Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The other thing I wanted to mention is that company stock options are taxed as ordinary income, not capital gains.
This.
As a result, there's no particular tax incentive to hold onto the stock you receive by exercising the options. At least, there wasn't when I last dealt with this stuff - tax laws can and do change over time.
If you need/want the cash now, pull the trigger.
Even if you wanted to keep the money invested (instead of spending it), I'd assert you'd be better off diversifying away from a concentrated holding in one firm, particularly the same firm that provides your paycheck.
As long as everyone else is piling on your husband... if managing the finances is his role in the household, *he* should be the one looking into the pros/cons of immediately exercising the options, as well as additional considerations. There are some useful hedges that can and possibly should be set up for your situation, as other posters have mentioned. It's not rocket science, but it will take some effort to better understand. Time for him to up his game w/r/t y'all's investments.
I'm quite concerned that you can't pay all the bills on one salary, your H is out of work, and you're already planning a bigger/more expensive house in the near future. That is a little scary.
Are you adequately funding your retirements and college funds for the kids?
You have 40k in cash right now? Is there a reason why you aren't using that money to pay off the debts? Would that be enough to reduce the expenses so they can be paid on one salary?
When I had stock options, I sold them periodically, taking advantage of the price going up. I usually invested that money elsewhere...but paying off debt is a really good option too, provided that you won't be replacing that debt with new debt.
background: i am 35, started working full-time about 18 months ago (before that I was a SAHM to my 2 young kids). When i was hired, i remember seeing something about being granted stock options..but i didn't pay too much attention (where's the bag over head smiley?). i am an engineer - tech geek, but embarrassingly, i know basically NOTHING about the financial world and basically would defer everything to my DH, who is very very conservative/low-risk taking when it comes to these things. his attitude has always been, don't go crazy with the stocks, ride things out as much as possible, think of long-term, etc.
well, the other day i go to my fidelity acct and notice that i have to accept the grant of the stocks i was given back when i was hired (i guess i have never done it..i never log in to it, dh handles a lot of it..embarrassing, yes i know). i do that, and realize that when i had been hired, i had been granted several thousand shares (almost 10,000), about 1/4 of which have already vested (i think the schedule is that 25% vest each year). the crazy thing is - i notice that the company stock price has more than DOUBLED since i was hired. If i sold immediately (cashless exercise) all the shares that have vested, i would get about $22k (minus taxes of course, so i guess $15k?). This is a ton of money for me...my base salary is $100k for reference. While that may sound like a lot, I am currently the only breadwinner. With the mortgage, health insurance, car payment, and daycare for 2 kids...there is not much left. We have liquid savings which we are dipping into a bit every month because my salary cannot cover it all. My DH will start working again in 4 months, where we'll much better off, but for the time being, it would be nice to have the extra $$$ (I would put it to paying off the car probably).
So, it boils down to the conundrum...sell these shares now (or just a portion maybe?) and cash in or wait longer hoping the price will eventually go up even more? On one hand, i'd hate to wait and then seek stock tank (though i technically wouldn't be really losing any money). OTOH, it would be nice to have extra $$$ right now. i would likely use it all to pay off the car so we woudln't have the monthly payments anymore. About a month or so ago the company announced a merger and that's part of the reason it has gone up a bit i think (though it has been going up steadily before that) . i have a feeling it is going to keep going up but what do i know.
sorry if this is somewhat disjointed and semi-rambling. I know there is no way to know the real answer, it seems like such a gamble..but could use some perspectives I am just sort of wigged out how i wake up one day and find out i could cash in something close to $20k since $$ is tight right now
If you had a paid off car, would you borrow against it to buy undiversified, risky stock options ?
If not, sell them and pay off the d**n car!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
