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Financial Planning: Strategies

NEW! What are the top 10 questions that I should answer before making a financial plan with my stock compensation?

To make the most of stock compensation, you need a financial plan that considers your goals for the income, identifies decisions you must make with your grants and acquired shares, and factors in the related tax consequences. Start by knowing the answers to the following 10 questions. Also, be sure you carefully review all of your stock-plan-related documents. If you need help, seek the counsel of a qualified financial advisor.


1. What is the vesting period of stock options, restricted stock/RSUs, or SARs? What goals must be met for the vesting of performance shares? How long are the offering and purchase periods of your ESPP?

2. With stock options and SARs, how long do you have before the grant expires?

3. What are other specific features of your company's stock and its stock plan? Does your company impose stock ownership or retention requirements? Do the shares pay dividends? Will your company allow you to engage in hedging with its stock?

4. How do you see the future of your company's stock and your job? How likely are you to receive additional equity awards?

5. What is your tax bracket? Will an income spike from option/SAR exercise or restricted stock/RSU vesting push you into a higher tax bracket? Do you have capital gains or losses already from this year or loss carry-forwards from prior years?


6. What are your goals for the income that you will receive from your stock compensation? Do you intend to use the money for near-term goals (e.g. college tuition) or long-term goals (e.g. retirement)?

7. How much of your net worth is tied up in your company's stock? Should you sell shares to diversify, perhaps with a Rule 10b5-1 trading plan, or explore other strategies to alleviate a concentrated stock position?

8. Are you charitably inclined? Do you want to make donations or gifts of company shares or set up special charitable trusts?

9. Do you have a substantial estate and net worth, making it prudent to undertake estate planning?

10. Toward the end of the year, are you prepared to make year-end-planning decisions about your outstanding stock grants, holdings of company shares, and other investments?

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