February 01, 2023

Your Guide to Stock Options: ESPPs, RSUs, and ISOs (That Won't Make You Take a Nap)

34 minutes

Whether you’ve got access to an ESPP (Employee Stock Purchase Program) at work and aren’t sure if it’s worth your time, or your new offer includes compensation via RSUs and ISOs, this week is dedicated to you. Strap in for a ride through Jargonarnia.

This week, I welcomed James Conole and Scott Frank—hosts of Real Personal Finance and holders of the prestigious CFP and CFA designations—to the show to help me break down this complicated world.

They had some excellent tips that you won’t want to miss. For example, pretend your RSUs are cash—would you use a cash bonus to buy company stock? If not, sell ’em.

Let's get into it.

Learn more about our sponsor, TaxAct: https://www.taxact.com/moneywithkatie

Transcripts can be found at podcast.moneywithkatie.com.

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Mentioned in the Episode

Human Capital Study on Employee Stock Purchase Plans: https://humancapital.aon.com/insights/articles/2020/how-common-are-employee-stock-purchase-plans-it-varies-widely-by-demographics

The Risks of Employee Stock Purchase Programs: https://moneywithkatie.com/blog/the-risks-of-employee-stock-purchase-programs

Morgan Stanley Guide to ESPPs: https://www.morganstanley.com/atwork/themes/equity-compensation/how-does-espp-work-your-guide

Pros and Cons to RSUs: https://www.investopedia.com/terms/r/restricted-stock-unit.asp

RSUs: The Basics: https://www.schwab.com/public/eac/resources/articles/rsu_basics.html

My Company Stock Options are Worthless: https://www.washingtonpost.com/business/2022/08/04/company-stock-options/

These Startup Workers Thought Their Company Stock Would Make Them Rich. Instead They Got Worthless Shares and Massive Tax Bills: https://slate.com/business/2015/12/good-technology-workers-thought-their-stock-would-make-them-rich-nope.html

Amazon Lost Half its Value this Year As Tech Stocks Got Crushed and Recession Fears Grew: https://www.cnbc.com/2022/12/29/amazon-shed-half-its-value-in-2022-as-tech-stocks-got-crushed.html

Incentive Stock Options (ISOs): Everything to Consider: https://www.nerdwallet.com/article/investing/isos

What is the Alternative Minimum Tax (AMT)?: https://taxfoundation.org/tax-basics/alternative-minimum-tax-amt/

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