Being Smart with your Stock Options


Employee stock options first came into the public eye in late 90s.  Newly minted B-school graduates would compare compensation packages.  They wouldn’t focus much on salary and bonuses, but more on “the options.”  After all, to get wealthy through a paycheck takes decades of spending less than you earn.  But with options this could be achieved in a year or two of frenzied work leading to an IPO – an initial public stock offering.

Today employee stock options don’t provoke the same heart pounding exhilaration as the 90s.  Many of those paper millionaires who worked for dotcoms such as and Webvan saw their seven figure net worths crash into oblivion by the time 2000 came around.  But stock options still have their place and can be a valuable part of your compensation package at established and emerging companies.   While this topic can be very complex, we’ll touch upon the major points so you can understand your options or at least follow what your friend or family member is talking about when they say “I got some more options.”

What are stock options?  While there are many types of options, employee stocks options generally give the employee the right to purchase shares of stock of the employer at a certain price.  The company can be privately held such as Boulder-based Orbotix or Sendgrid or publicly traded such as Ball Corporation in Broomfield.  They are called options because the employee has the right to purchase stock at a certain price for a number of years.  If your pre-IPO company does well, you may have options to purchase company shares for 25 cents, which means you have a nice potential profit at an IPO price of $18.  Most options have vesting schedules, which means you don’t get all of your granted options at once but over a number of years to help encourage your long-term commitment to the company.

How much are stock options worth?  Options have two fundamental components of value.  The first portion is the discount the option holder receives on purchasing a share of stock.  If you have 10,000 options to purchase your company’s stock at $1 a share which currently trades at $20 a share, then the discount is worth $19 a share or $190,000.  The second source of an option’s value is the ability to capture the future appreciation of a stock without spending a penny to do it.  Consider that the 10,000 options don’t expire until 2023.  There is tremendous value in the ability over nine years to participate in the potential increase in that stock’s value.  For more information on this elusive component, research the term Black-Scholes.

Are there different types of stock options?  Most common are nonqualified stock options (NSOs).  When you purchase shares using NSOs, you need to pay tax on the bargain you’re getting just like any other income you receive as an employee.  In the example above, that would mean your employer would report $190,000 in additional compensation to your salary and bonus upon exercise of those options.  This shows up on your W-2 at the end of the year.  More complex are incentive stock options (ISOs), which often are issued by pre-IPO companies.  These are like financial uranium, powerful if used carefully and wisely but they can crush your finances if you’re not careful.  ISOs give you the ability to purchase shares without paying payroll or ordinary income taxes but you may owe Alternative Minimum Tax also known as the AMT.  If you have significant ISO options, unless you have a penchant for wading through tax code it makes sense to hire an expert to navigate through the tax and investment considerations.

Final point to consider.  When you’re in the midst of building a startup, your first response toward your company’s prospects will usually be strong optimism.  Don’t let this positivity blind you to the fact that if you have the opportunity to exercise and sell shares that would change your financial situation significantly, it should be weighed carefully.  It’s not disloyal to exercise and sell a portion of your shares.  Many times it can form the critical foundation to building future wealth.

Four Tips to Keep Travel Abroad Within Reach

Boeing 747 Aircraft Taking Off

With spring break approaching and a “wintry mix” in the forecast, you may have plans for international travel.  My hunch is that Boulder and Broomfield counties punch well above their weight when it comes to going overseas.  This could be due to our relative affluence and high levels of education, the international influence of CU, the large number of foreign-born residents, and the fact that many are self-described life maximizers who moved to Colorado for the high quality of life.  You may think international travel is extremely costly, but it doesn’t need to be.  With these tips, you can help keep down the costs and risks of your next sojourn abroad.

Be flexible with your destination.   Vacationers start to lose money when they get fixated on a particular place to travel.  By being open to a new experience, you can unlock airfare values that can help keep your travel costs low.  My favorite vacation dream tool is the Explore page on  With this site you can specify budget, months of desired travel, and preferred weather and location to see the deals that other travelers are finding.

