Max out 401k or espp?
Espp guarantees 15% gains instantly, but it's a taxable account. Our espp contribution maximum is 10%. Maxing out both espp and 401k is not feasible for us. Financially. What should we max out first? Thanks!
ESPP guarantee 15%.. Wow..I wanna check whats that? Use excel and see how much it differ with current tax bracket. I guess if it is 15% Guarantee than ESPP should have better result..
15% ? Even after all the taxes and fees. Plus you say this not before tax money. If you still have + 15% it’s awesome.
Do both
Max ESPP then sell. Then max 401k
What is the company match policy for 401K?
6% of base is what glassdoor says
Let's take a hypothetical 1000$ pre-tax money that you can put in either place. Let's assume your already maxed out employer match, so you aren't leaving free 401k money on the table. On espp side, your 1000$ pre-tax would be ~700$ after tax that you can put in espp. Then you get 15% taxable immediate return leaving you ~770$ after espp sale and taxes on gains. What after that? Are you putting away that 770$ in Long term investment and not touching it till retirement? If yes... Then espp makes sense. In the long run (35 yrs) what will matter more is that you kept money invested for 35 yrs. Having 10% extra money invested from the beginning will matter less and less as time increases. Draw the curve for 35 yrs.
401k first of course. Tax free > taxed 15%
It also depends on what investments the 401k offers. Obviously take at least the 401k match as that’s free money. Though, If your company stock is growing over 20% a year you will most likely outpace any of the investments available to you in your 401k managed by your company as long as you sell into a qualifying disposition (depends on income).
If your employer matches the 401k, do up the match first. After that it depends on your timeline. If you need the money before retirement then EESP, if not then max out 401k.