3-Step Financial Planning Strategy for Tech Professionals
No matter who you are or which tech company you work for, everything about your financial situation will be unique based on you, your goals, and even your family. In other words, "one-size-fits-all" advice just won't work for tech professionals – especially when Amazon, Google, and other tech giants have unique compensation plans compared to other industries. There are a few general strategies that can guide your portfolio to success, though.
At Consilio, we believe in a comprehensive approach to financial planning for tech professionals that revolves around achieving three core goals: winning the tax game, optimizing RSUs, and making work optional. Here's what you need to know about our strategy for maximizing your compensation package.
Win the Tax Game
Taxes are confusing and complicated, even for those who are well-versed in the field. There are lots of deductions and exceptions available, but some tech professionals don't know about them or would rather not deal with the hassle, even when there's an opportunity to save money.
The first thing you need to do is understand the rules so that you can win the game for years to come – and Consilio is here to help.
Many tech professionals, particularly those at Google and Microsoft, have a compensation package that relies heavily on RSUs. You need to know how to reduce taxes on RSUs, when to sell your stock as it vests, manage capital gains, maximize your deductions on this aspect of pay, and even how to make the most of charitable contributions.
Knowing which types of investments are tax deductible can also impact your bottom line. You can make contributions to a 401(k) to avoid paying taxes on the income now. Keep in mind that this means you will have to pay taxes when you withdraw the funds in retirement, but you may be in a lower tax bracket at that point in life.
Year-end tax planning opportunities are a great time to review your investments, income, and compensation packages to help you make savvy financial moves going forward.
Optimize RSU Compensation
RSUs are a core part of many tech professional compensation plans. These investments are one area that other industries generally don't have to deal with as often, but they can be a huge chunk of compensation for those who work at companies like Microsoft, Google, Amazon, and Meta (Facebook).
In short, an RSU is a restricted stock unit that only comes into an employee's hands according to a vesting schedule, which is often based on the length of employment. Although they can be nuanced, understanding them is crucial to getting appropriately compensated for your work. Knowing when to sell and when to hold without having too much of a concentrated stock position is important for your planning.
To help you make the most of your stock compensation, we built the Consilio Excess Model™ to help tech professionals understand how their stock compensation relates to their financial planning goals, and create a decision framework for how many shares to sell vs hold. Our proprietary model breaks this down so you can easily understand what to do next and how to make the most of your compensation package and benefits. Using this system, we have helped hundreds of tech professionals calibrate a financial plan based on what matters most to them now and in the future.
Here's a breakdown of what you can expect from some of the major players in the tech industry:
RSUs are the most common addition to your compensation package in the tech industry, but this point also applies to similar package offerings, including stock options (NQSOs and ISOs) and stock refreshers. Consult with us to learn more about how to make the best use of these financial packages.
Make Work Optional
Here at Consilio, we have a saying: work because you love it, not because you need it.
Complete financial independence may mean relaxing and enjoying life without worrying about where your next paycheck is coming from. For many of our clients, the term “relax” doesn’t resonate. So their form of financial independence is working on passion projects or doing a startup, knowing that the outcome of the company doesn’t change the success of their financial plan.
Of course, we also take a look at your spending, savings, and strategies to make sure your assumptions are reasonable and that you’re not missing anything. Our financial professionals are much more focused on the future, your long-term goals, and how you can achieve them using age milestones. We'll help you focus on tax-advantaged accounts like health savings accounts and help you to manage your concentrated stock positions.
Most people already know that their retirement savings plan is crucial if they want to one day enjoy their golden years. A 401(k) is an especially powerful vehicle for this retirement planning, and you can benefit from company matching programs.
This is why Consilio will help you to make the most of this investment vehicle, depending on which tech company you work for:
If you are already maxing out your 401(k), Consilio can help you plan your next moves. For many of our clients, simply maxing a 401(k) plan isn’t enough! If you’re not fully maxing, we can guide you through what you need to do to take full advantage of this tax-advantaged account.
Are You a Tech Professional Looking for Financial Guidance?
From Google and Meta (Facebook) to Amazon and Microsoft, each tech giant has its own unique benefits for its tech professionals. Consilio can educate you on the wisest financial planning strategy for tech professionals to make decisions with confidence -it’s what we do!
If you work at one of these companies, are highly compensated in company stock, are over the age of 45 with a family to think about, and want some guidance, Consilio is here to help. Starting with optimizing your tax deductions and maximizing RSU compensation, our team of professionals can help you build and implement a plan for financial independence.
For more advice on where to go from here to achieve your financial goals well into the future, contact us about our wealth management services today!
DISCLOSURES:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information contained above is for illustrative purposes only.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
All investments include a risk of loss that clients should be prepared to bear. The principal risks of CWA strategies are disclosed in the publicly available Form ADV Part 2A.
