Today's episode is one of several that I will be doing that focuses on retirement with equity compensation. In my opinion, there is too much to cover in one episode, especially considering my episodes are short. You know, GenX, lack of attention span and all that. Honestly, it's just that I want to break these out because some topics may apply to just a few people and some will apply to more of you. I know there are others but we will stick with non-qualified stock options, restricted stock awards, restricted stock units, and employee stock purchase plans for these episodes. Most of you will have some combination of these types of equity compensation. One last thing, these may become a bit repetitive if you listen to each and every one. There are key items that I'll mention in every episode because I expect listeners will pick and choose which episodes to listen to and I want to be sure to cover the critical terms in each episode so they don't get missed.
You will want to hear this episode if you are interested in...
My first tip, and something you must do before anything else, and specifically anything with equity compensation, is to look at your spending. A theme I repeat too often is unless you know your spending number, I cannot tell you if you have enough savings for retirement. Spend a bit of time taking a look at what you spend.
Your next tip is to gather up numbers on your entire financial net worth. This includes balances for your 401k, Roth IRA, regular old IRA, taxable accounts, and savings accounts. I would also say to bring in things like social security estimates and your pension from work if you have one. You will also want to include the value of your equity compensation positions in this overall net worth number.
Now that you have done the prep work, this tip is to assess your restricted stock units and look at your concentrated risk. How much of your net worth is in one or a few holdings, in this case, company stock?
Then identify and track the various cost basis lots for all of your company stock identifying the cost basis. This will be key when you get ready to dispose of RSU shares.
Your final tip is circling back to identifying how much you're projecting to spend in retirement. Try and project out big planned spending numbers. Things like needing a new roof, wedding costs, a big vacation, or whatever that big planned expense may be. These are one-time expenses but too often I see people not consider them as expenses because they're not ongoing.
Pulling it all together
If you're doing this on your own or working with someone like me, who caters to clients with equity comp, you should have a solid starting point for retiring with restricted stock units. Knowing things like your spending number, your various tax lots of the vested RSU of company stock, how much is in your tax deferred accounts, current tax rates, tax projections for the next few years, required minimum distribution requirements, and other income sources like social security you can now start building out a detailed plan to sell off some of your company stock, reduce your concentration risk, and funding the retirement you always wanted. All without tipping Uncle Sam.
Everything is important and goes into the overall plan for your retirement with equity compensation. This is part of what I do with my clients. It is something you can do on your own if you have the time and desire. However, if you're like my clients, paying a flat fee to make sure it's done right—so you don't have to come out of retirement to make ends meet—by someone who caters to this world sound like a much better idea. If you have any questions about your equity compensation, do not hesitate to reach out. I am just an email away!
This week’s FLASHBACK: My sons’ first concerts
In today's flashback, I'm going to share two quick stories about the first concerts I dragged my sons to see. Two different kinds of music and two different reactions. Let's start with my older son. He was in grade school and I took him to a NEEDTOBREATHE show. They're a Christian rock band and it seemed like a safe band for a grade schoolers first show. It was at the House of Blues in Cleveland which is mostly standing room only but we got a good spot. It was a school night and I remember him starting to fade before the main act came on. The lights went down and a light display went to town. I was focused on my son's reaction, his eyes lit up and were wide. He loved the show.
My younger son's first show was Seether, a hard rock band. They put on a great show. This show is at the Agora in Cleveland, which means lots of seats. Which was good as he was fighting a cold. The opening act was awful and my son slept right through their entire set which was shocking because they were so loud. He woke up right before the main show. He enjoyed it but he felt like listening to his favorite bands via things like Spotify in his phone or in his car was more enjoyable than seeing them live.
I love live shows. I'm finally heading into my first live show in what seems like forever. Fortunately for my sons, I'm going. with some old friends and don't have to drag them to it. I guess Frank Turner just isn't there to taste.
Resources & People Mentioned