My first post-Laying it out there

[LivingAlmostLarge]

Less in taxes. Sure you put in $15.5k/year in a 401k but likely in your bracket it's really only $11k of real money.

Question, why can't you sell your company stock? It's privately held until retirement? What happens if you choose not to work there anymore? Do you lose it?

I like Jim's idea of splitting it, but I read earlier you can't sell it right?

[jIM_Ohio]

Married filing jointly is what I will assume

I assume salary/gross income of 180k now and 220k when wife returns to work.

I assume you will save 20% of gross in both cases

180k means you will pay 28% taxes (28% over $131450)
220k means you will pay 33% taxes (33% over $200300)

Can you outline how you would invest 36k now?
How much goes to 401k? I will assume 8k
I assume the other 28k is taxable and invested in taxable accounts.

So with gross income of 180k, you pay taxes on 172k. Std deduction of 10900, +3500 for each of 4 dependants (self, wife, 2 kids)- I think these deductions get phased out, but I will assume you have them for now- 10900+4*3500=24900
172000-24900=147100
Tax is $25550+28%*(147100-131450)=$29932 tax owed. Even though you invested 28k of the money you earned, you paid tax on it first.

Now assume Wife works and can contribute as much as she wants of a 40k income to retirement plan.

220k gross salary, 20% of this is $44000. Assume 8k tax deferred for you (to 401k) and that wife can contribute 36k to her 401k or similar plan at work.

That whole 44k is now pre-tax. The 220 gross is now reduced to 176k. $24900 is your adjustment based on std deduction and exemptions.

176000-24900=$151100 is your taxable income. Taxes owed on this are $25550+28%*(151100-131450)=$31052 taxes owed

You had 40k higher income in second situation and your tax bill went up only 2k.

If you saved in taxable accounts in second scenario, this will get a larger tax bill very fast. If you live in a high tax state like Ohio (where there is no married filing jointly on state tax return) this won't even paint the right picture for state taxes... but for federal, with NOT using the wife's 401k, here are the numbers

220k income, $44000 saved, 8k to your 401k, nothing to wife's 401k.

220k-8k=212k, 24900 adjustment to income= 187100
25550+28%*(187100-131450)=$41132 taxes owed

your tax bill went up 10k if you do not use 401k for the savings if available.

Things to check-
how much can you put into 401k?
At what level are the exemptions phased out (income level)

I am still new at doing this type of analysis, and no state taxes were factored in either. Always double check my math.

[jIM_Ohio]

Less in taxes. Sure you put in $15.5k/year in a 401k but likely in your bracket it's really only $11k of real money.

Question, why can't you sell your company stock? It's privately held until retirement? What happens if you choose not to work there anymore? Do you lose it?

I like Jim's idea of splitting it, but I read earlier you can't sell it right?

He doesn't need to split it- it appears this stock is for a company which is privately held and the private stock tends to perform well. What he needs to do is increase the amount of conservative investments he has in other places (wife's accounts, brokerage accounts, emergency funds) such that he has half the value of company stock in conservative investments (1/3 of portfolio would be conservative until this benchmark is hit, then this might decrease to around 25% once the "company stock/2" is in bonds and cash- then contributions can go towards equities and similar investments.

His company wants managers to hold company stock as an incentive to make the company do well. As an employee or investor I would want the same thing (what would that tell a customer, investor or employee if a senior manager was dumping company stock?).

[formerdebtslave]

Less in taxes. Sure you put in $15.5k/year in a 401k but likely in your bracket it's really only $11k of real money.

Question, why can't you sell your company stock? It's privately held until retirement? What happens if you choose not to work there anymore? Do you lose it?

I like Jim's idea of splitting it, but I read earlier you can't sell it right?

If I choose or they do, I have to wait 3 yrs, collecting 9% interest and am then paid out. It's a great plan, but an inflexible one, which is fine by me because it has grown significantly.

[Scanner]

Thanks, the company stock is not something that I can sell. It's an investment plan put together by our founder, and it is very sound. I know, Enron etc, but trust me this is not them! (we are privately held) We have been profitable every quarter the company has been in business, which is 40 years. The plan is for "Executive Level" employees and is an "award" of sorts. I receive roughly $40k a year in contributions to this plan, so it continues to grow. This money unfortunately will be considered deferred ordinary income when I quit, retire, terminated, or for my wife if I *gulp* die.

Now I'm going to lay it out there -

Horse Hockey.

Famous last words -" it was different." "They are different."

That's like a line I would have used when I was 19 to try to land a chick in the sack.

Fine, they gave you the stock.

You should be able to sell it or do with it as you please. I'd sell 3/4's of it and place it somewhere else. Luckily everything is down so transferring it from one equity to another wouldn't be that much of a hit.

His company wants managers to hold company stock as an incentive to make the company do well. As an employee or investor I would want the same thing (what would that tell a customer, investor or employee if a senior manager was dumping company stock?).

Um. . .that he wants to minimize risk while maximizing gain in his portfolio?

You are saying he has to hold onto the stock for political reasons?

Horse hockey.

I don't like that at all.

[zetta]

You should be able to sell it or do with it as you please. I'd sell 3/4's of it and place it somewhere else. Luckily everything is down so transferring it from one equity to another wouldn't be that much of a hit.

The stock is privately held. It is quite likely true that he can't sell it. First, there isn't a market. Second, the company's board can put restrictions on private stock -- such as the company has the first option to buy before any transfer can be made. Also that you can't sell unless you leave the company. (In the case of divorce, often the company will pay the spouse cash for the shares awarded in the settlement.) My dad had "limited partnership" shares that were like that. I'm sure it's all been spelled out in the documents he signed when given the stock grant.

Things work differently at the upper management levels...

[formerdebtslave]

Now I'm going to lay it out there -

Horse Hockey.

Famous last words -" it was different." "They are different."

That's like a line I would have used when I was 19 to try to land a chick in the sack.

Fine, they gave you the stock.

You should be able to sell it or do with it as you please. I'd sell 3/4's of it and place it somewhere else. Luckily everything is down so transferring it from one equity to another wouldn't be that much of a hit.



Um. . .that he wants to minimize risk while maximizing gain in his portfolio?

You are saying he has to hold onto the stock for political reasons?

Horse hockey.

I don't like that at all.

Thanks for your advice. I can promise you, it's not horse hockey. I have been with the company for 14 years, and know its founder and leaders well. This company has created significant wealth for its leadership, and continues to do so.

That being said, I realize that diversifying would be less risky of course. It's not an option. I would if I could, but I can't.