Why Understanding Executive Benefits When Changing Jobs is Absolutely Crucial

Today we’re diving into a topic that doesn’t get nearly enough attention—understanding your executive benefits when you change jobs. Also, I need to clarify, I am not a CPA, or attorney, or, in this role, a financial advisor and nothing here is considered to be tax, financial or legal advice. But these are important benefits you’ve got to get right when changing careers.

If you’re in a leadership or highly compensated role, you probably have benefits beyond salary—things like corporate stock options, employee stock purchase plans (ESPPs), restricted stock units (RSUs), performance shares, and maybe even supplemental retirement or deferred compensation plans.

Proper planning is crucial when changing jobs – so you can enjoy going to re-invest these benefits and avoid dealing with the tax man.

 

These benefits can be incredibly valuable—but also complex. If you’re not careful, you can leave a lot of money on the table—or face an unexpected tax bill—when you leave your employer.

So today, we’re going to break it all down:

• The types of executive benefits you might have.
• Vesting and exercise period rules you need to know.
• Tax considerations that can trip people up.
• And strategies to maximize value and avoid costly mistakes when you change jobs.

 

The Executive Benefits Landscape

Let’s start by defining the benefits we’re talking about.

1. Stock Options

• Incentive Stock Options (ISOs): Usually given to executives and key employees. They have favorable tax treatment if certain holding requirements are met.
• Nonqualified Stock Options (NSOs or NQSOs): No special tax benefits, but often more flexible in grant size and who can receive them.
• These give you the right to buy company stock at a set price—usually your grant date price—within a certain time period.

2. Restricted Stock Units (RSUs)

• These aren’t options—you don’t buy them. Instead, the company grants you shares that vest over time or when certain goals are met.
• Once vested, they’re yours, and they count as income at their market value.

3. Performance Shares or Performance-Based RSUs

• Vest only if the company—and sometimes you—hit specific performance metrics.

4. Employee Stock Purchase Plans (ESPPs)

• Allow you to buy company stock at a discount, often 10-15%, sometimes based on the lower of the price at the beginning or end of the purchase period.

5. Deferred Compensation or Supplemental Retirement Plans

• Let you defer some of your income now, to be paid later—often in retirement.
• Can be very tax efficient, but risky if the company’s financial situation changes.

 

Vesting – Why Timing Is Everything

Next, let’s understand, one of the most important things to understand is vesting—the process by which your benefits become yours.

Cliff Vesting: You get 100% of your benefits at a certain date. For example, all your options or RSUs might vest after 3 years.

Graded Vesting: A percentage vests each year. For example, 25% per year over 4 years.

When you leave a company:

• Unvested stock options, RSUs, or performance shares are usually forfeited.
• Some companies have provisions for partial vesting if you’re close to a vesting date or in special situations like retirement, disability, or company acquisition.

Tip:
If you’re thinking about leaving your job, check your vesting schedule before you resign. Waiting even a few weeks could mean thousands—or hundreds of thousands—more in benefits.

 

Exercise Periods

If you have vested stock options, the clock is ticking when you leave.

Typical Rule: You have 90 days from your departure date to exercise vested options. After that, they expire.

For ISOs, if you wait longer than 90 days after leaving, they automatically convert to NSOs—losing their favorable tax treatment.

Some companies extend exercise windows for executives—sometimes to one year or more—but you must check your plan documents.

Why this matters:

• If your company’s stock is high, exercising could require a large cash outlay and trigger a big tax bill.
• If you don’t have the cash, you may be forced to let valuable options expire.

 

Tax Considerations

Here’s where a lot of executives get caught off guard. Let’s walk through the basics.

1. Incentive Stock Options (ISOs)

• No regular income tax when granted or exercised—but the “spread” (market price minus strike price) counts for Alternative Minimum Tax (AMT) purposes.
• If you hold the shares for 1 year after exercise and 2 years after grant, gains are taxed as long-term capital gains.
• If you sell sooner, the favorable treatment is lost.

2. Nonqualified Stock Options (NSOs)

• When exercised, the spread is taxed as ordinary income—plus payroll taxes.
• Any future gains after exercise are capital gains.

3. RSUs

• Taxed as ordinary income when they vest, based on market value at vesting.
• Companies often withhold shares to cover taxes.

4. ESPPs

• Qualified ESPPs may get favorable tax treatment if you hold shares for the required periods.
• Nonqualified ESPPs are taxed more like regular stock purchases with a discount counted as income.

5. Deferred Compensation Plans

• Taxed when paid out, not when earned.
• But if the company goes bankrupt before payout, you could lose the money.

Tax Tip:
Because equity compensation often results in lumpy income, you could easily be pushed into a higher tax bracket in the year you leave. Coordinating with a tax advisor before you exercise or sell can help smooth the impact.

 

Strategies to Maximize Your Benefits

If you’re planning a job change, here’s a checklist to protect and maximize your benefits:

1. Review Your Plan Documents
   • Understand your vesting schedule, post-termination exercise period, and any special provisions.
2. Time Your Exit Strategically
   • Align your departure with upcoming vesting dates or bonus payouts.
3. Plan for Exercise Costs and Taxes
   • If you intend to exercise options, figure out how you’ll fund it—and set aside money for taxes.
4. Consider a Cashless Exercise
   • Sell some shares immediately upon exercise to cover costs and taxes while keeping some stock.
5. Use a Tax Advisor
   • Especially in years with large exercises or RSU vesting, professional guidance can save you significant money.
6. Coordinate With Your New Employer
   • Some companies offer signing bonuses or equity that can help bridge the gap if you’re losing unvested stock.

 

Common Mistakes to Avoid

Here are pitfalls I’ve seen too many executives make:

• Quitting right before a major vesting date – walking away from free money.
• Missing the exercise deadline – letting vested options expire worthless.
• Failing to plan for taxes – leading to surprise bills or forced stock sales.
• Not considering AMT with ISOs – a silent tax trap.
• Ignoring ESPP holding periods – losing out on preferential tax treatment.

 

Changing jobs is exciting—it’s a chance to take your career in a new direction, negotiate better terms, and grow. But it’s also a time when mistakes with your executive benefits can cost you dearly.

The key takeaways from today’s episode:

• Know your benefits—and the fine print.
• Understand vesting and deadlines before you resign.
• Plan for taxes—don’t let them take you by surprise.
• Get professional advice—a tax and financial advisor can help you make the smartest choices.

Remember—these benefits are part of your total compensation. You’ve earned them. Make sure you keep what’s yours.

Thank you for joining me today on Life by Design 360. If you found today’s article helpful, please subscribe, share it with a friend or colleague, and leave a review.

Tomorrow is going to be really awesome. I’m going to show you how to build a side hack into a business and an income you can’t get fired from ever again. Now that we’ve covered the financial planning aspect of going through a layoff, it’s time to put your money to work to make it grow as fast as possible. And there is no better way than a side hack, especially combined with your new job or career, that can turn a business into an unlimited income and wealth creation machine. Be sure to join us.

 

Also, be sure to look out for openings in our LifeByDesign360 Insider Academy and Community. There you’ll find all the coaches, the courses, the resources and an amazing community of people going through what you’re going through, who are utilizing the tools for maximum success.

 

Until next time—plan smart, work smart, and build your life by design.