Restricted stock is sort of like that. It's not as glamorous as employee stock options, which offer the promise of vast treasures if your company's stock soars.

Stock Options and Restricted Stock - Equity Compensation Awards

But if the share price keels over, you'll be grateful you have restricted stock. Restricted stock has been around for a long time, but it's getting a lot more attention now that Microsoft has decided to give it to workers instead of stock options.

Restricted Stock Units Definition | unyyozeqy.web.fc2.com

Other companies are expected to follow Microsoft's example, so it's important to understand the pros and cons of this form of compensation. Stock options give you the right to buy your company's shares sometime in the future at a preset price.

If the stock price rises, you're a winner. Restricted stock costs you nothing as long as you meet the vesting requirements. That usually means you have to stay on the job for a few years. But once the stock is vested, it's yours. Even if the price has fallen since the stock grant, it's still worth something. Most companies award fewer shares of restricted stock than stock options. A company that previously gave workers 10, stock options would probably give them 3, to 4, shares of restricted stock, which limits your ability to profit from future gains, says Bruce Brumberg, editor of myStockOptions.

Stock options stock market scams case study usually taxed until you exercise them, which gives you some control over when you pay your taxes.

Restricted shares are taxed in the year they forex magnates london event, whether you sell them or not.

Most restricted stock tradable stock options restricted stock units in stages, Brumberg says, so you probably won't have to pay the entire tax bill in one year.

Taxes are usually based on the market value of the shares when they vest, not the value at the time of the grant. There is an alternative to paying taxes when your stock vests, but it's risky. You can make what's known as a Section 83 b election, which requires you to pay taxes within 30 days of receiving the grant. How much money will i make on a cd calculator pay income tax based on the value of the stock tradable stock options restricted stock units the time of the grant, and future gains will be taxed at the lower capital gains rate.

If the stock rises significantly between the time of the grant and vesting, an 83 b election will produce a much lower tax bill.

Some restricted stock programs don't allow this strategy. There are big drawbacks to making an 83 b election, says Mike Busch, financial planner with Vogel Financial Advisors in Dallas. If you leave your job before the shares vest, you'll end up paying taxes on income you never received.

unyyozeqy.web.fc2.com - Stock options vs. restricted shares: A case of risk vs. reward

Similarly, if the shares decline in value, the IRS won't refund your overpayment. Once the stock vests, dividends will be taxed at the lower rate.

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays.

Click here for an index of Your Money columns. Wear a bright orange life jacket on your next sailing trip and no one will mistake you for Orlando Bloom in Pirates of the Caribbean. But if the vessel capsizes, you'll stay afloat while your mateys go down with the ship.

Newspaper Home Delivery - Subscribe Today. USA WEEKEND Sports Weekly Education Space.

Home Travel News Money Sports Life Tech Weather. CD and loan rates. Today in the Sky. Your portfolio - Log in. Is your fur fake, or is it Fido? More companies reduced their stock option programs this year in favor of restricted stock. According to a recent survey: Mercer Human Resource Consulting. Copyright USA TODAY, a division of Gannett Co.