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Get Free Money from Your Boss! Here’s the Secret Stockhack Experts Don’t Want You to Know


Employee stock purchase plans offer ‘free money’ — but also carry complexity and risk, experts say


When you work for a company that’s publicly traded, they may offer you a way to buy their shares at a discount through an employee stock purchase plan (ESPP).

This can be a great deal, but it’s essential to understand the rules and risks involved before signing up.

ESPPs are offered by about half of all public companies, but whether you should participate depends on your financial situation and goals.

If you have other short-term priorities, like saving for retirement or paying down debt, you may want to put those first.

During an ESPP’s “offering period,” usually six months, your paycheck will have after-tax deductions used to buy discounted company stock on a specific date.

The best ESPPs offer a 15% discount and a “lookback provision,” which bases the stock purchase price on the lower value of the beginning or end of the offering period.

For example, if the starting price is $20 and the ending price is $22, you could get a 15% discount on the $20 price and pay $17 per share.

That’s a savings of $5 per share and a roughly 22.7% discount from the current market price.

Depending on your plan, you may be able to sell the stock quickly after purchase to lock in the gain, but you’ll owe income and capital gains taxes.

However, the stock’s future performance is uncertain.

Holding it for the long term means gambling on the stock continuing to perform well.

In 2023, 85% of qualified ESPPs offered a 15% discount, and 83% had a lookback provision.

It’s crucial to read the plan documents carefully before signing up to understand the qualification status, length of offering period, purchase dates, and what happens if you leave the plan.

While ESPPs can potentially be a good benefit, they’re not always the best financial move for everyone.

  • Overall sentiment: positive
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    “In 2020, roughly half of public companies offered an ESPP, according to a 2021 survey from the National Association of Stock Plan Professionals and Deloitte Tax.”

    “If you have access to one, it’s worth considering because “there’s free money to be had,” said certified financial planner Matthew Garasic, founder of Unrivaled Wealth Management in Pittsburgh.”


    “But whether and to what extent you decide to participate depends on other short-term priorities and “how comfortable you are sacrificing cash flow” during the offering period, Garasic said.”

    “In 2023, some 85% of qualified ESPPs offered a 15% discount, up from 70% of ESPPs in 2020, according to a recent survey from the National Association of Stock Plan Professionals.”

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