Market Beat: The value of a stock purchase plan
May 12, 2014
Planning for retirement early is very important. Boxing great George Foreman once said, "The question isn't at what age I want to retire, it's at what income."
Foreman was one of the most powerful punchers of all time. He became famous at the age of 19 when he won the gold medal in the heavyweight division in the 1968 Olympics at Mexico City.
Immediately following the bout, which was stopped on a TKO in the second round, he paraded around the ring waving an American flag. He also makes a great grill — if you haven't tried one yet, do it. The only way to make tuna and turkey melts
Anyway, in retirement planning, there are two distinct phases. One is known as the accumulation phase, where you save and invest and build up your assets. The other is the distribution phase, when you finally retire and start spending your savings.
Younger people who are in the accumulation phase should start their 401k contributions as soon as they have the opportunity. In addition to a 401k, some employers also offer stock purchase plans. If you work for a company that offers a stock purchase plan that can be a great way to accumulate some wealth in addition to your 401k or retirement plan.
Stock purchase plans are known alternatively as ESOPs, Employee Stock Ownership Plans, and ESPPs, Employee Stock Purchase Plans. One advantage to participating is to get the discount that is offered which can be as much as 15 percent below the market price of the stock.
Recommended Stories For You
Individuals who spend many years at the same firm accumulating company stock can end up with a nice nest egg if the stock performs well. Spending 20 years or more at a successful company can produce a substantial amount of wealth and that is a good thing.
A study that was done at Washington state found employees who participated in ESOPs had about three times the retirement assets of those who did not. The best thing young people can do for retirement is save early and save often.
Take advantage of the retirement plans available to you at work. Some serious wealth can be built by staying at one company for a long time and accumulating company stock on a regular basis.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.