Retirement savings can be significantly boosted by equity compensation. When factoring stock options, restricted stock/RSUs, or ESPPs into your retirement planning, you should know the answers to the following questions that apply to you.
1. After I retire, what will happen to the vesting of my stock options or restricted stock/RSUs? Is early retirement treated any differently?
2. How can stock compensation help me to plan for a financially secure retirement? What are some retirement-planning basics?
3. Can stock compensation affect contributions to my 401(k) plan? Can ESPP participation affect contributions?
4. Can stock options or restricted stock/RSUs help me establish a Roth IRA or make a Roth IRA conversion? What are some planning ideas around this?
5. If I am eligible for vesting acceleration at retirement but have not actually retired, will my restricted stock or RSUs be taxed?
6. When I retire, will I get an extended period to exercise my vested options? If my post-retirement exercise period is longer than the remaining term of my stock options, which term applies after I retire?
7. What are some planning ideas with stock compensation for the year in which I retire?
8. What are some planning ideas with stock compensation that I may need to consider during my retirement, after I have left my company?
9. Do stock option exercises or restricted stock/RSU vesting events affect the annual earnings limit of Social Security and reduce my benefits? Will I still have to pay Social Security tax on that income?
10. If I move from one state to another after retirement, what happens with the taxes on my equity awards if I live in different states during the period between grant and option/SAR exercise or between grant and restricted stock/RSU vesting?
For additional reading about the role of stock compensation in retirement planning, see this website's sections on retirement and retirement plans.