That’s right, that was what I was trying to convey (apparently unsuccessfully!).
One other related issue re: mortgages, we are in unprecedented times economically but historically periods of inflation overlap with or are followed by periods of higher interest rates. So us “lucky duck” mortgage holders might have stable costs now, but be unpleasantly surprised when the mortgage is up for renewal and interest rates are much higher than recent norms. Or maybe not! But it is a risk that’s out there now.
I think the general consensus is that ESPPs (Employee Stock Purchase Programs) are usually pretty good, depending on the details.
One risk comes for people who never sell and become overexposed to their company’s stock. I had one once that I assume was pretty standard: contribute up to ~10% of your salary through payroll deduction, then at the end of the quarter get stock at a discount of ~10% to current value. The stock appeared in your account within about a week and was immediately sellable.
I had another one once that I assume was pretty rare—it was purchased at a discount of 10% relative to the lowest price of the quarter!
The effect the stimulus had on home prices was every small time real estate guy getting ppp loans for free cash to buy more real estate.
Only when this couple’s ceiling is set by their down payment and not their income, which I can’t imagine happens often. It increased many more budgets by $6400.
I don’t have all the details but it reads; Up to 10% of pay set aside at the 15% discount from the lesser of either the closing price on the first day of the offering or the closing price on the last day. The offering periods are broken into two 6 month chunks.
With interest rates being so low for most of 2021 and many people refinancing mortgages, a lot of homeowners would actually have had a reduction in P+I costs for shelter. If they are really just surveying homeowners and asking them what they think rent would be for their house, I’d assume many are just adding up their mortgage payment and property taxes without thinking about the actual rental market.
I think I would snap take that deal for the full 10% and also ask any trusted colleagues if I could “borrow” any of their space they’re not planning to use.
Yeah, this is pretty good, assuming you can sell when you get the stock. It’s pretty unlikely the stock drops 15% right after the purchase, so as long as you sell quickly, the downside is gaining ~10% of 10% of your salary in exchange for setting it aside for 6 months, with a decent upside if your stock trends up on the 6 months. An even more generous version of this is a big part of why I own a house now.
Oh, you do want to be somewhat cautious of the tax implications here, though. Selling immediately means your gains are ordinary income, and if your stock has a good year, you’ll want to make sure you’re withholding at least enough to avoid penalties.
This is complicated, because the discount is treated as ordinary income even if you don’t sell immediately (unless the ultimate sales price is less than purchase date price).
I participate in an ESPP, and I always have to do some fiddling with TurboTax because the paperwork doesn’t report the cost basis correctly. I understand that this is a common issue related to the discount showing up as income on your W2 as Spidercrab mentioned.
Yeah, I’m a Canadian tax payer so this is not directly applicable but when I had stock plan at my last job there were many levels of “benefit”, all taxed differently:
The employer match was taxed directly as immediate income, I put in 6% of pay and the employer matched 4%, the 4% was taxable in the year it was provided.
There was a discount (just 5% I believe) when the payroll deduction and match were used to by shares at the end of the quarter. This amount was immediately taxed as income as well.
If you later sold the shares, you paid a conventional capital gains tax on the sale price less the non-discounted price.
I think if you buy that there was inflation in home improvement services and Pelotons and such primarily because people were sitting at home and wanted to enhance their environment, then it’s kind of a gimme that the same reasoning would apply to TVs and consoles and speakers and such, but ok.
Only if it’s an adjustable rate mortgage, though. I assume the majority of people get fixed rates, right?
Wow I didn’t even think of that, great point.
I think a ton of millennials were more constrained by down payments than monthly payments.
My reasoning on that is that the people getting home improvement stuff done and buying Pelotons were pretty well off already and thus probably already had nice TVs.
I haven’t had a real job in years and never one that offered something like this, so perhaps this is a stupid question, but can he participate in the ESPP in a tax-advantaged account? Seems like it would be a no brainer to do so if possible, so I assume the answer is no.
I don’t know about this, but in general people aren’t getting 30 year contracts either way. Usually you lock in at current rates for 3-5 years or something like that and then you renew at market rates after that.
