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ESPP Calculator

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Re: ESPP Calculator

#11

Post by jakub_g »

colonCapitalDee wrote: post #8

I would strongly advise everyone to max out their ESPP contributions (you can contribute a maximum of 15% of your salary, up to the IRS mandated $25,000 limit). Why? Because it's a amazing investment that, if you sell stock immediately on reception, is risk free. I'm going to assume you know how ESPPs work, google them if you don't. Let's do the math: consider a typical ESPP (yours may vary) with a 3 month purchasing…

Mandatory gotcha counterpoint: it's risk free assuming immediate execution, which is not the reality. Between the time ESPP is finished at price X and the time your shares actually land on your account in Etrade / other broker so you can sell, there are several days of processing time, during which the stock can easily go down 10%+ in the "current economic climate". Then, the upside might be taxable (depending on your country) and suddenly the 15% becomes 0% or negative.

(Source: saw it happen.)

The good thing though is that you may withdraw all the money until a few days before offerring time end. Useful in situations of uncertainty like here.

Re: ESPP Calculator

#12

Post by beembeem »

colonCapitalDee wrote: post #8

I would strongly advise everyone to max out their ESPP contributions (you can contribute a maximum of 15% of your salary, up to the IRS mandated $25,000 limit). Why? Because it's a amazing investment that, if you sell stock immediately on reception, is risk free. I'm going to assume you know how ESPPs work, google them if you don't. Let's do the math: consider a typical ESPP (yours may vary) with a 3 month purchasing…

Having a lookback increases the upside massively. It's almost an entirely different investment product versus the vanilla - take an X% discount every couple months.

Re: ESPP Calculator

#13

Post by beembeem »

codingmatty wrote: post #5
smachiz wrote: post #4

Application error: a client-side exception has occurred (see the browser console for more information). I did get it to load something once - it's not super clear. Based on the dates you enter, and the stock ticker, it'd be nice if it looked up the offering price. I'm not actually sure how useful of a tool it really is... is it for convincing people who aren't maxing out their ESPP that they should?

It’s supposed to look up the stock price and display it under the price, but I’ll have to see why it’s not loading. I actually use it to optimize for how much to contribute because when the stock falls you end up hitting the convoluted IRS limit, which degrades the effective return on the total amount of contributions.

Many plans I've participated in cap contributions well before the theoretical 25k limit. Current employer has a very interesting plan that leaves much of the limits up to you which is a double edged sword. If you can figure out how to model the limit, you can make informed decisions when the price falls but for the average employee it's complicated and can cap their contributions way too early.

To effectively figure out the 25k limit you need a history of prior contributions to know how much limit is left in each tax/calendar year.

Re: ESPP Calculator

#14

Post by darkwizard42 »

jakub_g wrote: post #11
colonCapitalDee wrote: post #8

I would strongly advise everyone to max out their ESPP contributions (you can contribute a maximum of 15% of your salary, up to the IRS mandated $25,000 limit). Why? Because it's a amazing investment that, if you sell stock immediately on reception, is risk free. I'm going to assume you know how ESPPs work, google them if you don't. Let's do the math: consider a typical ESPP (yours may vary) with a 3 month purchasing…

Mandatory gotcha counterpoint: it's risk free assuming immediate execution, which is not the reality. Between the time ESPP is finished at price X and the time your shares actually land on your account in Etrade / other broker so you can sell, there are several days of processing time, during which the stock can easily go down 10%+ in the "current economic climate". Then, the upside might be taxable (depending on you…

Not just this, but also blackout windows. I've seen ESPP shares be granted during hold periods and then you have to incur even MORE risk!

Source: experience with Lyft ESPP

Re: ESPP Calculator

#15

Post by darkwizard42 »

colonCapitalDee wrote: post #8

I would strongly advise everyone to max out their ESPP contributions (you can contribute a maximum of 15% of your salary, up to the IRS mandated $25,000 limit). Why? Because it's a amazing investment that, if you sell stock immediately on reception, is risk free. I'm going to assume you know how ESPPs work, google them if you don't. Let's do the math: consider a typical ESPP (yours may vary) with a 3 month purchasing…

As noted in a few comments below already there are risks still.

Immediate execution isn't always possible due to the processing time of shares to your brokerage account and then execution of the trade, but also if your company grants the ESPP shares and it coincides with a black-out period. This adds to the risk you might be taking on.

Still usually an amazing return for the time/effort required, but caution all around.

Re: ESPP Calculator

#16

Post by op00to »

darkwizard42 wrote: post #15
colonCapitalDee wrote: post #8

I would strongly advise everyone to max out their ESPP contributions (you can contribute a maximum of 15% of your salary, up to the IRS mandated $25,000 limit). Why? Because it's a amazing investment that, if you sell stock immediately on reception, is risk free. I'm going to assume you know how ESPPs work, google them if you don't. Let's do the math: consider a typical ESPP (yours may vary) with a 3 month purchasing…

As noted in a few comments below already there are risks still. Immediate execution isn't always possible due to the processing time of shares to your brokerage account and then execution of the trade, but also if your company grants the ESPP shares and it coincides with a black-out period. This adds to the risk you might be taking on. Still usually an amazing return for the time/effort required, but caution all arou…

I've never had an ESPP purchase coincide with a black-out period. If it does, that's pretty shitty of your employer.

Re: ESPP Calculator

#17

Post by op00to »

lapetitejort wrote: post #10
jldugger wrote: post #9

Earlier quoted context omitted.

Technically, not all ESPPs work like your example. And realistically, we're talking about $2,000 every six months, and half that after taxes. For the kind of person who can afford can afford to max it out, this is less exciting. I won't say no to an extra 2k a year but it's not a exactly a deal breaker if I'm changing jobs.

My numbers make it less appealing. Purchase plan every six months, 5% off the price, combined with a confusing and restricting insider trading policy.

red hat?

Re: ESPP Calculator

#19

Post by jakub_g »

darkwizard42 wrote: post #14
jakub_g wrote: post #11

Earlier quoted context omitted.

Mandatory gotcha counterpoint: it's risk free assuming immediate execution, which is not the reality. Between the time ESPP is finished at price X and the time your shares actually land on your account in Etrade / other broker so you can sell, there are several days of processing time, during which the stock can easily go down 10%+ in the "current economic climate". Then, the upside might be taxable (depending on you…

Not just this, but also blackout windows. I've seen ESPP shares be granted during hold periods and then you have to incur even MORE risk! Source: experience with Lyft ESPP

Ouch, ESPP that you can't immediately sell are indeed really bad especially when everything is on fire.
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