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Savings Chart w/ ESPP (self.personalfinance)

submitted 2 weeks ago by root to c/[email protected]

8 comments fedilink hide all child comments

There's a pretty popular savings chart in the personal finance community, and I just noticed it seems to be missing the option for when your employer offers an ESPP (Employee Stock Purchase Plan) unless I'm completely missing it.

Where would you guys put it if you could add it to this chart?

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[–] skoberlink 2 points 2 weeks ago

It's never a guarantee and anyone who believes that shouldn't be investing in the market. But it would also be fair to say many (most?) don't understand the nuances of an ESPP.

I took part in one when it was available to me. I just built it into my overall risk profile. It was a fairly stable company and our discount was 15%. We had to hold it for two years for the cost basis to show the discount for tax purposes to incentivize holding on to it. It would be extremely unusual for the discount to be wiped out even if you held on to it for two years or more - but as you point out, it's not impossible. It also came out of payroll so to be honest I couldn't cut a ton out of every paycheck anyway, at least not without sacrificing other parts of the portfolio and increasing my overall risk.

It's not just a free bonus but I think it can be a good way to get a little boost as long as you consider your whole portfolio and how any restrictions may affect that return.