Walking away from Options and RSU's

[felizcortez]

I have a large number of RSU's/Options at work that I am looking for some advice on.


Information on awards.
RSU Vest Date
Jan 2016 - $20k
Jan 2018 - $23k
Oct 2018 - $124k
Jan 2019 - $19k
Jan 2017 - $29k

Total RSU's - $215k at current stock price of 57.85

Options Value on vesting dates
Option Grant 1 - Grant Price 32.36
Jan 2016 - $6.5k

Option Grant 2 - Grant Price 44.09
Jan 2016 - $8k
Jan 2017 - $8k
Jan 2018 - $8k

Options Grant 3 - Grant Price 53.94
Jan 2016 - $2k
Jan 2017 - $2k
Jan 2018 - $2k
Jan 2019 - $2k

Option Grant 4 - Grant Price 32.80
Jan 2016 - $9k
Jan 2017 - $9k

Total Options - About $56k at current stock price of $57.85

The options vest 25% each year over 4 years while the RSU's are 4 year vesting cliff's. I consider the options less valuable since they fluctuate greatly with the stock price and I think the company stock price is pretty high right now. I get a new chunk of RSU's and options each year worth about $30k combined ($15k options, $15k RSU's).

I'm 33 and have a NW of $1.12M in Investible assets between retirement and taxable investment accounts. Current expenses are sub $50k per year for my wife and I including rent which should drop after moving away from a HCOL area.

We are planning to quit next year in July which should provide about another $100k to our net worth due to salary, Profit sharing, sales bonuses etc. Current salary is about $240k per year before tax.

I'm struggling with walking away from the RSU's since they are such a large chunk of change. The painful grant is the $124k one, I'm comfortable with walking away from all of the other ones, but that one stings. I know it is 3 years out so when I divide it by 3, it is only worth about 40k per year, but that is almost one full year of expenses currently. If I leave in July of 2016, the above options/RSU's will vest about $36k which is partly why we are timing leaving for mid 2016.

I guess I'm struggling with the OMY complex a bit since I've been in corporate America for the last 14 years. Our plans are to quit my job, buy a sailboat and sail around the Caribbean for 2-3 years then see where life takes us afterwards. While the extra cash from the vesting schedules would be nice, it wouldn't be life changing.

Would appreciate any thoughts you have on the above.

 

[SecondCor521]

It helped me a little to go on an unpaid leave of absence for the last three months of my job - in my case, my options and RSU's continue to be in place and vest while I am gone. My last juicy options vest February 4th, and if things go as planned I will submit my two week notice on February 5th.

The other thing you might do is ask your stock compensation folks if there is anything that accelerates the vesting. In my case, those were death and disability, which I decided not to do but maybe your situation has other possibilities.

 

[jabbahop]

As you know the whole point of options/Rsu's is to the those omy reactions. At some point you just have to say it is enough

That was last Jan for me. Will probably have a little regret this Jan when I realize I missed out on a six figure payout but enough is enough at some point and I a Very happy to have had the past year to do what I want

Good luck with your decision


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[felizcortez]

It helped me a little to go on an unpaid leave of absence for the last three months of my job - in my case, my options and RSU's continue to be in place and vest while I am gone. My last juicy options vest February 4th, and if things go as planned I will submit my two week notice on February 5th.

The other thing you might do is ask your stock compensation folks if there is anything that accelerates the vesting. In my case, those were death and disability, which I decided not to do but maybe your situation has other possibilities.

The unpaid leave idea could be a good one if I could potentially extend it enough to get 2017's RSU's and Options. Not sure if the company would go for it, but I guess if I'm leaving I don't have anything to lose by asking.

The grants do get accelerated by death or disability, but I agree I don't want to speed the grants up that way.

 

[MichaelB]

Learning to say "enough" is an important component of FIRE.

 

[capjak]

Personally I would wait till after the 124K options vest as you will be 36 years old correct? I have found three years goes by quickly.

 

[dtbach]

Personally I would wait till after the 124K options vest as you will be 36 years old correct? I have found three years goes by quickly.

and $1.12M is not really that much since you have to make it last over 60 years. 3 years could easily up that to $1.5M with the options and savings from your 240K salary.

