In this episode, we tackle one of the most significant financial decisions tech professionals face: knowing when and how to walk away from a job—whether that's to retire or move to another opportunity—especially when equity compensation is in the mix. We emphasize the mental and financial distinction between retiring permanently and transitioning to a new firm. Retirement means permanently stepping away from income and needing a long-term strategy to generate cashflow from your assets. Switching firms, on the other hand, is temporary unemployment with the potential for new income and equity.
We walk through how to determine readiness for either scenario. For retirement, it’s essential to assess total wealth, stress test sustainable spending, and build a reliable paycheck from assets. For switching jobs, we need ample cash reserves and liquidity, as job searches are unpredictable in length. Equity compensation plays a central role—particularly what we leave behind. We highlight the importance of reviewing company plan documents to understand if retirement will trigger accelerated vesting or forfeiture of RSUs.
When it comes to timing, especially for those with stock options or RSUs, planning ahead is critical. If possible, we want to spread taxable events over multiple years to manage the tax burden more efficiently. We also discuss evaluating whether to hold or sell company stock after departure. The decision hinges on one’s financial goals, income flexibility, and risk tolerance. Behavioral aspects come into play too—avoiding regret by making informed, goal-aligned choices and not falling into the “shoulda, coulda, woulda” trap.
Taxes are unavoidable, but they can be managed with proper planning, especially when dealing with capital gains, ordinary income, and potential AMT from equity compensation. We stress the importance of integrating equity compensation into a long-term financial plan, using it to meet both short-term liquidity needs and long-term diversification goals.
Company-specific events like IPOs, mergers, layoffs, or vesting schedules can all influence the decision to leave. Evaluating those triggers through the lens of your goals helps in deciding whether to act now or wait. Lastly, we return to the value of working with a financial planner and the need for intentionality. Walking away—whether to retire or transition—is rarely simple, and it's okay to find the decision hard.
ThimbleberryU 137 - Equity Compensation - How and When To Walk Away
Speakers: Amy Walls & Jon Gay
[Music Playing]
Jon Gay (00:07):
Welcome back to ThimbleberryU, I'm Jon Jag Gay. I'm joined as always by Amy Walls from Thimbleberry Financial. Amy, always great to be with you.
Amy Walls (00:14):
Jag, it's always good to be talking to you.
Jon Gay (00:16):
Well, today we're exploring a crucial decision many tech professionals face: deciding when and how to walk away, whether that's retiring entirely or moving to another opportunity.
We're focusing specifically on equity compensation because it can be a large piece of the financial puzzle as we've talked about many previous episodes, and it often makes people feel that leaving a firm means leaving money behind.
So, Amy, before we dive into specifics, can you set the stage by explaining why it matters financially, whether someone is retiring or just moving to a different firm?
Amy Walls (00:46):
Yeah, it seems like moving on is moving on, but in the context of financial decision-making, it is different because retiring is typically a permanent situation. People don't say, “I'm retiring with the intention of going back to work.” That would kind of be, I'm going to take some time for myself before I move on.
And so, when you're retiring and that's permanent, it means you know you are transitioning to relying on your assets for income. It requires careful management of those assets and a strategy for minimizing risks. Obviously, there's the big financial pieces of that, but the difference is mentally, it's the permanent decision that makes a big difference.
The switching to another firm obviously does not have to be a permanent decision because ideally, everybody is going to stop working at some point because they can. There are those that don't intend to, but I think oftentimes, they are self-employed.
So, leaving for another firm really involves continued income, and possibly, new equity compensation if we're talking tech and standards within tech. So, that gives more flexibility and options around basically how you fill the gap, also for managing those equity assets.
And the issues that you're really facing in bridging this gap, going to another firm that may have a pause in between is about cashflow, like recreating an income stream in retirement, except that it's much shorter in nature.
Jon Gay (02:30):
Got it. So, how can listeners know if they're financially ready to either A, retire, or B, switch firms?
Amy Walls (02:36):
For retirement, first thing I'm going to say, because I have to: (shameless plug) work with a financial planner.
Jon Gay (02:42):
Yes.
Amy Walls (02:44):
(Chuckles) Number one, because that's where you will understand – if you're working with the right kind, a true financial planner, you're going to understand the pros and cons, your risks that you face, and have a strategy overall.
In doing that, the pieces of the process are really evaluating total wealth, including that equity compensation, determining sustainable spending, and that's really doing stress testing around retirement and what can happen.
