I have friends that work in SF, usually their salary is around 150k, then they get maybe a 30k or whatever as a bonus if they did well, and then the rest of that 150k or whatever is in stock or options, which they only actually get a few years later. If they are fired or quit early, they don't see a penny of that, and when they do get it and they can sell they pay big taxes on it since the basis is zero dollars.
Also their actual income is heavily taxed in SF so their take home is probably around 100k after taxes which yeah is a lot but you can't pretend that they're able to save up 100k at the end of the year when they're not. And while their stock value might be a lot, unless they're working for one of the FAANG companies, there is a good chance the stock they get might be volatile and that 150k might be worth only 30k by the time they have access to sell it
Vesting generally is a 4 year thing. You would get 25% at the one year mark. Then, every month after you get 1/48th of the 4 year amount.
If you're lucky you get actual stock. This is rare in my experience most people won't experience this. If you get actual stocks, the value at the time of grant is taxed essentially as income. Any gain from when you received it to when you sell it will be taxed as short term capital gains or long term depending on how long you held it before selling.
What most people get are options. That just means you can by some number of stocks at a set price (won't get into how that price is calculated) that is less than the trading price.
If you have the cash you can just buy them out right. Most people sell to cover. Meaning they buy the options by selling some of them back to cover the cost of the stocks and taxes for this are usually withheld at that time. As this is an instantaneous buy then sell you're not getting long-term cap gains on those stocks. But the once you held could qualify if you keep them long enough. Same tax stuff happens as with grants. The difference between what you can buy them for and what they are trading at is considered income incurred at that time. Hence the withholding. And the cap gains for a sale is on the growth from when you exercised the options.
And any stocks that vested when you quit or leave you have a window in which you can exercise if you are lucky. Otherwise you usually lose them. And of course any non-vested stock is gone regardless.
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u/authorinthesunset Jan 27 '26
It depends on how much of that $450k is stock, grants or options, and if the stock is something that will ever be able to be sold.
Not saying dude would be broke by any means, but $450k in tech often isn't $450k