10%, which is the maximum my company allows.  We get at least a 15% discount (there is a lookback feature, so if the stock was cheaper at the beginning of the offering period we get a 15% discount off of that, if it is cheaper now we use the current price).  We don't have a holding period so I sell the shares immediately and invest the money according to my IPS.