What to Do With Your Equity When Changing Jobs
You just accepted a new job, congrats! It may come with new equity awards, and you’re probably eager to understand how those can help you build wealth in the years ahead.
But before you dive into the equity plan at your new company, don’t forget about the stock compensation you’re leaving behind.
Big mistake. Huge.
While your new role is exciting, your current equity needs your attention now, because in many cases, it comes with a clock that starts ticking the moment you submit your resignation.
Let’s break down what to think about before, during, and after a job transition.
First Priority: Equity at Your Current Company
Before you learn everything about your new equity package, take stock (literally) of what you’re leaving behind. Most likely, some decisions need to be made and quickly.
Stock Options
If you have stock options, you’ll usually have 90 days to exercise them after leaving the company (unless you’re retiring or deceased, which I hope is not the case!).
Some companies do offer extended exercise windows, up to one year or even the full term of the grant, but that’s the exception, not the rule.
What you need to do:
Review your option grants immediately.
Check the expiration timeline.
Evaluate whether it makes sense to exercise before they expire, especially if they’re in the money.
If you have Incentive Stock Options (ISOs), there’s another wrinkle: Even if your employer gives you a longer window to exercise, ISOs exercised after the 90-day window lose their preferential tax treatment and convert to Non-Qualified Stock Options (NSOs).
That might not be a dealbreaker, but if the AMT impact is manageable and you plan to hold the shares, it could be worth exercising within that 90-day window to preserve the ISO benefits.
RSUs (and RSAs)
With RSUs, the big question is: Should you keep the shares?
Any unvested RSUs will likely be forfeited when you leave. But vested RSUs are yours, you’ll continue to own them, even after your departure.
The temptation may be to keep holding them. After all, your income is no longer tied to the company, so what’s the risk?
Here’s the thing: individual stock always carries risk. And with your job no longer tied to the company, you have one less reason to keep your financial future wrapped up in their performance.
Now is a great time to:
Reevaluate your investment strategy.
Consider diversifying out of your former employer’s stock.
Consolidate old 401(k)s and review your overall portfolio.
Want a deeper dive on how much employer stock is too much? Read my blog post here.
Before the Job Search: Plan Around Your Equity
Your equity shouldn’t be the only reason you stay or leave, but it absolutely should factor into your decision.
When you know what you’re giving up, you can make more informed choices about:
Timing your transition.
Negotiating your next role.
Taking a breather between jobs.
It’s common to see vesting cliffs or large blocks of RSUs scheduled for delivery in the next few months. That might influence your timeline and that’s okay. When you understand your grants, you can leave (or stay) on your terms, not theirs.
Take Control of the Transition
Equity compensation can create incredible opportunities, but only when you understand it. If you’re changing jobs, don’t let valuable equity slip through the cracks.
Before you get excited about what’s next, take time to:
Understand what you have.
Make a plan for what to do with it.
Use your equity to create the life you actually want.