Finding the best time and best strategy to exercise incentive stock options is difficult. Competing considerations on income tax, investment planning, and financial planning make it difficult to address the best time to exercise incentive stock options (ISOs) with a blanket answer. Some strategies suggest that exercising early may be a good idea, because this is when the impact from the alternative minimum tax, or AMT, may be lowest. Others suggest it’s best to exercise as late as you can. Waiting offers you certainty as to final value of …
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What You Should Know About Cash Exercises of Employee Stock Options
There are many reasons to exercise your employee stock options: a pending retirement that might require re-allocating assets; an approaching expiration date that warrants a “use it or lose it decision; a strategic exercise plan that integrates tax and financial planning. Coming up with “why” you might want to do a cash or cashless exercise of your stock options is easy. But equally important, and potentially scarier, is knowing “how” to do your exercise. When you exercise your employee stock options, you generally have a choice to do a …
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4 Non-Tax Questions You Need to Ask of Your Employee Stock Options
When dealing with employee stock options, the conversation usually centers around issues of income tax and investment risk. We talk about taxes because the amount of tax you pay has an impact on how much money you actually receive when you finally sell your shares. The issue of how much tax you owe depends on the type of stock option you have, when you exercise it, and when you sell it. We also focus on investment risk because owning many stock options means you own a large position in one company. That likely increases your level of risk …
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What You Need to Know About Drawing Down Your Assets in Retirement
Retirement planning is often summed up into a single question: How much money do I need to retire? Unfortunately, this question leaves many well-intentioned retirees far short of the actual goal. While understanding how much your retirement may …
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5 Basics I Wish Everyone Knew About Employee Stock Options
There is no easy way around it, employee stock options are complicated. And depending on the type of stock options you have, how many you have, other types of employee stock options you own -- along with all your other specific financial planning …
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4 Ways to Lower Your Alternative Minimum Tax Liability with Incentive Stock Options
When you exercise and hold incentive stock options, it’s very possible that you will be subject to the alternative minimum tax (AMT). This part of the tax code gets complex, making it difficult to understand. One way to think of the AMT is a …