I was laid off from a tech company recently, just before the latest big wave. I was given 90 days to decide what to do about my stock options, so I have just a short time to decide. I’ve been hunting for a job. I still have three months’ runway in the bank, and I’ve got freelance income that will come in soon, so I’m not panicking.
“The first thing that’s important to understand is there is a cost to exercise and there’s potentially a tax liability,” says David Snider, founder of Harness Wealth, based in New York. That 90 days is typical, by the way, and gives you some sense of the tax implications. That is, if your shares are designated as qualified incentive stock options , which the company should be able to tell you.“Some say end-of-year, some even say five years,” says Vieje Piauwasdy, senior director of equity strategy at Secfi, a wealth management company that specializes in employee stock options.
Looking closely at your overall financial situation will also help you decide if you can afford to lay out the money for the exercise right now. Some companies, like SecFi, offer financing options to borrow against your future gain in order to complete the purchase. With a private company, however, there’s no way of knowing when it might go public, or at what price.