Author Topic: Employee Stock Purchase Plan changed. Should I keep it?  (Read 269 times)

Scott_FI

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Employee Stock Purchase Plan changed. Should I keep it?
« on: September 11, 2019, 12:15:06 PM »
Hi fellows! Looking for some wisdom here.

My employer used to have a 30% discount stock purchase plan, but they changed it to 15%. The conditions are:
-I can buy a max. of $10K per quarter; and,
-I can liquidate on or after the quarter of the year after I purchased (If I buy on Q1 2019, I can sell on or after Q1 2020).

The huge drop in discount was a bummer for sure, but I'm debating if it's still a good mustachian move.

I'm nowhere close to FI. 39 year-old with a net worth of about $130K. My annual gross income is $66K, but I live rent-free.

Any thoughts? Should I purchase as much stock as I can? Or should I invest in index funds? Maybe both?

SweatingInAZ

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Re: Employee Stock Purchase Plan changed. Should I keep it?
« Reply #1 on: September 11, 2019, 12:47:25 PM »
I recommend doublechecking if you are allowed to sell immediately. There is nothing wrong with a disqualifying disposition!


Typical ESPP gets preferential tax treatment if you hold it for a year, but you are still allowed to sell immediately. I don't know the specifics of how much better it is, because I have always sold immediately. Hopefully an expert chimes in!

If you sell immediately, the discount is taxed at your income rate. (disqualifying disposition)
If you sell after a year, some portion of your gains are taxed at the capital gains rate. (qualifying disposition)

If you truly are required to hold it for a year... that is a tough call. You would have to determine how company stock fits into your asset allocation, and if you want to chance the volatility of a single-company stock.

My thoughts on company stock are emotional. I hold enough that if it doubles I can be happy with the rest of my office, but if it gets cut in half I will not be too sad. My number used to be ~$5k. This number has grown with my stash to ~$10k. The rest of my stash is in VTSAX and ITOT.