The bargains can be tremendous.  Just a cursory glance at Explore reveals rock bottom round trip fares from Denver such as $295 to Costa Rica, $333 to Jamaica, and $480 to Peru.  Know that it’s highly unlikely that you can get the best times and dates with nonstop flights at these prices.   If you must travel to a particular spot, then set a fare alert at or another travel site.

Pick the right financial institutions.  When it comes to using money in other countries, there are huge differences between banks.  The best way to exchange currency in most countries is to use the ATM machine once you arrive.  You get a much better rate than the exchange windows at the airport.  But even though it’s the lowest cost option, that ATM visit cost can vary tremendously depending on your bank.

Imagine you have a checking account with one of the mega banks.  You take out $200 from an ATM abroad.  You may spend $13 for the privilege once you consider the fees of your bank, the ATM bank, and foreign currency exchange fees.  If you use a foreign travel friendly bank such as Schwab, the cost is essentially zero.  Also be mindful of your credit cards.  Some will charge a foreign exchange fee of 3 percent, while others have no fee at all.

Rental car insurance.  When you travel domestically, often you can bypass all of the costly insurance options at the rental car counter because you’re covered by your personal auto insurance.  This changes when you travel abroad where generally you are not covered at all.  Consider using a credit card that covers collision damage overseas.  Then combine this coverage with liability insurance that you purchase at the rental car counter.  It can add $15 a day to your rental car costs, but it will be worth it if you run into trouble.

Avoid timeshares.  Timeshares and other forms of fractional ownership rarely make sense.  But when you have a cold margarita in hand and azure seas out of the window, they can be hard to resist.  You may be lured to a timeshare sales presentation with the promise of free massages, hotel stays, or credit in the bar.

Unless you have strong fortitude against high pressure sales tactics, steer clear of these sessions.  After all, there are many timeshare owners who list their properties on eBay for a song as they have tired of the annually increasing maintenance costs.  A great resource to get informed before you go is the Timeshare Users Group at  Your vacation time is too precious to waste on a sales pitch.

Do You Need a Tax Pro?


Most of you should have no problem preparing your own taxes.  If you have a very simple tax return, you may qualify for the IRS Free File program giving access to H&R Block and other resources to e-file your federal return at no charge. If you prefer a personal touch, the IRS VITA program offers tax help to those earning less than $52,000. If you don’t qualify for either program, both H&R Block and TurboTax are available at a low price online or in your local store.

Whenever we start working with financial planning clients, we review their past tax returns.  While many of them are ably self-prepared, we have found that with some categories of people it makes sense to use a tax professional.

Same Sex Married Couples.  Despite a pending court challenge against Colorado’s ban on same-sex marriage, there are perhaps thousands of married same-sex couples in our state.  They were married in one of the seventeen states or many countries that permit same-sex marriage.  With the Supreme Court’s Windsor decision last year, the federal government now recognizes same sex marriage.  Now those in a same sex marriage must file married filing jointly or separately and cannot file as single or head of household.

While it may just be a matter of changing your tax filing status, there may be complexities that could save you thousands depending on your personal situation.  The IRS now permits same sex marrieds to amend previous returns back to tax year 2010.  But you may need to file three sets of amended tax returns using Form 1040X to get a refund.   Those who are in same sex marriages in which one person earns significantly more than the other are likely to benefit.  Another consideration is if employer health insurance benefits were provided to a same sex spouse. These were considered taxable income previous to last year. Now same sex spouses can receive tax free employer health insurance benefits and are entitled to amend previous tax returns to reflect this difference.

Significant Flood Damage.  If you suffered from our historic floods last September, you may have the right to deduct unreimbursed casualty losses.  Consider the damage to your home and your property.  Perhaps your property was unaffected but its value was due to damage in the general area.  Because we were declared a federal disaster area, you have the right to recognize the casualty loss through an amended 2012 return or for 2013.  If you suffered an unreimbursed loss in value that exceeds 10 percent of your income to all of your property, you should get help with a tax pro who could defend your tax return if necessary.   Same goes if you suffered any significant loss at all to your rental or commercial property.

