Great Advice for Grads 2023

If you receive stock options, or would like to participate in an ESPP, you’ll need to think carefully about when to purchase your shares and how much of your paycheck you can afford to allocate to company stock. Buying stock options or reducing your take-home pay to participate in an ESPP can be expensive, and it’s worth budgeting for, to ensure you can afford to do so. Myah Moore Irick, founder of the Irick Group at Merrill Private Wealth Management in Pittsburgh, said in an email interview that it’s important to educate her clients about their compensation awards, and help incorporate those positions into their wealth plan. Ensuring your investment portfolio isn’t too heavily allocated in one stock is still important, even if it’s your own company’s stock. Investing in broad, low-cost index funds can help you avoid too much exposure to one company. Many 401(k)s invest in broad funds (often target-date funds), so even when there is market volatility, it’s likely you’re invested in a well-diversified portfolio. PUTTING IT ALL TOGETHER While determining exactly how much to contribute to each of your new employee benefits will be different for every person, there are a few guidelines that may be worth keeping in mind. You’ll also have to consider your personal budget. If contributing to your employee stock purchase plan will cut into your housing or grocery money, it might not be worth it right now. And just because you might not be able to participate in each benefit as much as you’d like right away, that doesn’t mean you won’t get there eventually. 1. Contribute enough to your 401(k) to receive your full company match. Read through your company’s benefit offering to make sure you’re getting every penny of free money. 2. Consider maxing out an HSA. This may be a difficult goal to balance (especially if you’re also investing in a non-work-related account, such as a Roth IRA), but because HSAs have additional tax benefits, it may be better to focus on maxing out an HSA over maxing out a 401(k), McLaughlin says. Maxing out an HSA (totaling $3,850 for individuals and $7,750 for families) also costs significantly less than maxing out a 401(k). 3. Look at your portfolio and assess. In order to know where best to invest the remainder of your available funds, it may be wise to look at your existing portfolio and think about your risk tolerance. If you’re confident your company will perform well in the future and you can tolerate taking a lot of risk, you may consider investing more heavily in an ESPP. If putting all your investing eggs into one company’s basket feels too risky, investing further in a well-diversified 401(k) may be a better option.



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