Step-by-Step Guides
Stock Comp Planning (80/20 Rule)
The 80/20 rule applies with stock-based-comp: high quality decisions can generally be made by focusing on a few key items
Simplify the Process by Focusing on What Matters
With stock-based-comp every situation is different, and the details can definitely have a notable impact. That said, in most cases high qualify decisions can be made by focusing on just a few key items (i.e. the 80/20 rule):
(1) What Decisions/Choices Do You Have?
With stock comp, the decision(s) you need to make generally come down to a handful of key choices.
(1) Should you exercise/buy your options?
(2) Should you sell your shares/options?
(3) Or should you wait/do nothing?
(2) What Key Factors Should Be Considered?
Which decision(s) you're focused on impacts the specific key factors at play. But generally, the key inputs will come down to these four factors:
(1) What is the cost to buy your options (price to buy + taxes owed when exercising)?
(2) What is your financial plan and alternative use cases/need for cash?
(3) What is your risk tolerance, and how much concentration risk will/do you have?
(4) How do you feel about the company's business prospects/do you believe it's a good investment?
(3) Is There a Way to Optimize For Tax?
Optimizing for tax is usually a second-order focus (behind the investment and risk decisions), but it can have a notable impact on your after-tax dollars and definitely should be part of your analysis. Key tax-optimization vectors/areas typically include:
Can you reduce your income tax (mostly for choices related to NSOs and RSUs)?
Can you reduce or optimize your AMT tax (mostly for choices relating to ISOs)?
Can you reduce or optimize your capital gains tax (mostly for choices relating to stock from exercised ISOs/NSOs or vested RSUs/RSAs)?
Can you reduce or optimize your other taxes (mainly FICA and State taxes)?
For more information on tax optimization opportunities see: 50+ Tax Strategies
Work with 30/40 Wealth
Have a big equity or tax decision ahead?
We're a fee-only fiduciary for tech employees with a lot of company equity. We build your multi-year plan: when to exercise options, what to sell and when, and how to cut the tax bill. Then we stay with you for the years that follow.
You're likely a fit if:
- You have $2M+ in company equity, including options
- Your next big decision is coming up: an IPO or lockup, a tender offer, exercising options, selling a large position, or leaving your company
- You want ongoing help with all of it: your equity, taxes, investments and the plan that ties them together
Kris Barney, CFA, EA
$750M+ in equity compensation advised
Fees from $12,500 a year, based on the assets we manage
We take on 1–2 new clients a month
Book a 30-minute fit call →Free and no obligation. If we're not the right fit, we'll say so.
See who we work with →Most Similar
Selected by content similarity, not just shared category.
Next Step
Want this applied to your situation?
A 30-minute consult will tell you whether the framework in this article applies cleanly to your equity package — and if so, what the next three moves are. No pitch.