Business and rental property owners.  Those who own businesses or rental properties should get help with their taxes.  The IRS and Colorado in effect will help pay for your tax preparation as the amount attributable to the business and rental can be deducted on the appropriate schedules.  With businesses you have complexities such as the opportunity to deduct capital expenses over a number of years or in a single year.   You may be able to put in place a small business retirement plan that allows you to deduct up to $56,500 a year depending on your income and age.  A qualified tax preparer can earn their fee in a millisecond with good advice here.   Rental property owners face different depreciation schedules and options, plus some difficult questions about what to do upon the sale of their property.  Should they engage in a tax-free exchange or pay the tax?

If one of these cases applies to you, you fall under the dreaded Alternative Minimum Tax, or have incentive stock options, a qualified tax preparer will be a worthwhile investment for even the thriftiest taxpayer.

Is Obama's New myRA a Good Deal for Savers?

Retirement Road Sign with blue sky and clouds.

In his State of the Union speech, President Obama unveiled a new myRA account for savers.  Introduced as novel way to save for retirement, the myRA “guarantees a decent return with no risk of losing what you put in.”  If I saw a retirement scheme touting a good return with no risk, I would be immediately skeptical.  Risk and reward are inexorably linked.  Let’s dig a little deeper into the myRA to see if it’s a good idea for your savings.

 First I sympathize with the President’s plight.  He wants to increase retirement savings as fewer people have access to guaranteed defined benefit pensions.  Many savers just getting started see the wide swings in the stock market and want no part of it.  So they decide to not save for retirement at all, which of course is a disaster.  Living solely off Social Security is not the subject of glossy brochures extolling fanciful retirement dreams.

Right now there are a jumble of different retirement accounts with their own advantages and qualifications.  While more fundamental reform is needed, he knows he can’t change law without Congress, and this speech was all about affecting change through unilateral executive branch action.

Like a Halloween-sized peanut butter cup, the myRA combines two great investment options in a portion that’s just not big enough for your retirement appetite.  The first ingredient of the myRA is that it is structured as a Roth IRA.  With a Roth you don’t get a tax deduction up front for contributions like a 401(k).  However, you do get tax-free growth for the rest of your life, and the ability to withdraw contributions at any time without penalty.  When you contribute to a Roth, you are shielding your investment from taxation for the rest of your days.

The second ingredient of the myRA comes from the Thrift Savings Plan, which is the retirement plan for federal employees.  The TSP has a unique investment option called the G Fund ( that allows you to invest in Treasury bonds at intermediate-term rates without any risk of losing value.  For our federal employee and retiree clients, we love the G Fund because it gives you a blended rate of the yield of all intermediate and long term Treasury bonds at no credit or principal risk.  Last year was Exhibit A in how investors holding long-term Treasury bonds suffer a decline in value when interest rates increase. In contrast, the G Fund earned 1.89 percent last year.

Through automatic payroll deductions, married savers with an AGI under $181,000 and single savers under $114,000 will be able to contribute the maximum to the myRA in increments as low as $5 per paycheck.    These conform to the standard Roth rules.  I also expect that the maximum contribution just like the Roth will be $5,500 a year with those 50 and over able to contribute $6,500.  If you use up your Roth contribution with another investment, you can’t contribute to a myRA.  One significant caveat is that a myRA account cannot go above $15,000.  You most roll over funds to another Roth at that level.

Is there anything earthshaking about myRAs?  Not really.  You can most likely contribute to a Roth today regardless of what employer plan is in place.  While the myRA does have a novel investment option with a low minimum investment, the $15,000 limit constrains its impact.  Finally those who are just starting their savings should in most cases be investing in stock funds rather than a Treasury bond.  Putting $1,000 in the Vanguard STAR Fund is a much better option for most to get going.   Still interested in the myRA?  Look for it to be rolled as pilot project later this year.

Guilt About Higher Education

graduation cap

This time of year can be bittersweet for members of the upper muddle class.  Every week high school seniors receive packages and emails from their prospective alma maters.  There can be elation when they find out years of hard work have been rewarded with an acceptance to a good college.  But this is tempered by fears about how their families will pay for school.

