I can’t help but realize that writing this blog each week almost always involves me giving some advice about some money issue. Sometimes it has been very specific on things like saving money at the grocery store or preparing yourself for retirement and at other times it’s been more spiritual like when I refer to things that can motivate you and good money habits to develop that help protect your financial well-being.
Sometimes when I look back on what I’ve written, I realize I definitely have had a tendency to pontificate and yes, even ramble. I’m being kind to myself more than a little here. I really think writing a 2,000+ word post can lose even the most diehard readers. Who has the time for that much stuff to read on a regular basis?
So today I am going to write a shorter, more personal, and concise post. And guess what? I going to write it with less than 1,000 words and actually ask for your help and advice about it.
This post is about a financial decision my wife and I have to make right now. I don’t always have every answer to every question (gee, that is kind of hard to admit!) so why not see what you have to say? Today I am asking this question: “What is your advice on this ESPP exit?”
When an unexpected financial decision appears, what do you do?
A couple of weeks ago, my wife received a letter from Philips Electronics (PHG), a former employer, regarding changes in her ESPP (Employee Stock Purchase Plan) which she still owns after years of not being employed there. Her stock has been accumulating with dividends and reinvesting every year.
It has grown very well over the years despite no additional new cash infusions. It just sat and grew into a tidy sum until now she has over 300 shares with a value of nearly $12,000. The ESPP plan will be revised effective April 1, 2019 (coincidence?) and ex-employees must exit now from the plan by that date!
Of course there may be tax implications to this so that is another reason we are doing some heavy thinking. A choice has to be made, and soon.
What are our choices?
Option #1 – Remain a shareholder and transfer all of the whole shares to a personal brokerage account. Any fractional shares must be sold off before any transfer no later than April 1st.
Option #2 – Sell all of the shares through the administrator no later than April 1st.
We could do absolutely nothing and the administrator will sell all the shares (whole and fractional) off and forward a check to my wife (with higher fees that way and a mandatory withholding deduction to cover any potential tax consequences).
Upon receipt of the money, we would then be free to re-invest any or all of the money into a retirement type account like a Roth IRA or an IRA CD account for example. Re-investing may create a tax deduction that eliminates some or all the tax consequences on our 2019 taxes.
What will it cost us to do all of this?
Of course, none of this is free. In fact, option #1 actually requires paying some of our own money up front to have any of this processed (by credit card). After the transaction is completed, any monies she will receive will take about 10-14 business days to actually get in hand.
But, whether we choose option #1 or #2, there is a cost. They do differ slightly.
In option #1, transferring the shares to a broker will cost a flat $50.00 fee plus $0.03 per fractional share sales.
In options #2, fees are $0.03 for the sale of each share plus a $24.95 fee added.
If we do nothing, the cost is $0.07 per share when the company sells the stock, plus a fee of $39.95. They will then deduct the mandatory withholding.
Oh and by the way, asking the company for any advice or help with the options will cause all the share fees to double and add another transaction fee of $39.95.
There is also a $5.35 “handling” fee (WTF is that?) charged as well as a “small” SEC charge for issuing any transaction and it will be deducted from the proceeds. Sounds like fun, doesn’t it?
Just an additional point to know
The money we are talking about here is not a life changing number and we haven’t ever even thought about using it for anything in the 12 years we have been married. In fact, my wife was very content to just leave it where it was and let it keep growing every year. That includes even the down years of market drops during the recession of 2008.
Since she is not that close to FRA (full retirement age) age, it makes the most sense to re-invest the money somewhere rather than just use it as a windfall gift that fell from the sky. We aren’t going to spend it right now as we always planned that money as a part of her retirement funds.
So what do you think?
We will decide what to do in just a few weeks so here’s where you come in. Which choice do you recommend and why?
We have over 300 shares of a very reliable well known company who currently is growing and whose stock pays dividends regularly. The company stock has grown about 167% since 2008 and has grown 25% in the past two years alone so it’s kept pace and even exceeded the overall market trends. Please make your pick here and we’ll let you know what the verdict and decision outcome is before the April 1st deadline! You can leave any comments you have in the comment section below and thanks!
Option # 1? Option #2 (and then what)? Or, do nothing and get a smaller check in the mail?
There ya go. All in less than 1,000 words!
Update: March 25, 2019
So I promised that we’d reveal our decision. We decided to keep the shares and roll them over into a brokerage account. Since we transferred the shares from the brokerage side, we are hoping we avoided all the fees (we have other accounts with the brokerage firm). It’s in process now, so we’ll see how that turns out.