Stock Option Planning

If you’ve worked for a private company long term, odds are you’re hoping to cash in your vested stock options when the firm finally “goes IPO.”

There’s nothing wrong with that. Who doesn’t dream of reaping an options windfall and using it to retire early, buy a house, travel around the world or any number of options that come with financial independence?

But when it comes to stock option planning, most employees are on their own. In most circumstances, employers are legally forbidden from providing one-on-one options advice for employees.

And if you make the wrong decisions, you could be hit with a huge stock options exercise tax bill, often eating away 50% or more of your proceeds. That’s why many savvy employees with stock options turn to a fee-only fiduciary financial advisor, working in partnership with your tax advisor, to develop a stock option taxation and exercise strategy plan to make the most of your stock option windfall.

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Key stock option planning questions a fiduciary financial advisor can answer

  • How do I exercise my vested stock options?
  • What are the differences between incentive stock options (ISO) and non-qualified stock options (NSQO)?’ Why do they matter?
  • How can I avoid a disqualifying disposition that could cost me the tax benefits of my ISOs?
  • What will my stock option exercise tax be? How can I minimize it?
  • Once I exercise my stock options, should I hold on to the shares or sell them?
  • If I decide to keep the stock, how long should I wait before selling these shares? And once I do, how should I invest the proceeds?
Stock Option Planning Challenges

How a financial advisor in the Wealthramp network can address your stock option planning challenges

Serving as your financial advocate, your financial advisor in the Wealthramp network works directly for you. Collaborating with your tax advisor, they can walk you through your various cash-in scenarios and come up with a comprehensive financial plan for both investing and spending your windfall. Your financial advisor can:

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Help you understand the potential tax (including alternative minimum tax, AMT) implications of exercising and selling stock options

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Draft a schedule for selling exercised ISOs over several years to help you avoid short-term capital gains and mitigate the tax impact of long-term capital gains

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Create a strategy for minimizing the tax impact of exercising NQSOs, the proceeds of which are always treated as short-term capital gains taxed as ordinary income

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Develop a comprehensive financial plan that enables you to spend some of your options windfall today while investing the rest for retirement, college and other financial goals

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Explore options for selling your vested private shares before your company goes public

Don’t turn your company stock options into a hefty tax bill

We won't sell your data. You decide which advisors to talk to. And you won't receive any pushy sales calls from Wealthramp

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The biggest stock option planning mistakes

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Not realizing that you generally have to pay to exercise stock options with your own money

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Getting hit with costly short-term capital gains taxes by exercising ISOs and failing to wait a year before selling shares

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Not understanding that exercising NQSOs always generates short-term capital gains

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Leaving your company before you’re fully vested in your stock options or have had the chance to exercise them or sell your vested private shares

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Spending too much of your options windfall today rather than investing some of it toward long-term financial goals such as retirement

Connect with a financial advisor with deep experience in stock option planning

We won't sell your data. You decide which advisors to talk to. And you won't receive any pushy sales calls from Wealthramp.

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