Company stock purchase plan

So 25% less taxes. When are you vested? On the surface yes I would think its a pretty safe bet you can come out ahead or even vs the $5k you would invest in other things.

quote:

---

What's the vesting schedule? If any

---

None, it’s all mine day one.

quote:

---

None, it’s all mine day one.

---

Do you have a minimum length of time you have to hold it?

It's risk free guaranteed return net of taxes of ~20%.

If you hold it long term (more than 1yr when it’s given to you) you don’t have to pay capital gains. It’s free money so you should absolutely buy in. At a minimum it’s 25% return and max depends on how the stock does. Makes no sense to not contribute unless you can’t afford to live without that amount.

You have to do it, no matter what. What you do immediately after the purchase, since it's yours immediately, depends on your tax situation and what you think about the company. I've always been on record here about selling company stock ASAP so you can diversify.
What's your marginal tax rate?

quote:

---

He won't have to worry about capital tax gains if he sells immediately.

---

There are some ESPP’s nowadays that come with a mandatory holding period. Effective this year, my ESPP requires participants to hold the stock for at least a year. From what I understand the shares are basically locked in Fidelity until the holding period ends. First time in my career I have not participated in an ESPP when one has been available. At that point it comes down to the company’s stock performance and whether you feel like you are better off investing elsewhere in the short term.

To the OP: if your ESPP does allow you to sell immediately, there’s no shame in doing so. In many cases the company contributions are reported as W-2 income anyway, so you pay income tax on the company contribution regardless. So it makes a lot of sense to take your quick 25% and put it into something you know you want to hold.

About 10 years ago I had a job where they actually gave you a “discount” on the shares, which applied to your cost basis and could theoretically be taxed as capital gains instead of ordinary income if you held long enough. But I’m not sure whether that’s still possible or not. I feel like it’s not, but could be mistaken.

quote:

---

to avoid short term capital gains

---

short term capital gains are largely irrelevant here if you do something with it immediately. Unless the stock moves big the day you get it or something.

My company has a similar program and it’s the best thing I have done to save non retirement money

We can invest up to 20% of our income in the ESPP. It is split up into 2 6 month periods per year and you get the stock at 15% less than the lowest price during that 6 month period.

As stated before taxes are pretty brutal because they take the 20% out pretax and you’re taxed on that entire amount but you save tons of money.

The way I have it setup is it’s immediately transferred to my financial advisor and he holds the company stock for 12 months and then diversifies to avoid short term taxes.

My old company had this as well. It was an O&G service company and you could invest up to 10% of your salary. It was withheld from your paycheck each month, then quarterly you received the stock at the lower of the beginning/end quarter price (minus a 15% discount).

I maxed it out right out the gate. It was great way to fund my roth and acted as a medium range savings account for big purchases (new car, house, engagement ring).

Word of the wise, I did have a coworker that did the same but never periodically sold. As you can imagine, when oil dropped, it drastically swung in value.