Jon Gay (03:16):
Those projections, yeah.
Amy Walls (03:18):
Yep. Looking at additional projections around cashflow: what is the shortage for what periods of time that you want to make sure you cover and that you've included things like healthcare costs, health insurance costs, inflation, longevity risks.
Jon Gay (03:34):
Yeah.
Amy Walls (03:34):
And if we stick all that in a pot and stir it, what comes out of that is how you recreate a paycheck, and which assets are going to be contributing towards that paycheck recreation.
Jon Gay (03:47):
So, that's for retirement. What about switching firms?
Amy Walls (03:50):
So, when you're switching firms, first of all, and let's assume here that there is a delay in the switch of firms. You're saying, “I'm going to leave this firm and while I am unemployed, I'm going to be looking for my next job,” kind of like a sabbatical.
Jon Gay (04:04):
I was waiting for that word,
Amy Walls (04:05):
But with the intention of looking for that next job.
Here, you're going to want to make sure that you've got adequate cash reserves. And I'm going to call it cash reserves versus emergency savings because emergencies will happen, but cash reserves are for both emergencies and opportunities. This is an opportunity probably more than an emergency. There could be situations where we could categorize that as an emergency, but I think we're splitting the hairs if we get into that.
Also, that you have adequate liquidity, because you could say, “Hey, I'm going to find a job in two months,” but that's not something you control, it's something you influence. So, best laid plans, we want to have extra cushion, extra runway, and liquidity does that.
Jon Gay (04:50):
Absolutely.
Amy Walls (04:52):
And then you want to look at how this lost equity compensation, and when I'm referring to lost both in terms of retirement and switching firms, I'm really referring to what you end up leaving behind at your old firm.
Jon Gay (05:04):
Yeah.
Amy Walls (05:05):
How leaving that behind is going to affect your future financial goals, and if you're okay with that. That's a huge part of the consideration. And then thinking through and considering the value and stability of your likely future income and potential new equity compensation.
Jon Gay (05:25):
So, to sum up everything you've just said, Amy, I'm going to use your favorite phrase: it depends. Everybody's situation is going to be different and really evaluate based on all that criteria from a macro perspective. But let's dive into equity compensation specifics.
Amy Walls (05:38):
Let me just say one thing first. Jag, I know I just totally interrupted you. It's funny that you said it depends because immediately what I thought of is you just held up a mirror to me with my, “it depends” comments. And what we're really talking about is a scenario for our listeners where they need to look in a mirror and really evaluate.
Jon Gay (05:59):
That's very true (chuckles). Alright, so let's look at equity compensation specifics next. First, what happens to unvested RSUs as your stock options if someone retires or moves jobs?
Amy Walls (06:10):
Yeah, let's focus primarily on RSUs here. So, with retirement, what we have to know is if retirement is going to trigger accelerated vesting or forfeiture of the stock. What I mean by that is when RSUs are granted and really any grant, the employer will include in the contract, “If you leave, do you get to keep these?”
And normally, if you're just leaving, no you don't. But if you meet rules of retirement, for some firms, they say, “Great, you've met the rules of retirement, you get to keep these shares.”
I'll use the example of Intel in 2024 with their layoffs. And as we were evaluating that severance package for clients who were eligible for retirement, it was a matter of defining of the number of grants they had. Some of them were eligible to pay out in retirement if they left for retirement, and some were not.
So, we had to know which is which to say, what is your decision, what assets go with you? And so, to do that, we need to look at the plan documents to know the age and tenure-based benefits of an employee and just understand those extra choices around retiring versus just resigning.
And if you're changing firms, typically, you are forfeiting any unvested equity. So, it's understanding the cost of this equity that you're giving up and planning your departure. Maybe it's because at this point, I want to be gone or maybe look, you've got an extra big payout in September, even though you'd really ideally like to be gone in March, and it's worth staying the extra six months for this equity payout that's going to happen that's larger than your normal quarterly payouts.
Jon Gay (08:10):
You're leading me into my next question, Amy, which is timing the exercise of stock options. If you're leaving, what should the approach be here?
Amy Walls (08:17):
I think there's a couple ways we could interpret this. One is if you're leaving and you need to figure out what to do with the stock options or RSUs primarily in this case, you want to think about that timing ahead of time.
But sometimes, you come upon this where it's unexpected and maybe I should be retiring. So, we may have runway or we may not. That's something that people need to be thinking about. Ideally, we'd want to plan in advance.