Although you say $50K/yr is enough, there are always big ticket items that will pop up and blow that budget to shreds.

I'd think carefully about walking away too soon.

 

[RunningBum]

Confused about your stock options. For option grant 2, did you actually have 8000 shares vesting each year? That's 24000, and with the current price $13 over the grant price, that's over $300K. Option grant 4 would be $450K.

Or is it that you got 8000 shares total, and with 25% vesting each year you have 6000 unvested? Even that is over $80K alone, and grant 4 with 4500 left to vest is over 100K.

I know you are discounting the value because the stock is high, but still, it is nearly $250K right now even with the lower assumption, unless you mean something else even more limiting. Taxes might cut that in half if your state tax is high, but that's still well over the $56K you stated, so I don't see where you are getting that figure.

That's a lot more to walk away from. At some point you probably want to walk away anyway, but you may not get another shot at this kind of money. At your young age I'd want some buffer while it's easy to get, and I don't think you have much of one right now. Do you own your boat now? Aren't boats pretty pricey to maintain?

If you stay, I'd encourage you to exercise the options and RSUs that you are vested in if you haven't already since you aren't confident of the stock price outlook. I had more than enough to retire on but got greedy and stayed omy, a year in which the dotcom bubble burst and I no longer could retire. Should've taken the fat bird in the hand while letting more gather in the bush.

 

[Seattle]

RSUs

I had to deal with walking away from RSUs as well when I decided to retire. I know what you are going through.

My experience is that RSUs are golden handcuffs and you will just keep getting more every year which will tempt you over and over again to hang in there. That is why companies give them out - to keep good people.

My recommendation - set a target and when you hit it, you walk. Mentally, you just have to be strong that once you hit that target you won't give into temptation and stay because they gave you more RSUs. It will never end.

For me - I hit my target and then I just stayed another 90 days to get a large RSU vest and called it a day. Worked out well. And get this, when I announced I was leaving, the following week the annual RSU grants flowed out and I received the largest grant I had ever gotten. I could have easily been tempted to stay, but I stayed the course and walked away from over $1M in unvested RSUs...I just realized that my freedom was worth more then money...and so far, I was right.

Good luck to you - sounds like if you can hang in there 3 years, you will hit your target and be able to sail off...

 

[Animorph]

I'd pick up the $124k. That also gets a lot of the current options. Shouldn't be as hard to leave the rest by then, as long as future options aren't of the $124k variety.

 

[felizcortez]

Confused about your stock options. For option grant 2, did you actually have 8000 shares vesting each year? That's 24000, and with the current price $13 over the grant price, that's over $300K. Option grant 4 would be $450K.

Or is it that you got 8000 shares total, and with 25% vesting each year you have 6000 unvested? Even that is over $80K alone, and grant 4 with 4500 left to vest is over 100K.

I know you are discounting the value because the stock is high, but still, it is nearly $250K right now even with the lower assumption, unless you mean something else even more limiting. Taxes might cut that in half if your state tax is high, but that's still well over the $56K you stated, so I don't see where you are getting that figure.

That's a lot more to walk away from. At some point you probably want to walk away anyway, but you may not get another shot at this kind of money. At your young age I'd want some buffer while it's easy to get, and I don't think you have much of one right now. Do you own your boat now? Aren't boats pretty pricey to maintain?

If you stay, I'd encourage you to exercise the options and RSUs that you are vested in if you haven't already since you aren't confident of the stock price outlook. I had more than enough to retire on but got greedy and stayed omy, a year in which the dotcom bubble burst and I no longer could retire. Should've taken the fat bird in the hand while letting more gather in the bush.

I edited the original post to make this more clear. The 8k is actually $8k or the current value of the option based on the grant price and the current share price. All of these values are pre-tax so they would be lower once Uncle Sam takes his cut.

I've exercised all of my vested RSU's and options and do so whenever they vest. Take the cash and run. I also do the same with ESPP.

A few other pieces of information.

I've been moved multiple times for work, and don't really enjoy where we live now. Thought we could make it work, but my wife and I don't like the winter even though we grew up in the area.

My wife and I have been talking about doing this before potentially having kids so it is a bit of a life goal thing. We also aren't averse to returning to work if needed and things don't completely work out.