Those who come from families with low to average incomes ironically may find elite private schools within their financial reach, if they can secure admission.   Harvard for example will cover tuition, fees, room, and board for students with families that earn less than $65,000 a year.  Even those that earn under $150,000 will pay no more than 10 percent of their income to send their child to college.  That’s why it’s vital to understand the net price of schools given your income profile.

Think about a student from an upper middle income family of four that earns $125,000 a year with $150,000 saved in other non-retirement investments, 529 education savings accounts for both children, and bank accounts, along with $150,000 in home equity.  At Harvard, the family contribution is $19,600 a year, while at Colorado College (arguably our state’s most selective college) the net cost is about $37,000 a year.   Public school is not much better as this family would most likely not receive need-based assistance at CU, resulting in a first year cost of over $28,000.

It wasn’t always this way.  According to the Institute of Higher Education Policy tuition costs have increased 538 percent since 1985.  This is compared to a 121 percent gain in the consumer price index.  While this arresting figure may overstate the case as financial aid is more available today than in 1985, many middle income families earn too much to qualify.  I haven’t seen a reasonable explanation for this phenomenon beside the decreasing support for state funding of public education, which can’t explain but a portion of the increase.  Gone relatively unnoticed is the high inflation of on-campus room and board costs at CU, which total $12,258 this year, exceeding costs of some private institutions such as Duke University.

This is hard to hear for parents of future collegians.  Your grandparents may have put your parents through public or private school on relatively modest incomes.  For your education, your parents may have borne most of the costs.  But what about you?  Understand that it’s an entirely different proposition for you to pay for college than it was in previous generations.  For many of the middle to upper middle income families out there, the covenant of an affordable, traditional four year college education has been broken.

Despair of course is not the only option.  Well known are Colorado 529 education savings plans which give you a state income tax deduction and are a form of an “Education Roth IRA,” where earnings are not taxed if used for higher education.  You have been warned, so start saving now.

More than anything, we need an open conversation between parents and children.  Let them know that there aren’t unlimited funds for college, if that’s the case, and that taking out huge student loans is not the best option.  Nothing sours the elation and promise of college graduation more than a six-figure student loan balance, which can be had with a few strokes of the pen at the bursars office.   Shed your guilt at not being able to pay full-price for four years of private or public education.  Be a smart college consumer using resources such as the net price calculator available on college web sites to determine what your child’s net college costs are likely to be given your financial situation.

What We Can Learn From a Bull Market


The word that comes to mind to describe last year’s investment performance is awe.  Last month new market all-time highs were so commonplace that they barely merited a mention in the financial press.  We are in the midst of a powerful bull market, and individual investors are finally beginning to believe its strength.   After all, it’s hard to be pessimistic when the S&P 500, the broad index of large US publicly traded companies, had a total return of 32.4 percent last year.

Market watchers are grasping to explain this remarkable run.  Of course any glib member of the financial cognoscenti can supply reasonable ramblings for market performance after the fact.  Market predictions, reserved for the boldest commentators, are often exposed as guesswork when the truth is revealed.

Consider the predictions for last year that came out at the end of 2012. Then Morningstar released its stock market outlook.  It stated that the market was close to fairly valued with high volatility a near certainty for 2013.  Wisely they dismissed the impact of the fiscal cliff (the one from early 2013 that you barely remember) on the market.

A fairly valued market with high volatility in market speak implies a single digit positive return with big swings along the way.  Instead last year the S&P 500 had the best performance since 1997 without a single correction, defined as a 10 percent retreat.  It was a relatively low volatility, strongly positive market.

We shouldn’t pick on Morningstar.  There were plenty of financial experts with seven-figure compensation packages and members of the financial media that missed this incredible run.  Dimensional Fund Advisors in its review of last year’s predictions highlighted a Barron’s cover story in November 2012 telling investors to “get ready for the recession of 2013” and a Time article blaring “Why Stocks are Dead.”

Even if back then you had a clear vision of world events to come in 2013, would it have helped your prediction?  The slowing economy in China weighed upon us.  The fiscal cliff, sequestration, and the debt ceiling demonstrated a poorly functioning federal government.   The civil war in Syria, the Boston Marathon bombing, and the Detroit bankruptcy inspired fear.  For most, those events would not augur a strongly positive year in the financial markets.

