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Cons of ESPP for employees There could be different tax implications depending on where you and your employer are located. The discount allowed by the company may be taxed as benefit-in-kind. Returns are not guaranteed and the share price may fall as well as increase. There could also be a currency risk involved.
ESPPs may have a look back provision allowing the plan to use a historical closing price of the stock. This price may be either the price of the stock offering date or the purchase dateoften whichever figure is lower.
What happens if I buy shares through an ESPP and then leave my company? The shares that youve purchased are yours to keep, regardless of whether you continue working for your company or the circumstances around your departure.
A lookback is a provision in certain tax-qualified ESPPs. A lookback provision bases the purchase price not on the stock price at the time of purchase but, rather, on the price either at the beginning of the offering period or at the end of the purchase period, whichever is lower.
There is a good chance that the 401(k) plan beats the ESPP if you expect your marginal taxes to go down, as is often the case because you move into a lower bracket and potentially even move from the high-income tax state where you worked to a zero or at least low-tax state in retirement.

People also ask

Are ESPPs good investments? These plans can be great investments if used correctly. Purchasing stock at a discount is certainly a valuable tool for accumulating wealth, but comes with investment risks you should consider. An ESPP plan with a 15% discount effectively yields an immediate 17.6% return on investment.
Because you wont have to forfeit ESPP shares youve purchased when you quit, youll want to evaluate if your shares are still worth holding onto. Its also worth doing the math on whether or not its worth it to stick around until youve purchased ESPP shares in the current purchase period.
Often, vested stock options expire if they are not exercised within the specified timeframe after service termination. Typically, stock options expire within 90 days of leaving the company, so you could lose them if you dont exercise your options.
Employee stock options can be a valuable benefit when you join an early-stage company, especially if youre among the first employees. While the potential payoff is huge, theres also a risk that you could lose everything if the company fails.
A lookback is a provision in certain tax-qualified ESPPs. A lookback provision bases the purchase price not on the stock price at the time of purchase but, rather, on the price either at the beginning of the offering period or at the end of the purchase period, whichever is lower.

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