You elect how much to contribute per pay period during an initial “ Enrollment Period”.Īt the end of this enrollment period, typically every six months, this money is used to purchase shares at a discount of up to 15%. Under an ESPP program, employees can elect to defer salary and bonus up to the IRS limit of $25,000 per year (the “ Contribution Limit”). If your employer offers an Employee Stock Purchase Plan, and you are not participating already, in most cases, you should immediately stop what you are doing and go enroll! #2 – How an ESPP works? So, if you take only take one thing away from this post it should be this: Now, there are some specific rules on how much and when you can contribute, how the shares get taxed when you sell them, and other logistics that we’ll get to, but for now, just remember: An ESPP lets you buy shares of your company stock for a discount, and then immediately sell them, locking in a nice profit. It’s this discount that allows you to use an ESPP to turbo-charge your savings. It’s this discount that’s the most significant advantage of Employee Stock Purchase Plans.įor most employers, you can expect that discount to range between 5%-15%-obviously, the higher, the better for you! These shares can then be sold immediately (assuming your company offers a “ Quick Sale” program), locking in a tidy and risk-free profit. Offered by most publicly traded companies, an ESPP is an employee benefit that allows you to purchase shares of your company stock at a discount. Let’s get started to learn how you can take advantage. The popular employee compensation program, known as an Employee Stock Purchase Plan (ESPP) allows you to do just this-to buy your company stock at a discount. If I offered to sell you a nice, crisp $100 bill for $85, would you buy it? And how to use ESPP shares to accelerate your financial goals.When should you participate in your ESPP.We’ll cover the five things you must know to maximize the benefit you get from your Employee Stock Purchase Plan: In this article, we will outline how the Employee Stock Purchase Plan (ESPP) works, where you have an advantage (and where you don’t), so you can tip the odds in your favor. #5 – Using an ESPP Strategy to Achieve Your Goals.#3 – Should You Participate in Your Company’s ESPP?.
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