You’re probably living on the streets now!
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…aaaaand it’s going back up!
… and down
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Question: should I be including the equity at my current company in my planning?
We are now 12 years old, about 1,800 FTEs, EBITDA is nice and positive. It’s kind of hard to track the share price but I’ve found a couple of websites that say they have an estimate. I know the valuation as of the last funding round but that’s a little stale and I think the valuation is down due to the whole mess that is Medicare Advantage right now.
So historically I’ve either not included it, or included it at a very low valuation of like $10/share, I think it’s more like $30+ at the moment, and I added it to my Excel with the ability to toggle it off/on. I have about 11k shares plus 4k options ($3.89 strike price), and it grows each month as I continue to vest. Yes, I’ll pay some pretty hefty taxes if and when we IPO, but it’s a pretty decent pile of money still. We’ve hired an IPO readiness firm, hired a bunch of folks to beef up security and deal with SOX, feels like this year or next we’ll finally do it.
Thoughts?
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If you’re shooting for a portfolio mix, I would definitely count that as an equity position. If you are doing retirement planning, I’d wait until you have a true market price and even then, I would apply a discount to reflect the uncertainty created by a high concentration in the company stock.
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Having little understanding of the US tax system, but having heard of things billionaires do…
Should you somehow be putting your stock options in your IRA or 401k to avoid taxes on the capital gains given their low/unknown value right now?
Something like what Macroman said… some kind of loose discount rate, accounting for the probability that the value plummets.
Personally, I plan conservatively, so when it comes to my Social Security I admit 50% of the claimed future benefits toward future expenses/spending/QoL. Anything in excess of that 50% that actually plays out in my 60s will be fun money or charity/inheritance in our estate.
I hate the tax code. What I’m seeing indicates I cannot transfer the options. I may be able to transfer the shares if a) my company allows it, and b) if my IRA allows it. I think I can work around (b) by opening a new IRA with a company that will allow it. I can’t seem to figure out (a) by looking at our company’s plan documents. Google says a lot of companies don’t allow transferring to an IRA, but I don’t know why. But something to look into given how much it would save me.
I like this idea, maybe assume half of whatever my best guess is, feels reasonably conservative
I think of it somewhat similarly. One, if I retire around age 50 then I’ve only got ~15 years until SS, so I think of SS as a way to mitigate SOR risk. And two, if things go well then SS will basically fund what you mention - giving it to charities and buying a Tiffany lamp or two.
Just did a quick search. It sounds like you should Google Peter Thie Roth.
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just a shout-out to all the lurkers (like me) who are nowhere near close to the headline value, and don’t anticipate getting anywhere close to that in the next ten years (also me), I see you.
Whether you had an investment go south, dissolved a marriage, parents who screwed you out of paying for college, family obligations, have just chosen to live a different lifestyle, or the myriad other reasons why you might not be on par with your peers posting in this thread (still me), let me say this: You’re okay. You’re fine. You got this. You don’t need to have a seven-figure net worth to be a good person. True, the vast majority of people who do (like who posts in this thread) are good people, but that’s more correlation than anything else.
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Check out this article on Net Unrealized Appreciation. One condition on this is that you can only use it when you separate from the employer that issued those shares.
Net unrealized appreciation (NUA): Make the most of company stock | Fidelity
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What does money have to be with being a good person? And if Mark 10:18 is to be believed, No one is good except God alone.
Of course not. At the end of the day, its just a number, and something that’s likely a combination of both luck and choice. I got lucky with some early career opportunities and having financial support from my parents. On choice, simply resisting the urge to ratchet up the lifestyle with each promotion. I’m boring, have cheap hobbies, and DIY a lot of things around the house.
A few bits of advice from what has worked for me - live near work (if you don’t WFH), the new car smell is never worth the cost, and own your career.
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It looks like the equity has to be in a qualified plan. I think that’s what I need to focus on. Does my employer allow me to transfer this to an IRA? I think.
as someone who managed to eke over the line last year…i have avoided calamity like the ones you list. i am old and that’s the real driver. hats off the the super savers who manage it way faster than me. but for the others, live your best life and plan accordingly and in this career…you’ll get there soon enough.
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Couldn’t agree more, including living near work too, I would say my average commute over my entire career averaged 15 minutes each way. I don’t think it makes any sense to compare yourself with others based on income or wealth. Each person needs to be content with their own situation. But of course we are actuaries and we have more $ than the average person and more interest in being smart with it.
You shall remember the LORD your God, for it is he who gives you power to get wealth (Deut 8:18)
I was blessed with the ability to create wealth (although it was a struggle at times and I’m sure many actuaries did considerably better). I worked hard for it, but I can’t take responsibility for the knowledge and drive to learn and succeed; I just made the most of what I was given. On the other hand, my two Aspergers adult children aren’t anywhere near as smart and will work minimum wage jobs their whole life, but they are content in their circumstances. I’m glad I have the ability (hopefully) to pass some substantial $ to them (and charity) when it makes sense.
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The top quintile spends 25k per year on transportation. If you live near work, you get back a lot of time, and you save a lot of money. Cars will last forever, and the shorter the commute, the less you care about car you drive. I think I have spent about a third of that, much closer to the bottom quintiles. Taking this 16k a year difference at the 10.8% S&P CAGR from the last 20 years accumulates to a million dollars.
Note: I don’t drive beaters, although my minivan is getting up there in years. I’ll own a car 15 years and not hit 100k miles.
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If you live where it’s possible to cycle to work, you can save even more. A couple of times we’ve lived in cities where we got rid of our car and used bicycle/public transportation. When we needed to do a road trip or haul stuff from a big box store (every two or three months) we just rented a car.
Cities like that are usually expensive, and the savings you get from not owning a car is usually spent on housing that is near those options. That’s a lot of cities where actuaries are employed.
When I bought my current house, the trend was for everyone to buy bigger new homes that were 10+ miles further out. I spent about 25% more on a comparable house. The difference was enough to cover a car payment at the time. I was able to lower my borrowing costs when interest rates dropped, and the principle within that payment was mine to keep. So there was some financial tradeoff to live near work that I am ignoring, maybe 150k in additional borrowing costs.
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