Equity Compensation Plays Major Role in Workers’ Retirement Plans and Financial Wellbeing

Equity compensation is far more than a workplace perk for employees at firms offering this benefit. According to a new survey from Charles Schwab of stock plan participants, three-quarters (76%) say equity compensation is very important, and nearly half consider it a “must-have” benefit when evaluating a new job. Half view equity compensation as a critical tool to help achieve retirement goals, and many say it will help them build/increase wealth (38%), learn more about investing (37%), alleviate financial stress (32%), and boost employee morale (32%). Participants say company stock makes up about one-third of their overall investment portfolios on average.

The survey also reveals gaps in perceived benefits and understanding around valuation, tax implications, and portfolio strategy between participants who are receiving professional advice and those who are going it alone.

“Equity compensation is both a powerful benefit and a meaningful motivator,” said Andrew Salesky, Managing Director, Schwab Stock Plan Services. “Employers are always seeking to attract top talent. Through a strong equity program, they can demonstrate a commitment to employees’ financial security and also build stronger alignment. Our study shows that when participants understand and strategically use their equity, it can be transformative for their financial wellbeing.”

Planning for retirement – and beyond

Nearly three in four stock plan participants (72%) feel very likely to reach their retirement savings goals and 44% say using equity compensation to help finance retirement best describes how they plan to use this benefit. They also intend to use it to support other strategic priorities like financing their own education or children’s education (17%), paying off debt (11%), and buying a home (8%).

One in three participants report selling or exercising equity awards to pay for immediate financial needs (32%), diversify their portfolio (29%), or accomplish routine planning goals (29%). Among those who have not sold (67%), nearly half are waiting for more favorable market conditions and 40% are waiting to become fully vested. Some are also concerned about the tax implications (29%).

“Equity compensation plays a dual role — it provides the potential for long-term retirement security while also offering flexibility to address shorter-term financial needs,” said Salesky.

“This versatility is part of what makes equity such a valuable workplace benefit, and why participants, supported by their employers, should ensure they understand how to maximize its potential.”