chiver78
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Post by chiver78 on Aug 25, 2020 15:01:56 GMT -5
my company is starting to offer an employee stock purchase plan, new since the corporate move a year ago. new company had a program, my company never did. it's been a hot second since this was available to me, and I've got some basic questions. input is appreciated, thanks! I'm eligible to purchase stocks at a 10% discount, with a maximum dollar amount per paycheck - pre-tax dollars, IIRC - that I can select. as little as $15, as much as $625. while I would love to max this out, I don't think that's the best idea immediately. or is it? my hesitation right now is that I don't know what my living expenses will be with the new house. I know my mortgage payment (including RE taxes and homeowner's insurance in escrow) and regulars like my mobile bill and whatever I choose for internet service, but I don't know what kind of costs to expect. if I "next day sale" it, I'm guaranteed at least a 10% ROI....even more if the stock price rises from lock-in. I'm definitely still paying stuff off, but the rates aren't obnoxious on what's left. does it make sense to take the risk of paying a little more interest for the chance of the reward that the stock prices continue to rise and my ROI is more than 10%? I'd be pulling back on the aggressive pay down and then throwing all of the proceeds at the balance when it pays out.
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schildi
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Post by schildi on Aug 25, 2020 15:16:01 GMT -5
It sounds like the company allows you to do an immediate sale after the end of the period, correct? Is it a 6 months period? If the answer is yes, then your equivalent APR return on the ESPP is 40% (assuming a 10% discount), meaning you would need a 40% APR in a bank or brokarage account to get the same money at the end of a 6 months period. That 40% is kind of worst case, it could be much higher. I would not pass that opportunity (meaning I would max the ESPP) if you can sell right away. The only risk would be like the one day fluctuation from time of purchase until you can sell. I am pretty sure this is post tax money, but maybe you are in some sort of special situation?
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chiver78
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Post by chiver78 on Aug 25, 2020 15:23:56 GMT -5
it may be post-tax, that's one of the things I'm fuzzy on. my first employer had this program available, and I used it to pay off my student loans much earlier than expected. the takeaway I have is that it's kind of a no-brainer, and that if you can afford to cut your regular income by that much, you should max it out. thanks for reassuring me I'm not wrong there.
the notice I have says it's October-April, so 6mo. not sure if it is a single payout at the end, or what. I need to look into that more. the program I used to have was a price lock that held for two years, and the purchases happened quarterly. you could re-start that 2y clock in January or June by re-upping, too. we actually had a time where the stock had tanked after a split, where we were being refunded deductions because there wasn't enough stock to allow everyone that had signed up for the program to max out their deductions. by the end of that two years, those payout checks were pretty sweet as the stock had recovered really well.....
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schildi
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Post by schildi on Aug 25, 2020 15:31:32 GMT -5
Yeah, get all the details, and post them. IMO - if you can sell right at the end at the 6 months period - it would be worth it to max the ESPP vs paying off debt, unless your debt is at a > 40% interest rate.
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Post by Deleted on Aug 25, 2020 15:49:05 GMT -5
FWIW I used to max my company’s about 20 years ago, 15% discount and a locked in price for 6 months of paycheck withdrawals. Absolutely banked and it allowed me to afford a townhome I shouldn’t have bought on my salary at that time.
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chiver78
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Post by chiver78 on Aug 25, 2020 16:01:31 GMT -5
ok, I found "the rules" in a huge doc that felt like all legalese. then I found the PPT presentation. way easier! let me know what might be missing, I'm transcribing b/c I can't share across the firewall, not that I would share my company name either. lol...
-you are allowed to save up to $7500 over 6mo -I am given a 10% discount, due to being eligible for another bonus tier. some employees are given a 20% discount rate, that's pretty sweet. -there is no minimum required hold time, but I haven't yet seen a statement indicating an automatic next day sale option. I may have to manually do this myself. 1st company program, if you elected automatic next day sale, the dollar amounts were worked in to your W2 and it was pretty seamless. I never held the stocks, so idk how complicated this can become. -at the end of the 6mo period, <company> American Depository Shares are purchased with the savings.
I need to figure out whether I need to be able to access my e-trade account to manage the shares (I've been on hold for a password reset for over 40min already) or just my bank account for sale proceeds to be deposited. but, I think I'm going to max out at the $625/paycheck for sure.
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jerseygirl
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Post by jerseygirl on Aug 25, 2020 16:02:41 GMT -5
10% discount isn’t much, probably within the usual up/down So unless you think the company stock is a really good buy now I wouldn’t participate much Do you have options available?
