Do i keep my stock options if i quit
Laid-off workers react to the bad news in quit variety of ways. Others, weary of hour weeks, head straight for the beach and hurl their cellphones into the surf. Whatever route you choose, some tasks can't wait. If you own stock options in your former company, you usually have just 90 days options exercise them before they disappear. In some instances, you may have to exercise them immediately. Exercising your stock options could provide you with a valuable cash cushion while you're between jobs. But to get the most out of your options, you need a strategy. Some issues to consider:. A stock option gives you the right to buy a set number of shares of company stock at a specified price. However, you can't exercise your options until they're vested. Options typically vest in phases, options on how long you've been on the job. Most options agreements call for vested options to expire if they're not exercised within 90 to days after you leave the company. Whether you leave voluntarily or with the assistance of a security guard doesn't matter. And your company is under no obligation to tell you how long you have to exercise, says Bruce Brumberg, chief executive officer of My StockOptions. It's up to you to read the options agreement. And while you're at it, watch out for provisions that could vanquish your options even before the expiration period has lapsed, says Steve Mertz, a financial consultant for A. Some plans state that your options will expire immediately if you're hired by a competitor, says Mertz, who frequently conducts planning workshops for laid-off workers. Some workers own non-qualified stock options, some own incentive stock options and some own both. The two types of options are taxed differently, which could affect your planning. When you exercise non-qualified stock options, you're taxed on the difference between the exercise price and the stock's market value at your ordinary income rate. You will keep to pay this tax even if you decide to hold on to your shares. Incentive stock options may receive more favorable tax treatment. Usually, if you wait at least a year stock you exercise to sell your shares, the difference between the exercise and sale price is taxed at the capital gains rate. Many options holders do a "cashless" exercise, whereby a broker will sell your shares, use a portion of the profits to pay for the keep and give you the rest. That allows you to exercise your options without coming up with a lot of cash. In many instances, you can also arrange for the broker to withhold your income taxes. If your company's stock has suffered some big setbacks, you may be tempted to postpone the sale stock your shares. Quit especially tempting if you hold incentive options, since holding your shares can lower your taxes. Even workers with non-qualified options may be tempted to hold on to their shares in hopes of selling at a bigger profit. But waiting to sell is risky, because the stock could also decline in value. Remember that with non-qualified stock options, taxes are based on the spread between the exercise and market price of your options when you exercise, even if you hold the shares. So if the stock price falls sharply, you could find yourself paying taxes on phantom profits. That's a gamble many laid-off workers can't afford to take, Mertz says. If you own incentive options, you could find keep dealing with this scourge. The AMT was designed to prevent wealthy taxpayers from evading taxes with options deductions. However, the law wasn't indexed to inflation, which means more middle-class taxpayers are getting hit with it. Exercising incentive stock options and holding your shares is one of the events that can trigger the tax, Mertz says. The AMT has more parts than your quit engine, so don't go it alone: Find a tax professional with a solid background in the area. Sandra Block is a personal finance writer for USA TODAY. Her Your Money column appears Tuesdays. USA WEEKEND Sports Weekly Education Space. Home Travel News Money Sports Life Tech Weather. CD and loan rates. Click here to get the Daily Briefing in your inbox. If you're laid off, be sure to know your stock options Laid-off workers stock to the bad news in a variety of ways. Copyright USA TODAY, a division of Gannett Co.
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We also know that groups who exhibit positive affect think deeper, more creatively, and more thoroughly.