Workers selling shares
FAVORABLE STOCK MARKET conditions encouraged 50% of employees who have access to an employee stock purchase program at work to sell all of their shares over a three-year period ending in 2016, according to research by Fidelity Investments.
The number of employees who held all of their shares dropped to 43%.
“Company stock plans are increasingly viewed as a top employee benefit and can play an important role in an employee’s overall financial health,” says Mark Haggerty, head of stock plan services at Fidelity Investments. “Employees often use these plans as a savings vehicle alongside their 401(k), but money from an ESPP can be used to address short-term expenses and financial needs and help workers avoid the need to tap their 401(k).”
Fidelity analyzed 365,000 workers over a three-year period to see how they managed their stock purchased through an ESPP. It found that those under the age of 40 or who receive a significant discount on their stock purchases are more likely to sell off their shares. Older employees were more likely to hold onto their shares, but Fidelity noticed an upward trend of those between the ages of 50 and 60 who sold all their stock during that three-year time frame.
What are employees using that money for? According to Fidelity: 34% of them were using it to pay down debt; 17% were using it to make home improvements or purchase real estate; and 11% used it to establish an emergency fund. Nearly 20% of those surveyed reinvested their proceeds from the ESPP into a mutual fund or their retirement savings account.