So, if we've had time to plan in advance, it may be strategically for stock options exercising to manage those taxes over multiple years so that you keep the stock rather than with stock options where you have to exercise within 30 days, maybe 90 days, and it may all happen in the current year with one big tax bill.
With RSUs, they pay out at the time they vest. So, if you retire on September 1st, that final paycheck essentially is going to have all of that stock coming in as income with shares withheld to cover some of the tax bill. But considering RSUs are withheld at 22% or 37%, may not be enough. So, it's a big messy math problem. That's the easiest way to say it for our listeners.
Jon Gay (09:38):
And I'm glad you hit on the tax piece as well, because I'm thinking about the timing of all these machinations of everything you're talking about, but the tax piece is certainly important too. So, after leaving, our listeners are walking away, they have this company stock, how should they decide whether to hold it or sell it after they've made that clean break?
Amy Walls (09:55):
This really comes down to (again, I'll look in your mirror) “it depends.” Because they need to assess their personal financial goals and overall asset concentration, and where they're at. So, understanding the long-term strategy. With retirement, it may be someone that prefers stable income and doesn't want the risk associated with a large concentration.
If someone's going to a new firm, they may have more flexibility because they're going to have income coming in soon. And so, they may say, I've also got more runway until I retire, I feel like I can hold this, and I feel like there's some good opportunity here.
Something we've talked about before, Jag, is this idea of are you going to kick yourself based on your decision if you sell? So, one, if the amount of money you're getting is what makes the goal feasible, the right choice might be to sell. If you don't, you are at risk of the market falling and if this is retirement, you'd need to go back to work.
I think for many people, it would settle the decision-making. For somebody who's changing firms, they have more choice. But in either case, if you are going to “kick yourself” because you sell and then all of a sudden, the stock price goes up 50% and you're going to base every future investment decision on “shoulda, coulda, woulda” from that situation, you're not going to make good investment decisions going forward.
Jon Gay (11:30):
Sure.
Amy Walls (11:31):
So, there's that layered approach that we've talked about in prior episodes.
Jon Gay (11:35):
I want to come back to the taxes thing. We hit on this a moment ago, but what should listeners anticipate about taxes when they exit their current firm?
Amy Walls (11:42):
In both cases, there's going to be a bill to pay (laughs).
Jon Gay (11:45):
Yeah.
Amy Walls (11:47):
First of all, but retirement, it's about the plan. You're mapping out a cashflow strategy to recreate a paycheck, or at least ideally, that's what you'd be doing with the of an advisor. So, how are you going to be paying for capital gains for the ordinary income, for potential AMT from all of this equity comp that may be paying out?
Jon Gay (12:10):
AMT?
Amy Walls (12:10):
Alternative minimum tax.
Jon Gay (12:12):
Got it. Okay.
Amy Walls (12:13):
We haven't talked about that one in a while. Probably something we should talk about soon.
Jon Gay (12:17):
Thanks for the refresher (laughs).
Amy Walls (12:20):
The other piece with retirement that I've alluded to is: can you, if we've got some runway on this, spread out some of these taxable events over multiple years for tax efficiency?
Jon Gay (12:33):
Right.
Amy Walls (12:34):
So, rather than let's use stock options for an example, we'll say non-qualified stock options, that ordinary income is going to be due. Some people say, oh wait, and exercise at the last minute. Because ideally, the stock price has gone up, but your exercise price will stay constant, and so you're basically gaining more money.
Jon Gay (12:56):
We talked about that in a previous episode.
Amy Walls (12:58):
So, people sometimes say, “Well, gosh, I'm not going to exercise until I absolutely have to.” Well, then if that's the beginning of 2026, boom, all of that tax happens there in 2026. But if you can exercise maybe a little bit, let's say we had runway, we exercised some in 2024, some in 2025, and at some in 2026, we can spread out some of the tax gain.
Jon Gay (13:23):
Right, exactly.
Amy Walls (13:24):
Or the tax consequences I should say. But it all depends on what kind of options or RSUs and things we're talking about. As I said, when we started to answer to this particular topic, I said there's going to be a tax bill. So, for those changing firms, it's not anticipating that you're going to sell your equity compensation and live off of that in this period, not accounting for your tax bill. That's the big danger.
Jon Gay (13:50):
Right, okay. Alright. So, how should equity compensation fit into someone's broader financial plan when it comes to walking away from that employer?
Amy Walls (13:59):
Well, I think as an advisor that equity compensation should support your long-term financial goals first. It's a form of your compensation. And I think any of us could agree that income we have coming in does have to support today and it needs to support the future.