I've also looked at potentially earning some side income and believe that even part time work could sustain us for quite some time.

 

[Texas Proud]

I will throw out something to look at...

Do you get to keep them if you are laid off I had small options and only a few shares of RSU.... got laid off and I still had them...

I still got a W2 from mega 5 years after I was let go.... for less than $2K, but hey, it was something I was not expecting...


So, if your company has layoffs, you might be able to get out with that... your boss might help since it usually does not affect their budget...

 

[Fedup]

I would wait until you get laid off and then take time off. I think it's coming soon for some companies.


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[FIREd]

RSUs and stock options will likely keep rolling in every year, so no matter when you quit you will leave some money on the table. That's the purpose of golden handcuffs - making it harder for you to quit. You just have to accept it. Nobody knows what the stock will be worth in 2-3 years so there is no telling how much you will actually make on these RSUs and options when they vest.

 

[felizcortez]

RSUs and stock options will likely keep rolling in every year, so no matter when you quit you will leave some money on the table. That's the purpose of golden handcuffs - making it harder for you to quit. You just have to accept it. Nobody knows what the stock will be worth in 2-3 years so there is no telling how much you will actually make on these RSUs and options when they vest.

That's the rub, the stock may go up it may go down. I've made a pretty penny as the stock has risen over the last few years, but that may or may not be repeatable. Don't really know.

 

[wanaberetiree]

....

I'm 33 and have a NW of $1.12M in Investible assets between retirement and taxable investment accounts. Current expenses are sub $50k per year for my wife and I including rent which should drop after moving away from a HCOL area.

Irrational advise - you are 33 with 1.12M NW, so doing noting with normal AA and if you are a disciplined investor, you will have ~5M by 50 yo. If you want to do your 2-3 time off - do it now.

I am 56 and always think I'd like to go live in EU for 1-2 years and etc. and I can't, because of family, parents etc. So the longer you wait the more difficult it will be. RSUs, if you are a good professional, you will get them again after you are back

 

[Ian S]

Personally I would wait till after the 124K options vest as you will be 36 years old correct? I have found three years goes by quickly.

I agree with this. 36 is still awfully young so you'd have no trouble doing whatever you want at that point. From what you've said, I gather your plans to leave are more based on trying something a little more exciting rather than you hating your job so much that you just can't take it any more. If it were me, I'd stick it out a bit longer and build up the NW some more.

 

[papadad111]

Keep in mind the huge tax hit that you take with options and RSU's. Is the amount quoted the gross amount or the net after tax amounts?

Only grant that I would consider is the big 124k one. But .... Generally figure 40 percent or so in terms of tax hit. That 124k becomes 75k or so - not chump change but not life altering either. Even then, you likely will want to hold shares for at least a year to make future appreciation, if any a long term gain. Consider diversification risk during that period too. That's all little stuff to consider.

Time- the big one - becomes more valuable than money at a certain point in life. For me it was mid 40s. Others are in their 50s. You may be in that space now at late 30s.

Remember - don't let the tail wag the dog. That's what golden handcuffs do. I bet they give another 100k plus grant in about a year. Keep you on their timeline ...

The little 2k here and there grants are like cookie crumbs. Don't bother sticking around for that ...

 

[Closet_Gamer]

Congrats on getting to $1.12M so young. Well done.

I'd say suck it up and work a few more years to bank the money. You're quite young and obviously have climbed in your field. Not sure what you do for a living, but you may find out that a three year hiatus leaves your knives more rusty than you expect while your peers (competitors) are driving their skills & resumes forward.

Different situation but earlier in my career a number of us found ourselves in the "take time to play or press on" situation. I decided that while someone was willing to pay me today, that might not be true tomorrow and chose to press on. Others took different approaches -- and just about to a person their careers never recovered the zing they had before whereas nearly everyone who pressed on is in really great shape. In fact many of the people who were thought to be "laggards" in the group wound up in the strongest positions. I suspect most who played damaged any chance of really FIRE'ing at some point. I'm not sure if you asked them whether they look at those life experiences and say "it was worth it." Perhaps they do. I do know that everyone who pressed on (and LBYM along the way) has great choices and a fair bit of peace as they navigate to the finish line.

