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Financial Planning › Advanced Strategies

Want to learn more about financial planning for equity compensation? Visit our podcasts page for interviews with some of our expert contributing authors.
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Articles

A Least-Regret Analysis For Equity Compensation: Maximizing Value While Minimizing Risk This is premium content

Podcast included! For some employees, the value of their equity compensation plans represents their largest investment. With so much at stake, making the right decisions is critical. Intelligent planning can maximize value while minimizing risk.

Restricted Stock & Stock Options: Financial Planning After Your Tax Return Is Filed (Part 1) This is premium content

The time right after you have completed your tax return is ideal for big-picture financial planning. You can more accurately project your income and likely tax situation for this year and the next to develop your strategy. This article series discusses factors to consider in your income and tax projection, along with planning ideas.

When To Wait, Hold, Or Sell: A Wealth Manager Reveals His Wisdom On Stock Option Exercise Strategy (Part 1) This is premium content

Podcast included! When your stock options vest, you need a strategy to make the most of their wealth-building value. However, no single strategy fits everyone. This article discusses various approaches to planning your option exercises.
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UPDATES! American Taxpayer Relief Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies This is premium content

Podcast included! The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you must consider in deciding when to exercise stock options, when to sell company shares, and how to plan around income from restricted stock/RSU vesting. Although tax reform is on the horizon, these tax laws will remain in place until new laws are adopted.

UPDATES! Tax Planning For Options, Restricted Stock, And ESPPs After The 2013 Tax-Law Changes: High-Income Taxpayers Impacted Most (Part 1) This is premium content

Notable shifts in tax rates occurred in 2013 for people with high incomes. Part 1 surveys these important tax changes and considers their impact on planning. Unless or until tax reforms become effective, the rates and income thresholds covered in this article still apply.

Tax Planning For Options, Restricted Stock, And ESPPs After The 2013 Tax-Law Changes: High-Income Taxpayers Impacted Most (Part 2) This is premium content

Part 2 of this article series looks at planning strategies involving capital gains rates, the AMT, and ISOs, and considers general ideas related to income-shifting.

How To Develop A Stock Option Exercise Strategy To Reach Your Financial Goals (Part 1) This is premium content

Podcast included! One of the most vexing investment decisions you will ever make involves when to exercise your stock options and when to sell the shares. This article series will give you the tools for determining that time.

Restricted Stock And Stock Options: Financial Planning After Your Tax Return Is Filed (Part 2) This is premium content

Your tax return can help you develop your stock option strategy. With your return in hand, make projections for your income, taxes, AMT risk, and use of capital-loss carry-forwards. Next, review the details of your stock plan documents to develop an exercise program.

Reframing Your Stock Option Exercise Strategy In Volatile Markets This is premium content

Your option grant terms and the behavior of your company's stock price are only part of your financial-planning story in volatile markets. Equally important is the price movement of what you will buy with the proceeds from an option exercise and stock sale. As this article explains, relative changes in price, not absolute changes, are what matter.

Strategic Planning With Roth IRAs And Stock Compensation (Part 2): A Case Study This is premium content

Weighing a Roth IRA conversion is complicated enough, but the complexity can explode when you add in stock option exercises or the vesting of restricted stock. Let's take a look at how this can work in real life through a case study.

Better Late Than Never: Stock Option Strategy For The Market Upturn This is premium content

When stock markets rise, question the urge to exercise your options for quick profits as soon as possible. Exercising too early can be a big mistake.

Equity Compensation Strategies For Down And Rising Markets This is premium content

Even when stock prices are volatile, there are still opportunities to achieve gains from stock compensation. This article presents a range of ideas to considerr: buying stock now to swap later, exercising and holding ISOs, or making a Section 83(b) election for restricted stock.

How Tax Rate Changes Impact Your Stock Grant Strategies (Part 2): Restricted Stock This is premium content

With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy for equity compensation and company stock holdings to determine whether action is required. Part 2 looks at restricted stock and restricted stock units.

How Tax Rate Changes Impact Your Stock Grant Strategies (Part 1): Nonqualified Stock Options This is premium content

With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy for equity compensation and company stock holdings to determine whether action is required. Part 1 looks at nonqualified stock options.

How Tax Rate Changes Impact Your Stock Grant Strategies (Part 3): Incentive Stock Options This is premium content

With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy. Should you take action with stock options now? Part 3 looks at incentive stock options.

When To Wait, Hold, Or Sell: A Wealth Manager Reveals His Wisdom On Stock Option Exercise Strategy (Part 2) This is premium content

Podcast included! Part 2 of this series considers reasons and strategies for diversifying away from a concentrated position in your company's stock.

