Author Topic: Selling employee stock in order to pay debt or reinvest  (Read 848 times)

ejh

  • 5 O'Clock Shadow
  • *
  • Posts: 69
Selling employee stock in order to pay debt or reinvest
« on: February 12, 2017, 03:52:30 AM »
Hi All,

My employer offers an employee stock ownership plan (ESOP).
I work at a very successful tech company (currently one of the top companies in the world). The stock is doing very well.
I am granted new stock once a year based on performance.
2 years from the grant date, I can sell half the stock, while the remaining half can gradually be sold within another 2 years*.

Selling the stock incurs tax.
Avoiding all the details, part of the sale amount is considered income (about 35-45% tax) and part capital gains (25% tax). Tax rates are for Israel.

My question is, should sell the stock as soon as I can in order to reinvest in a passive fund or even in order to pay mortgage debt?
On one hand, the stock is very valuable and the tax is deferred until sale.
On the other hand, I'd like to pay off my mortgage as fast as I can and it may not be smart to have all my eggs in one basket (all my income coming from the same source).

Am I even taking everything I should into consideration?

* Every month, a relative part of the grant is eligible for sale, until all is eligible in 4 years.

mandy_2002

  • Bristles
  • ***
  • Posts: 292
Re: Selling employee stock in order to pay debt or reinvest
« Reply #1 on: February 12, 2017, 04:12:22 AM »
When I was employed at a company with an ESPP (purchase instead of ownership; I'm assuming yours is given as a bonus in your compensation package while ours was purchased at a discount), I sold most of the stock I owned as soon as I got it for the "eggs in one basket" reason. I still think it was a good choice, but knowing the market results I would have only changed my timing :).

In the US, when you hold an investment longer, the earnings are taxed at a lower rate (long term gains vs. short term gains). Do you know if that's the case where you are? You will pay the other taxes at some point no matter what, correct? I personally would sell when I could with the lowest tax implications (in the US, that would be a low earning year witha small bonus, without other gains like a home sale, or no other large taxable stock income). Also be cognizant of the fees to sell. My company's broker of choice charged $75 to sell plus a $22 handling fee (I was able to move the stock free from them to my more reasonable broker, $7 to sell). If that's the case for you as well, minimize the number of times you sell, or move it if you can.