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chiver78
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Post by chiver78 on Aug 25, 2020 16:47:50 GMT -5
10% discount isn’t much, probably within the usual up/down So unless you think the company stock is a really good buy now I wouldn’t participate much Do you have options available? 10% discount of the lock-in price, which could be lower than the stock value that day. so with a next day sale, you're getting at minimum the 10% discount as your ROI.
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alabamagal
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Post by alabamagal on Aug 25, 2020 17:00:07 GMT -5
$625 a paycheck (month?) sounds like a lot, especially for individual stock. I thought you worked for non-US company, is it US stock? 10% is not much of a discount. But I think pharma stocks(esp US pharma stocks) should be good investment. But again, individual stocks can go down with one problem ( been there done that).
At my previous company we were able to buy stock at 50% discount but small amount maybe $1000 per year. We had to hold for a long time while we were employed. This was a German company. We got yearly dividends (most was $30) but first year a lot of people got charged foreign transaction fees by the bank, they had to request a refund for $20 from company (PITA). Dividends were taxed byGermany, but they just took their money no paperwork required. Entered into my tax program, but didn’t have to pay double taxes on it. When I left company I had to sell, stock was down 50% because it was impacted by exchange rate plus bad performance, so I basically got my money back.
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Post by The Walk of the Penguin Mich on Aug 25, 2020 17:02:29 GMT -5
If you leave the company, are you required to relinquish the stock? We had this happen with TD’s stock purchase for stock he had held onto for a long time. This was the year we got to pay a $45k tax bill, and I got to pay Medicare $500/mo extra for my Medicare premium.
There was no way we could relinquish the stock that was more amenable to us.
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schildi
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Post by schildi on Aug 25, 2020 17:29:48 GMT -5
10% discount isn’t much, probably within the usual up/down So unless you think the company stock is a really good buy now I wouldn’t participate much Do you have options available? Where else do you get an almost guaranteed APR of 40% ("almost" because there may be a day between buying and selling)? And potentially, that return could be much higher. I see no reason why not to max it, unless there is some catch in the OPs plan. I have been doing this at my workplace for the last 22 years, and have gained a lot of money.
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buystoys
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Post by buystoys on Aug 25, 2020 17:31:19 GMT -5
I never participated in the ESOP because I could usually count on getting the stock at a better price just by watching for dips. I also liked being able to keep my stock when I left. I sold it a few years ago at a nice profit.
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Post by Deleted on Aug 25, 2020 18:22:33 GMT -5
ok, I found "the rules" in a huge doc that felt like all legalese. then I found the PPT presentation. way easier! let me know what might be missing, I'm transcribing b/c I can't share across the firewall, not that I would share my company name either. lol... -you are allowed to save up to $7500 over 6mo -I am given a 10% discount, due to being eligible for another bonus tier. some employees are given a 20% discount rate, that's pretty sweet. -there is no minimum required hold time, but I haven't yet seen a statement indicating an automatic next day sale option. I may have to manually do this myself. 1st company program, if you elected automatic next day sale, the dollar amounts were worked in to your W2 and it was pretty seamless. I never held the stocks, so idk how complicated this can become. -at the end of the 6mo period, <company> American Depository Shares are purchased with the savings. American Depository Shares are the US version of securities ordinarily traded on a foreign stock exchange. So... they hold on to your money for 6 months and then invest it all at once at 90% of the price 6 months from now? Or at the price today? And I agree with Mich- find out what happens if you leave before 6 months (my guess is that you get back whatever you contributed but no stock) and after 6 months (are you forced to sell?).
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sesfw
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Post by sesfw on Aug 25, 2020 19:18:46 GMT -5
Don't know about all the ups and downs of high finance but I was told many years ago to buy at least the minimum in the company you work for. Shows you have confidence in your work. If the company matched the contribution, then that is the max I would invest.
Because of the limited 'portfolio', when I left the company I cashed out my account.
Things to think about.
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schildi
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Post by schildi on Aug 25, 2020 19:20:52 GMT -5
Usually you are not forced to sell. Bu with our plan we have the option. It's been a big money maker for me over the years.