Rather than trying to time the market better than the experts, use the odds to your advantage.  Since 1926, the S&P 500 has had 24 years with a negative return, which means that 73 percent of years have had a positive return.  (A free tip for those professional predictors: if you always forecast a positive market then you’ll be right most of the time!)

Your investment strategy should bank upon the long-term appreciation in the markets, with enough in safer alternatives like bonds to endure the downdrafts of horrible markets.  Once you are in the early stages of retirement and pulling cash out of your portfolio, then you should increase your safe  percentage to ensure you’re not liquidating stocks to pay for living expenses in the midst of bear market.  While you may believe you need to hit home runs by chasing hot tips on emerging marijuana penny stocks, hitting singles over time will do the trick.

The Laid Back Portfolio had another strong quarter with an increase of 6.5 percent, finishing the year with 17.5 percent total growth including one percent annual costs.   Bonds were slightly down again with a negative 0.4 percent reading, but the S&P 500’s 10.5 percent return more than made up the difference.  For the start of 2014, we will again rebalance to 60 percent S&P 500 and 40 percent Aggregate Bond Index.

How Much Can Charitable Donations Save You?


This time of year we hear about the needs of charitable organizations.  The confluence of the giving season and end of the year tax deadlines hits us now.  You only have until tomorrow to make a donation to help with your 2013 taxes.  If you have an influx of new clothes that you unwrapped last week, you may be ready to give some lesser used garments to your favorite charity.

But how much can you claim on your taxes?  The IRS would not be impressed by the blank Goodwill receipt from last week when you dropped off five bags of clothes. So how do you come up with a value?  The IRS states that donated household items must be at least in “good condition” and that you should use fair market value when claiming a charitable deduction.  Use these resources to help.

Deduct It!  Deduct It!  This book by Bert Whitehead and Carol Johnson is released every February and is available at for under $9.  For many years the authors have surveyed thrift stores, auction web sites, and other resources to come up with reasonable values for household items.  It’s a workbook, designed for you to write in donated items that can be tabulated at the end of the year for a total value.  If you produced this completed book in a meeting with the IRS, it would be clear you were acting in good faith with your claims.  Because this book has been produced for many years, it has been through several audits and has served well as substantiation for charitable donations.

Goodwill Valuation Guide.  This free resource available at can be found by searching Donation Valuation Guide.  From coffee tables to griddles to ice skates, this guide gives you a range of the sales price of items sold in their thrift shops nationwide.  While the price is right with this guide, it apparently is not updated each year (this most recent version seems to be from three years ago), and does not give you the benefit of the higher values that can be found through other methods, including eBay auctions.

The do it yourself tax behemoths also have resources for you.  TurboTax offers It’s Deductible ( as an iPhone and web application.  It’s free to use and has more categories than most (examples are western footwear and corduroy pants).   While you need to generate a login and password, in return you get an itemized list of donations that can be imported into TurboTax or printed out.   H.R Block has its own value data related to its tax preparation software, but seems harder to access unless you’re using one of their tax prep products.

The DonationApp for iPhone permits free access to its eBay valuation data until you hit $500 in total donations when the charge becomes $25 per year.  iDonatedIt at $3 in the Apple App and Google Play Store has mixed reviews and allows you to attach a photo to your donation.   The Charitable Donations Log for Android also has thrift store values and the ability to take donation pictures, although its data may be suspect (for example it has a category for used men’s underwear).

Which should you choose?  While the Goodwill guide is free, it may under value your donations because online auction data is not considered.  Deduct It! Deduct It! is worth the $9 if you prefer a physical book.  The smoothest and most authoritative app is It’s Deductible online or for the iPhone.  It’s free, has values pulled from online auctions, and is backed by the biggest player in the industry.