To another poster's point, life obligations may make it harder to do a big life experience later -- but don't presuppose someone will write you big checks later either. And don't kid yourself...if you come back in 3 years and the person who is currently your peer is now your boss, that will leave a sting.

Good luck with your choice.

 

[Al18]

$1.12 mil in investible assets is high for a 33 year old. However considering your age, your safe withdrawal rate is probably about 2.5%, which equates to only $28K per year. I would keep working, to get your investible assets up around $2 mil. Working a few more years will also help your SS earnings, because your benefit is calculated from your highest 35 years of earnings and 0's are averaged in for less than 35 years.

 

[JoeWras]

RSUs and stock options will likely keep rolling in every year, so no matter when you quit you will leave some money on the table. That's the purpose of golden handcuffs - making it harder for you to quit. You just have to accept it. Nobody knows what the stock will be worth in 2-3 years so there is no telling how much you will actually make on these RSUs and options when they vest.

Ha ha, I laughed at that. I thought so too, and then RSUs suddenly started drying up.

So, they are going to make my ER easy. Handcuffs released. Thank you!

As for the future value: good point. I thought I was going to ER at 40. And then the dotcom bubble burst.

 

[petershk]

I'll give my persinal perspective. Early in my career I had options (think late 90s). After a roller coaster... They expired worthless. So I started the FIRE path.

Fast forward 12 years and I take a job I like at a small company (turning down a "sure thing" at one of the high flying tech companies).

Since they couldn't pay me as well I got tons of options. Wouldn't you know... High flyer crashes.. small startup rockets. Suddenly my worthless options are worth more than I ever thought.

Made myself a promise in the 90s .. never... Ever... Risk something you need to get something you don't. So I cashed out. Needless to say it's still been going up. Thanks to my 90s experience I have 0 regret of "cashing out too early.". Lots of coworkers playing option roulette... No thanks .

So now I have MORE options and more and more... Because... Well... Once you can leave your value goes up. Now I was getting close to FIRE anyway... This just put it way over the edge.... Yet I'm still working.

So when I stop working in the next year or so I'm walking away from those options. It's not really a factor.

To be clear the potential value could possibly be 50% of my current NW but I don't really need it and I wasn't expecting to have the NW I have now anyway. If it made a difference if probably stay till it didn't. But DW and I are well above out original "number." This is just luck.

For detail... I'm 40,.2 young kids... NW around 3.8m. Burn rate around 90-100k/yr.. post tax. It's been dropping a bit.

So would 5.5m be nicer than 3.8m... Sure... But 4 years from now 7.8 will look better than 5.5 . The ladder goes up... I think I'll just get off here.

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[JoeWras]

To be clear the potential value could possibly be 50% of my current NW but I don't really need it and I wasn't expecting to have the NW I have now anyway. If it made a difference if probably stay till it didn't. But DW and I are well above out original "number." This is just luck.

For detail... I'm 40,.2 young kids... NW around 3.8m. Burn rate around 90-100k/yr.. post tax. It's been dropping a bit.

So would 5.5m be nicer than 3.8m... Sure... But 4 years from now 7.8 will look better than 5.5 . The ladder goes up... I think I'll just get off here.

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Wise. Amazing how greed gets hold of so many with options and they ride them into the dust.

Take it and run. Enough is enough. You are wise.

 

[Danmar]

Personally I would wait till after the 124K options vest as you will be 36 years old correct? I have found three years goes by quickly.

Me too. You are very young and three more years isn't that much at this stage. Very long retirements need a fair amount of funding to provide the flexibility you might want.

Now if you absolutely hate your job and your health is at risk, different story. But you didn't mention that. Options and other equity related incentive comp is a common way for ordinary people to get quite wealthy. Worked for me.

 

[Sojourner]

Personally I would wait till after the 124K options vest as you will be 36 years old correct? I have found three years goes by quickly.

+1

I semi-retired a few years ago in my mid-40s and based on my experience, I think mid-30s could be a real challenge... mentally, socially, financially, and in many other ways. Hang in there for 3 more years and see how things look and feel to you then. In the meantime, take as much vacation and paid & unpaid leave as you can to test out the idea of ER.