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chiver78
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Post by chiver78 on Aug 25, 2020 19:46:03 GMT -5
ok, I found "the rules" in a huge doc that felt like all legalese. then I found the PPT presentation. way easier! let me know what might be missing, I'm transcribing b/c I can't share across the firewall, not that I would share my company name either. lol... -you are allowed to save up to $7500 over 6mo -I am given a 10% discount, due to being eligible for another bonus tier. some employees are given a 20% discount rate, that's pretty sweet. -there is no minimum required hold time, but I haven't yet seen a statement indicating an automatic next day sale option. I may have to manually do this myself. 1st company program, if you elected automatic next day sale, the dollar amounts were worked in to your W2 and it was pretty seamless. I never held the stocks, so idk how complicated this can become. -at the end of the 6mo period, <company> American Depository Shares are purchased with the savings. American Depository Shares are the US version of securities ordinarily traded on a foreign stock exchange. So... they hold on to your money for 6 months and then invest it all at once at 90% of the price 6 months from now? Or at the price today? And I agree with Mich- find out what happens if you leave before 6 months (my guess is that you get back whatever you contributed but no stock) and after 6 months (are you forced to sell?). quoting this post for what i (hopefully, I'm on my phone) bolded. ESPP plans have a lock-in date and price, and you purchase is at an x% discount of the lower price between lock-in and purchase date. as far as separating from the company, I think it is written into the laws around programs like this that whatever funds were set aside would he paid out upon separation. I obv need to sanity check myself that this is still the case.
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chiver78
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Post by chiver78 on Aug 25, 2020 19:47:42 GMT -5
Usually you are not forced to sell. Bu with our plan we have the option. It's been a big money maker for me over the years. yep, I remember that. I would still sell, though, I want the cash to pay stuff off. it sounds like I can change my elections every 6mo with this particular program.
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justme
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Post by justme on Aug 25, 2020 19:59:52 GMT -5
10% discount isn’t much, probably within the usual up/down So unless you think the company stock is a really good buy now I wouldn’t participate much Do you have options available? Where else do you get an almost guaranteed APR of 40% ("almost" because there may be a day between buying and selling)? And potentially, that return could be much higher. I see no reason why not to max it, unless there is some catch in the OPs plan. I have been doing this at my workplace for the last 22 years, and have gained a lot of money.
I'm adding in to the post because I've been debating it with my company - mostly kept forgetting to the window closed but I have like 3 weeks until this one closes. My company buys it in quarters - so the next one starts deducting Oct 1 and ends on Dec 31 and give a 15% discount on the closing price at the end of the offering period. There's no saying you can't sell immediately after - I know some did. It's just that the 15% discount will be taxed as ordinary income. Our stock hasn't completely crashed like say the cruise lines did even though a good chunk of our business is greatly affected by the pandemic (our CEO owning the majority of it prob has something to do with that) but I guess none of that matters if I'm selling it right after the offering period right? I'm kinda stupid for waiting so long to do this, right?
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schildi
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Post by schildi on Aug 25, 2020 20:39:17 GMT -5
Where else do you get an almost guaranteed APR of 40% ("almost" because there may be a day between buying and selling)? And potentially, that return could be much higher. I see no reason why not to max it, unless there is some catch in the OPs plan. I have been doing this at my workplace for the last 22 years, and have gained a lot of money.
I'm adding in to the post because I've been debating it with my company - mostly kept forgetting to the window closed but I have like 3 weeks until this one closes. My company buys it in quarters - so the next one starts deducting Oct 1 and ends on Dec 31 and give a 15% discount on the closing price at the end of the offering period. There's no saying you can't sell immediately after - I know some did. It's just that the 15% discount will be taxed as ordinary income. Our stock hasn't completely crashed like say the cruise lines did even though a good chunk of our business is greatly affected by the pandemic (our CEO owning the majority of it prob has something to do with that) but I guess none of that matters if I'm selling it right after the offering period right? I'm kinda stupid for waiting so long to do this, right? Right. And right. 🙂
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chiver78
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Post by chiver78 on Aug 26, 2020 8:11:41 GMT -5
ok, so it looks like there are 13 paychecks over the 6mo time period. $7500/13 = ~$575. I'm not sure why they would let you go up to $625/paycheck just to have to cut off savings before the end of the period, but whatever. I'll be signing up for $575 to max it out. I am going to have to wait til next week to finish the enrollment, though. the system wants account information, including the addresses listed for them - which don't at all match anything in my employer's records at the moment b/c I'm in the middle of a move.
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aricia
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Post by aricia on Aug 26, 2020 14:59:11 GMT -5
With a look back provision, no holding requirement, 10% discount, I would say it’s a no brainer to max it as long as you have enough money to live off meanwhile.
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