How To Develop A Stock Option Exercise Strategy To Reach Your Financial Goals (Part 2): Understand Risk Versus Return This is premium content

Podcast included! Deciding which stock options to exercise and when can pose a dilemma. Part 2 of this series focuses on reducing risk when you exercise. Quantifying a risk/return number can determine the point when holding your options is no longer desirable.

Options For Your Options: Generating Income From Your Vested Employee Stock Options Without Exercising This is premium content

If the majority of your net worth lies in unexercised stock options or company stock, it may make sense to sell a portion to reduce the concentration risk while holding on to a portion to participate in future appreciation. However, if most financial goals can be reached without these proceeds and your position is not heavily concentrated, other strategies are worth exploring. One that is gaining popularity is writing call options on vested ESOs to generate some income.

Stock Option Valuation And Your Exercise Strategy This is premium content

When should you exercise nonqualified stock options? You need a decision-making process that removes guesswork and emotions. Otherwise, you're likely to exercise too soon or too late.

Presentation! Restricted Stock, Performance Shares, And Trends In Equity Compensation: What Financial Advisors Need To Know This is premium content

myStockOptions.com
This PowerPoint presentation provides financial and wealth advisors with an overview of trends in equity compensation grants that can affect their clients and their practice.

FAQs

My company is now granting restricted stock, and the current share price is much lower than I think it will be in a few years. Any tax-planning ideas? This is premium content

For restricted stock, you can make what the tax code calls a Section 83(b) election to be taxed immediately at grant instead of later at vesting, when your stock price, and thus your tax rate, may be much higher. However, before you make your decision, realize that...

What is the impact of past tax increases on my restricted stock grants? This is premium content

Increases in tax rates indirectly affect the value of grants. Most importantly...

What are price and time targets for stock option exercises and sales of company stock? This is premium content

Some type of periodic exercise-and-sell strategy can help even out stock-price volatility, spread out your tax bill, and eliminate...
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Can you calculate whether it is better to be granted stock options or restricted stock? This is premium content

The outcome depends on how well your company's stock price does in the years after the grant date and on the ratio of stock options to restricted shares, among other factors. To calculate whether the appreciation of stock option gains equals or exceeds restricted stock gains, you need to...

With stock options, what do the terms "intrinsic value" and "time value" mean? How do these concepts apply to financial planning? This is premium content

The value of an option consists of two elements: time premium and intrinsic value. Intrinsic value is the difference...

Should I make a Section 83(b) election for my restricted stock grant? This is premium content

Before you even analyze the decision, you should learn the basic facts and risks of the Section 83(b) election. Once you understand it, the election can make sense in certain circumstances, including...

Are there any stock option or restricted stock strategies for using capital-loss carry-forwards? This is premium content

Tax considerations alone should not drive the choice of what stock you sell. For example, if you are holding appreciated company stock from a nonqualified stock option (NQSO) exercise or restricted stock vesting, you will be taxed on...

What is a concentrated stock position, and what can I do to protect myself and get cash for other purposes? This is premium content

A concentrated stock position occurs when a significant chunk of your net worth is tied up in a single stock. Strategies for hedging, diversification, and liquidity include...

Is there a way to defer taxation when I sell company stock? This is premium content

Deferral means delaying the standard tax treatment that would normally occur when you receive income or undertake a specific transaction, such as...

Are my stock grants affected by the rules of deferred compensation under IRC Section 409A? This is premium content

A number of tax law provisions and interpretations that may affect your stock grants occur in...

Are there any strategies for paying estimated taxes on income from stock options and restricted stock? This is premium content

Estimated-tax periods end on the last days of March, May, August, and December, with payments due by the 15th (or the next business day) of the following month. If you are paying estimated taxes, one strategy is that just after the start of an estimated-tax period you can...

What ISO strategies can help minimize AMT liability? This is premium content

Experts suggest several strategies for you to consider when you exercise ISOs and are concerned about triggering the alternative minimum tax. For example, near year-end or at the beginning of the year, you can...

I know that my ISO exercises will trigger the AMT for me this year or next. Are there planning strategies related to other tax payments and income? This is premium content

When you are intermittently subject to the AMT, tax advisors suggest different planning ideas on shifting income and deductions. You have much less flexibility in your planning when you project paying AMT for the next several tax years. A basic plan is to...

What is a Rule 10b5-1 trading plan?

SEC Rule 10b5-1 provides a defense against charges of insider trading if you later trade stock while you know confidential, important information about your company. A Rule 10b5-1 trading plan is a program for the preset purchase and/or sale of your stock that meets the requirements of this SEC rule, including the need to...t

UPDATES! Next year I may be in a higher tax bracket. I am thinking about exercising my nonqualified stock options before then to accelerate income into this year. What issues do I need to think about? This is premium content

Before you rush into exercising, you may want to do some calculations with potential future stock prices and tax rates. When you exercise earlier than necessary...
Financial Planning

Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.