Tech Employees and Money

How we help

As a tech employee, you have many opportunities. We help you make the most of your equity compensation and benefits.

RSUs:

Since RSUs can make a big chunk of your compensation, it’s important to understand how they work, how they get taxed, and have a plan for how to manage.

If I offered you compensation of $200K/yr, but told you that $50K of that would be paid in company stock – would you hold onto the stock or cash it in right away?

That’s essentially the decision you have to make with RSUs.

How we help:

Plan for your RSU taxes so that you’re not surprised and look for ways to reduce your tax bill
Decide when it’s best to sell your RSU shares in order to manage your risk while considering capital gains
Figure what to do with the proceeds to help reach your personal goals

Stock Options (ISOs and NSOs):

Whether you’ve been awarded Incentive Stock Options (ISOs) or Non-qualified Stock Options (NSOs), both give you the right to buy company stock at a future date and for a predetermined price. You make money if the stock price goes up between when you get the options and when you exercise them.

How we help:

Make a strategy for exercising your stock options that balances tax considerations with managing for reward/risk. With NSOs, you need to pay taxes when you exercise. With ISOs, you don’t generally pay taxes upon exercising, but you could owe AMT.
For ISOs, consider an 83(b) election. This can help you avoid AMT.
Decide when to sell your exercised options. Holding shares longer will have tax benefits, but none of that matters if the stock price plunges.

Employee Stock Purchase Plan (ESPP):

ESPP is a type of employee benefit that some companies offer to their employees, which allows them to purchase company stock at a discounted price.

If I offered you a $100 bill for only $85, would you take it?

That’s how ESPPs work. So if your company offers this benefit and you can afford to tie up some of your paycheck, then you should go for it.

How we help:

Figure out how to prioritize your savings: should you go all in on ESPP versus other savings options like a 401(k)?
Decide when it’s best to sell your ESPP shares in order to manage your risk while aiming to capture all the tax benefits of ESPPs

After-tax 401Ks/Mega Backdoor Roth:

A Mega Backdoor Roth is a retirement savings strategy that enables you to potentially add an extra $43,500 to a Roth 401(k), in addition to your usual $22,500 yearly contribution (2023).

Sounds complicated, and it’s not a slam dunk for everyone. But if you have the extra cash flow, the tax benefits from this strategy are substantial.

How we help:

Assess how much of your cash flow you can afford to put towards this strategy. Remember that retirement accounts generally can’t be accessed prior to age 59.5 without incurring a 10% penalty.
Figure out how to prioritize this strategy against other tax-advantaged vehicles and how this fits into your overall financial plan.