Stock options and restricted stock units (RSUs) are becoming more common as part of a total compensation package. But there are differences between saving for retirement from salary and incorporating stock into a retirement plan.
Making automatic contributions to an employer-sponsored plan is the foundation of tax-advantaged retirement savings, and you want to be sure you take full advantage. But once you set it up, it happens without you thinking about it. Creating a retirement income plan from stock requires more proactive and consistent planning. It may also fit into your retirement income planning in a different place than traditional savings.
Depending on where you are in your career, you may have decades to exercise options and set up a plan to save consistently. Or you may be close enough that you’ll need to carefully plan your retirement date to vest as much as possible before employment termination.
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