The Upside of a Low Income Year


Many of you are wrapping up a low income year.  You’re getting a business launched with little income and lot of effort.  It could be a period of under- or unemployment.  Or like many, you have suffered a significant catastrophic flood loss and not been made whole by your insurance company or FEMA.   For more information on how much such a loss might affect your taxes, see my last column or IRS Publication 547 at

 As painful as it might be, you don’t want to let a low income year go to waste.  When clients start with us they provide their two most recent tax returns. Those times when I’ve seen very low or even negative income in years past, I’m frustrated at the lost opportunity.  Don’t let this be you.  Instead when your federal tax rate is low, take a look these options and enjoy the perks of low income.

Zero percent capital gains tax.  If you’re in the 15 percent federal tax bracket or lower, which goes up to $72,500 of taxable income for married couples and half that amount if filing single, capital gains tax pulls a sly trick: it disappears completely.  That’s right.  If you’re in the 10 or 15 percent tax bracket for ordinary income, you’re in the 0 percent federal tax bracket for capital gains.  So consider selling some investments that have increased in value over time.   If you have stocks or mutual funds in your taxable account, consider selling them to recognize income that will not be taxed.  You’ll still pay 4.6 percent state income taxes on the gains if you’re in Colorado.

Roth Conversion.  With a Roth conversion, you’re taking an IRA or other pre-tax retirement account and moving it into a Roth IRA.  It makes sense for most to have a significant percentage of wealth in a Roth because it’s tax-free money.  When you take out a qualified distribution, you don’t have to pay taxes on the gains in the account.  Roths also give you flexibility as you’re not forced to take retirement distributions and may have access to the funds before you retire.  For estate planning purposes, Roth IRAs are wonderful.  Your heirs under current law can get tax-free growth for their lifetimes.

The downside of Roth conversions is that you must recognize the amount you convert as ordinary income.  If you convert $40,000 of your IRA into a Roth, in most cases this adds $40,000 to your taxable income.  But if you are deducting a significant loss from a catastrophe, you may be in low or negative income territory.  A Roth conversion allows you to benefit tomorrow from the low income tax bracket that circumstances put you in today.

End of year deadline.  When you sell appreciated investments to recognize capital gain or convert an IRA into a Roth, remember that you only have until the end of the year to do this.  If you project you will have a low income year in 2013, and you want to “use” your low tax bracket you must sell stocks for gain and complete the Roth conversion by the end of the year.  Once we get into January, the opportunity has passed you by. 

Amend last year for catastrophic loss.  There’s one final wrinkle to consider when it comes to catastrophic losses related our floods in September.  If you live in a county that was declared a federal disaster area, you have the opportunity to take the loss against your 2012 taxes through amending your return.  Your accountant can tell you which option makes the most sense.

Tax Benefits of a Catastrophe


While your plans today may include shopping online for gifts under the tree, you may be buying drywall or a furnace to restore your home because of the flood.   If you keep good records and your tax preparer informed, you could be looking at a big refund come next April. Today we will consider a significant flood loss and in the next column we’ll look at how you can use this loss to your tax advantage.

Just two years ago you completed an extensive finish of your basement complete with a home theater and a guest bedroom and bathroom suite.  You also installed an energy efficient tankless water heater and new furnace during that renovation.  You began the renovation right after you put your last child through college, so you splurged and spent $105,000 using cash and a loan.

Although your house is not in a flood plain, that didn’t keep your basement from being inundated – twice. Your sump pump failed because of a power outage.  Once the raining stopped, you did your best to find available “remediation specialists” because you had seven feet of water in your formerly gorgeous basement.  You ended up paying $85 an hour for labor to get your basement down to the studs with a total bill of $10,000.

Now your basement is finally dry enough to begin contemplating finishing it again.  With changes in your landscaping and a battery backup to your sump pump, you think you could withstand another 1,000 year rain.   Reputable contractors have come in with an average bid of around $120,000 to finish the basement.  Of course this includes some changes and enhancements from the original finish that you now want to make.

Your insurance company sweetly yet firmly informed you that your homeowners insurance is not flood insurance and so you were not covered for the loss, but it was determined your coverage has a rider for sump pump failure and that will pay $5,000.  You also applied to FEMA for assistance, and qualified for a $5,000 payment.

