If you are lucky enough to be at a company like NVIDIA, then you have made it.
Your wages have grown.
And your net worth has grown due to the stock appreciation over the past few years.
But what do you do now?
I work with a ton of clients in this situation. Either from their equity comp, a business they own, etc.
Here's exactly how I am coaching clients through these situations.
First of all, let me start off by saying congratulations! This is a huge WIN. Most people never see the stock of their company amount to anything, let alone almost 3000% growth over 5 years.
You've won. Now is the time to plan well.
Here's how:
The more RSUs, ISOs, NSOs, etc. you have coming, the more it makes sense to diversify from existing holdings.
Why?
You have exposure to the price increases either way. I often see that many are scared to sell some but when you have more equity coming in future years, you can reap the benefits (or negatives).
No one is saying to sell all your existing stock, but to consider taking some winnings off the table.
As you sell, you want to think about taxes. This could mean deciding to cut your exposure in half, but doing it over 2-4 years to even out the tax liability.
It could mean doing a lot of tax loss harvesting from other investments. One great way to do this is through Direct indexing as it can help mitigate taxes as you sell.
It could be using a donor advised fund and donating stock before selling to avoid capital gains and get a deduction against your income.
It could mean using trusts, qualified opportunity zones, etc. to help mitigate the tax liability.
Point is that you need to do real tax planning. And sooner rather than later.
Do you want to get a new house, fund kids college costs, get a new car, etc?
Map those out and use those as reasons to diversify. For most, it is hard to diversify just to diversify. But way easier when there is a real goal behind it.
Many sell, then move to to ETF's like QQQ, VOO, etc. while keeping a good percentage of the their company stock. But understand, your stock, like NVIDIA, might be a huge part of the index.
You don't want to diversify to just re pick back up the exposure.
Maybe for reason, you have not been maxing out your 401k, spouses 401k, backdoor Roth IRAs, mega backdoor Roth 401(k), etc.
Use these funds to supplement cash flow so you can max out these accounts. But don't just stop this year. You can sell some stuff in your brokerage account or keep extra cash on the sidelines so you can do this every year for as long as possible. The power of these accounts is massive. $50k+ a year to Roth will really pay off down the line.
Now that you're wealthy, you are a prime target for lawsuits. Max out your homeowners, auto, and then get umbrella to sit on top of the other insurances.
You do not want to risk losing your assets from something like a car accident.
This is where I would start.
It is definitely a weird feeling to go from doing well to super wealthy over a few years. But it's something many of my clients have gone through.
Take your time here hire the right team (like us) to ensure you are doing everything right.
Financial Advisor