Are Stock Options Worth It?

Equity compensation like stock options used to be reserved only for C-suite executives. But today it seems like most employers are offering them to their workers... but are these "golden handcuffs" worth the tax headache?

Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
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[kortyEdna]

Additional earnings reports from major tech companies, driven by Nvidia, coupled with trader FOMO, could fuel a resurgence in market buying pressure. I'm considering investing over $300k, but I'm uncertain about risk mitigation strategies.

[JaredOwen]

It is crazy how complicated some of this gets! Thanks for the great video

[adissentingopinion]

Don't forget that in the Diversification section, you might simultaneously lose your job and have your stocks/options plummet when the company or *sector* is in trouble. You're already functionally diversified in the sector of your career, so if you do take the stock options, you have to heavily invest in other sectors to even the risk out.

[mikehughes]

I think another important thing to consider when discussing equity with a future employer is to ask if they have a “clawback provision“. A lot of people assume that if they purchase or receive equity from their employer that they will be able to still hold onto it even if they leave the company. That’s exactly what the clawback provision stops people from doing and a lot of employers don’t tell their employees about this until after they’ve accepted an offer. It’s pretty deceptive imo.

[westtech]

Friend of mine's boss/founder described the stock options he was offering as "I can promise you enough stock options to wallpaper your house with. I can't promise that won't be the best use for them."

[marktomatino]

I sell off company RSUs and ESPP shares as soon as they vest and channel that money into diversified index funds. Holding large amounts of money in an individual company's stock is very risky. Additionally, the time during which a company's stock price goes down is also a time when layoffs may be more likely, increasing the risk further.

[awarepenguin]

Stock options are phenomenal at companies that are actually making money. Most startups, especially the ones burning cash, either are worthless or are diluted so much that they end up being worthless. Never take a lower salary (cash) for more stock.

[roseroland]

Although the companies in my portfolio are solid, last year was a loss. In my first year of investing, I experienced a 35% decline in the March/April sell-off and a further 17% decline in the most recent sell-off. I earn my money via hard work, thus investing makes me anxious and depressed. I'm uncertain if I should sell everything and wait.

[AyoolaBoyejo]

This is the first Two Cents video that gets me really confused because of how complicated the topic is. Kudos to you guys for helping to improve financial literacy for everyone.

[angrysarcasm]

Stock options are absolutely worth it, for those already making 6-7 figure salaries. If you make $40K a year, you'll never be able to buy enough to make a significant difference unless you get employed early in the company's history, and you get lucky enough for their stock price to explode.

[redfoxorganics]

very informative as always! You guys rock!

[droma]

As simple as the explanation was made, this video would need to be watched several times to better understand stock options. My head spinning

[KaironQD]

Excellent intro to a varied and deep topic, thank you! BTW, LOVE the IRS Eagle logo character! Something about it is both mighty AND terrifying!

[alexandersebela]

My brothers girlfriend is working at amazon she got every year instead of money as a bonus Amazon shares as a christmas gift. And over the years it went up to 100 000€. It can be a really good but depends on which company you are. Amazon's stocks went up a lot during pandemic.

[JS-svol]

As someone working at a startup…this is the only way 90% of companies compensate with “equity” (which it is not)

[Freddyyyy]

I have challenged myself to put away 50% of my monthly income into stock options which is quite easy since I live frugal without debt. I work as an account executive, and make over $20000. $10000 goes into dividends, and the other $10000 covers my my food plus living expenses. I am seeing improvements in my portfolio, dividends look certain, but I have to attribute this to only to guidance of a licensed fund manager who allocates funds to a plethora of assets. I have to stay disciplined, and remember that I’m in it for the long term. Good luck to everyone and thanks for the great video.

[FinancialShinanigan]

Depends, Microsoft stock option, hell yes!
Carvana stock options, probably notlol

[_MrTV]

Most offer RSU's it's not as tax favorable for an employee 😥

[Nohandleentered]

I was given craptocurrency as equity for a prior job. I had to hire a tax lawyer just to fight the irs because the company reported it incorrectly, then declared bankruptcy - long story short, Crypto sucks.

[lambmaster]

I think of these things as nice bonuses, but I only rely on my main shovel (base salary) to fund my life and retirement. Anything else is just icing.