Let’s consider some other facts.  You paid $550,000 for the house in 2003 and the only improvements you made were $20,000 for landscaping and the $105,000 basement renovation.  Your house was appraised because of a refinance about 6 months before the flood for $780,000.  An appraiser came up with a value of $650,000 after the flood considering the destroyed landscaping and the basement torn down the studs.  You documented all of the personal items in your basement, such as the mattress, furniture, and TV and determined it will cost $30,000 to replace them (which is close to their cost).

What does all this mean for your taxes?  First we need to figure out the loss, which is the lesser of its decrease in fair market value or your basis in the property damaged.  The house including landscaping decreased in value $130,000 plus you spent $10,000 for the basement remediation and $30,000 for the personal items.  For tax purposes, you have a $170,000 loss less than $10,000 in reimbursements.  Your adjusted gross income this year will be $140,000 as a family, so you can deduct $160,000 less $100 (strange wrinkle in the tax code) less 10 percent of your AGI ($14,000) for a total of $145,900.  This goes on schedule A as an itemized deduction on your federal tax filing.

It now appears that this casualty will throw you into negative income for 2013.  Professional tax preparers never want a low or negative income year go to waste, and in the next column we’ll talk about what steps you can take to use your unusually low taxable income this year.

Money on the Sidewalk


If you saw a five dollar bill on a deserted sidewalk, you’d probably pick it up.  Strangely enough, many of you regularly leave bags of money with your name on them in the human resources department of your employer.  If it were literally a $1,000 pile of cash, of course you’d scoop it up.  But because it’s buried in the minutia of annual benefit updates you may miss it.

Retirement Plan Match.  Your employer probably has a retirement plan with a matching contribution.  So called safe harbor 401(k) plans often have a dollar for dollar match of the first 3 percent of pay and a 50 percent match of the next 2 percent of pay that you put in your plan.  So if you’re being paid $100,000 a year and set aside at least $5,000 in the 401(k) plan, your employer will graciously deposit $4,000 in matching funds.  Forget about finding a five dollar bill, this is closer to a ten or twenty that you find every single day on the job.  It amazes me that there must be millions who fail to do this.

If you’re contributing up to your employer match every year, then look around at your co-workers that have baffled or blasé faces at the end of the annual 401(k) meeting.  (They must have attended for the crudité because they’re not filling out any enrollment forms).  Get them away from their fantasy football and sign them up for a target retirement fund to maximize their employer match.  You could help them retire a year or two earlier.  You’re welcome, cube neighbor!

If stories of retirement dolts in your lunchroom seem apocryphal, consider how company after company puts a plan match in place rather than depositing an automatic 3 percent into your 401(k) account, which is another option for them.  This means it saves the company to match your 5 percent contribution because they know many of you will not contribute to your plan at all.  Also, be mindful the plan may not be called a 401(k) as other plans such as a SIMPLE-IRA and 403(b) also have these features.

Employee Stock Purchase Plan.  If you avoid owning company stock, your decision would be justified.  After all, your income is dependent on the fortunes of your employer.  As your company does better, the stock price will tend to increase as will your career opportunities and pay.  This is the definition of a correlated asset.   The value of your investment in company stock could decline at the same time as your losing your job.

I’m not talking about holding company stock for long periods.  Instead our angle is to take advantage of the discount available on the stock price, which often 15 percent.  Imagine that you can withhold up to 20 percent of your pay to purchase company stock at a discount.  If you earn $100,000 a year, this bonus could be worth over $3,500 a year.  You can then sell the stock in many plans soon after you purchase it at a discount.  Of course there are tax benefits of holding on to the stock, but unless you have some unusual insight (and you probably don’t) you should probably sell the stock quickly to manage your risk.

Roth IRA.  Want a way to guarantee that your earnings won’t be taxed in your lifetime of that of your heirs?  Contribute $5,500 ($6,500 if 50 or over) to a Roth IRA as long as you have earned income and a modified AGI of $178,000 or less (different limits apply if not married filing under jointly).  In most cases you can get your money back soon if needed, so don’t let that be an excuse.