I've been lucky enough to enjoy a big windfall thanks to my employer stock options (NSOs) going through the roof in the last few years. A recent run-up has made it a whopping 80%+ of my assets, so I'm planning to diversify.
My question is: what's the best way to go about selling? This is probably the biggest financial decision of my lifetime, and getting it right or wrong means the difference between early retirement and a lifetime of kicking myself.
- The options' value currently sums to $13.0M, and exercise price sums to ~$1.4M, for a net of $11.6M before taxes.
- Those numbers already reflect that I sold 10% of my holdings last quarter. I already regret it, since the stock price has grown a lot since then.
- My marginal federal and CA tax rates for 2018+ will be the maximum. So I'm treating short-term capital gains as 50.3% and long-term as 37.1%.
- I can only trade my company's options/stock within a brief trading window after each quarterly earnings report.
- The oldest options expire in 2022.
- My newest options are a small share of the total value, since I'm granted fewer options at current stock prices. So, new options don't substantially increase my exposure.
- I'm 37. My wife and I both work, though my income is much higher (~$1M vs. $120K). We'd survive losing this windfall, but obviously we'd rather not.
- I plan to sell gradually, rather than immediately-- something like 8-10% each quarter, possibly a bigger lump initially. The stock has always been volatile, and there's always a risk any individual company will tank, but I assume the most likely outcome by 2022 is continued growth.
- To minimize taxes, I intend to do a cashless exercise and hold the resulting shares for a year before selling. This would delay my diversification by a year, but with a big tax benefit.
- I don't plan to talk with a financial adviser, since A) I don't even know where I'd find a good one, and B) I associate financial advisers with peddling funds with high fees. Also, C) my plan is flawless, so of course I don't need one, right?