Cordelia, a 43 year-old, single, sales manager for a pharmaceutical company is leaving her job after 12 years to join a small, start-up company.
Challenge:
- What should Cordelia do with her stock options and retirement money?
Financial Issues:
- Cordelia has non-qualified employee options on 6,400 shares of the company at various prices. Should she exercise and hold the stock or sell it?
- She has $625,000 in her 401(k) account invested mostly in a small-cap value mutual fund. Should she leave it there or roll it over?
- She has $387,650 worth of company stock in an ESOP plan. Should she roll it over into an IRA?
Lifestyle Issues:
- Cordelia has a one-bedroom condominium and would like to buy a house.
- She can perform new job from anywhere in the Pacific Northwest with an airport close by. She currently lives in Dallas, Texas and is considering a move to Portland or Seattle. Washington.
- She is a triathlete and trains hard. She wants to be sure that if she ever has a sports injury, she will still be financially sound.
Solutions:
- WrapManager recommends that Cordelia take the company stock from the ESOP Plan, and pay the tax and penalty on the cost basis. She should hold it until it qualifies for long-term capital gains and then sell it.
- She should exercise and liquidate the stock options, and hold aside enough for taxes and a down payment on the house.
- She should do an Envision goal plan to define her life goals and determine how much money she will need to achieve them.
- We would build her a portfolio that matches her comfort level with risk, initially rolling over the 401(k) and moving up to institutional money managers.
This case study represents hypothetical situations as examples only. Accordingly, no client or prospective client should assume that solutions presented (or any component thereof) serve as the receipt of, or a substitute for, personalized advice from WrapManager, or any other investment professional.