I want to introduce you to Joan:
53, recently divorced, new job, relocated to a new city—an overwhelming amount going on.
Great news: Joan’s one of those bright lights that has a zest for life and is excited about her future.
Prior to our first engagement, Joan had never worked with a financial planner and was unsure what to expect. We sat down and began our discovery conversation and on top of everything she had going on, one of the many “new” things she was facing was that she was granted Restricted Stock Units (“RSU’s”) for the first time.
Joan was excited to have an equity ownership opportunity with her new employer but frankly she had no idea what it meant for her or in the context of her overall financial plan?
Good news, of all of the equity compensation options that exist, RSU’s are generally the easiest to understand. When your RSU’s vest they are taxed as ordinary income. From a taxation standpoint, they are no different than a cash bonus.
We got to know Joan and understand where she was financially and emotionally. It was clear that she wanted to become “financially independent” as quickly as possible to make future work “optionable.”
In our first meeting we accomplished a lot:
- Paid off a 401k loan
- Reallocated her 401k plan
- Reallocated future 401k contributions
- Eliminated the “managed account” option within the 401k which helps reduce fees and simplifies the investment process
- Increased 401k contributions to maximize pre-tax and catch-up contribution limits (navigating a sign-on bonus that would’ve elevated her into the highest tax bracket)
- Decided upon an appropriate emergency fund balance
- Opened an individual brokerage account to invest excess cash & hold the vested RSU’s
- Agreed that the future company stock would not exceed more than 20% of her liquid net worth
- Agreed upon a monthly investment contribution amount to fund her plan
- Referred her to an estate planning attorney.
Clients like Joan are a blast to work with because she’s hungry for advice & guidance and was eager to put in the work toward living her best life.
I am excited to see all that Joan accomplishes in the years ahead. I wouldn’t want to bet against her!
If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.
Cheers, Nic