But in an ideal world, we'll live off of our income that is not part of equity compensation. So, we want to align our approach to goals really clearly. In retirement, it's worth considering that that equity compensation should help generate your consistent, reliable income.
Jon Gay (14:35):
Okay.
Amy Walls (14:36):
Jag, I think I've said “should” a number of times here recently, and I'm feeling bad about that. Perhaps for our listeners, please replace that “should” with “will.” It is not a judgment statement; it's more of a “consider these things” statement (laughs).
Jon Gay (14:50):
Agreed.
Amy Walls (14:50):
With switching firms, equity compensation can be used strategically for long-term goals for diversification of assets because that creates risk, and perhaps, it does also cover short-term liquidity needs.
And importantly in this, it's not just about, “I have this desire to retire to switch firms, and so I'm going to look at this in this moment,” the important part of this is this is a bigger picture, longer-term strategy that ideally is going to be in place that you adjust as goals change.
Jon Gay (15:31):
Got it. Alright, Amy, what specific triggers or company events might influence or tip that scale for someone to retire or leave?
Amy Walls (15:39):
Good question. Major company milestones, IPOs, mergers, acquisitions, I think all of those. Scheduled vesting events or acceleration opportunities. Sometimes that comes up where a firm says, “Hey, we will reclassify this form of equity comp, here's the offer.”
And it may stretch it out to give you more opportunity if the stock price isn't doing well, or there may be, we've talked about tender offers, a tender offer where you can take advantage of selling some sooner because the company hasn't gone public or whatever. And just really industry and market shifts that are going to impact stock values.
This year, 2025, there's been some volatility.
Jon Gay (16:23):
You might say that.
Amy Walls (16:26):
There's the potential that that volatility continues. And since we're talking about tech, tech is having a hard time in terms of people staying employed, people finding employment. And along with that comes that stock prices often aren't as healthy as they once were.
Jon Gay (16:45):
Agreed.
Amy Walls (16:46):
And the last thing I'd say around triggering events is really that ongoing evaluation that says, “Here's where I'm at, does waiting or acting sooner enhance my financial security? And how income’s related to my goals?” Because ultimately, this is about goals.
Jon Gay (17:02):
Amy, one thing that I loved in the many episodes of this podcast we've done is your emphasis on behavioral investing and the psychology behind investing. You mentioned regret earlier. How can listeners confidently approach this decision and do their best to avoid regret?
Amy Walls (17:16):
I think first of all, accept that perfect timing is rare. You're not going to get this right each time. There's always “shoulda, coulda, woulda.” Focus on being informed and making deliberate intentional decisions aligned with goals. I feel like a broken record on that one.
And then take practical steps, clearly articulate those goals and document your decisions so you can look back on them. So easy to “misremember” when our mind is telling us to do something else.
Jon Gay (17:44):
Oh yes.
Amy Walls (17:45):
Periodically, review it with a trusted resource like an advisor. And diversify to reduce regret risk from those concentrated positions.
Jon Gay (17:54):
Right. You don't want to have all your eggs in one company basket. So, Amy, what final advice would you give listeners thinking about making this kind of move soon?
Amy Walls (18:02):
Again, intentionality, number one: know what the equity compensation, the total equity compensation means for your current life stage and your future life stages. And seeing clarity, simplicity, and professional support to help navigate these decisions. They're not easy and if you're struggling with it, know that that is normal.
Jon Gay (18:28):
Yes.
Amy Walls (18:29):
For someone to say they don't struggle with this would be unusual. And so, the norm is this is difficult stuff.
Jon Gay (18:38):
Absolutely. Amy, I know the tech sector as well as the medical field, they're both specialties of yours at Thimbleberry Financial. If one of our listeners wants to come talk to you and your team about these topics or anything related to their financial future, how do they best find you?
Amy Walls (18:51):
They can give us a call at (503)-610-6510 or find us online at thimbleberryfinancial.com.
[Music Playing]
Jon Gay (19:00):
Alright, good stuff, Amy. We'll talk again in a couple weeks.
Amy Walls (19:02):
Sounds good, Jag.
Voiceover (19:03):
Securities offered through registered representatives of Cambridge Investment Research, Inc., a broker dealer, member of FINRA/SIPC, advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.
Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions.
Securities offered through registered representatives of Cambridge Investment Research, Inc., a broker dealer, member of FINRA/SIPC, advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.