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As wage growth outpaces inflation, Americans have reason to be more optimistic about long-term goals like retirement.
But many still fear that uncertainties like a higher cost of living or U.S. government changes to the retirement system may throw them off track.

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Last year, Americans’ confidence that they would have enough money to live comfortably in retirement fell the most since the global financial crisis.
New research shows both workers’ and retirees’ confidence has not recovered. But some signs of optimism have emerged, particularly as wage growth now outpaces inflation growth, according to the Employees Benefit Research Institute and Greenwald Research.

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The more than 2,500 Americans surveyed said certain factors are most likely to throw them off course — for example, an increasing cost of living that will make it harder to save and the U.S. government making significant changes to the retirement system.
The latter worry comes as both retirees and workers expect to rely on three sources of income in their golden years: Social Security, workplace retirement savings plans and personal retirement savings or investments, the research found.
While 88% of workers expect Social Security will be a source of retirement income, almost all of today’s retirees, 91%, say they depend on those benefit checks.

Changes to Social Security benefits may be on the horizon, as the program’s trust funds face depletion dates in the next decade that make benefit cuts of at least 20% inevitable if Congress does not take action. Meanwhile, Medicare’s trust fund that covers Part A hospital insurance is due to run out even sooner.

Other factors, like changes in tax breaks to employment-based retirement savings or individual retirement accounts, could also upend retirement planning if they were put in place, noted Craig Copeland, director of wealth benefits research at EBRI.
“That can really change the dynamics of what would happen in retirement and how people plan for retirement,” Copeland said.
Social Security is always a top issue in polls AARP conducts of its members, Nancy LeaMond, the interest group’s executive vice president and chief advocacy and engagement officer, said during a Wednesday press briefing.
“In light of that, and the importance of Social Security, we are asking every candidate for federal office this cycle what his or her position is on Social Security,” LeaMond said.

New survey results released by the AARP this week paint a less optimistic outlook for Americans ages 50 and up, with 20% indicating they have no retirement savings. Moreover, 61% say they worry they will not have enough money in retirement.
The nonprofit organization, which represents Americans 50 and up, is also pushing for lawmakers’ positions on family caregiving, which tends to contribute to women’s economic insecurity in retirement, LeaMond said.
AARP is also backing other legislative proposals to improve retirement security by providing Americans who do not have access to employer-sponsored retirement plans with retirement savings accounts or automatic IRAs.  
While Congress has also taken action to address retirement security through recent legislation, the effects may be limited for people who are close to retirement, Copeland noted. That includes changes that make it possible for savers in their 60s to make additional catch-up contributions and a match for low-income workers.
“There wasn’t a great deal that’s really change the dynamic for people near retirement,” Copeland said.

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Restricted stock units, or RSUs, are a type of equity compensation that grants company stock to employees over a set schedule.
RSUs have become more common over the past two decades, and most public companies now offer RSUs to at least mid-level employees, according to the National Association of Stock Plan Professionals.
However, employees need a comprehensive strategy for RSUs, experts say.

Enes Evren

When you receive equity compensation from an employer, it typically requires a comprehensive financial plan — and restricted stock units are no exception.
In 2000, only 20% of public companies granted restricted stock or restricted stock units, primarily for senior executives or higher, according to the National Association of Stock Plan Professionals.

That percentage, however, has jumped to 94%, and most public companies now extend grants to at least middle managers, the organization’s most recent survey from 2021 found.
From a tax perspective, “it’s very similar to a cash bonus,” said certified financial planner Chelsea Ransom-Cooper, chief financial planning officer for Zenith Wealth Partners in New York.
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However, once the shares vest, you’ll have to decide whether to sell or continue holding company stock, she said.
That could hinge on several factors, including your short- and long-term financial goals, how much company stock you already own and how you feel about the company’s growth potential.

How restricted stock units work

Typically, you’re granted RSUs upon hiring, throughout employment or tied to corporate performance.
“That first grant is typically always the biggest,” Ransom-Cooper said. “The additional ones are going to be those golden handcuffs.”
You acquire the actual shares over a set period or “vesting” schedule. Until you own the shares, you won’t receive dividends or have voting rights.
The vesting schedule could be graded, which delivers shares over specific increments. Alternatively, there could be a cliff, such as one year of employment. In either case, you could forfeit unvested shares by leaving the company early.
After RSUs vest, you can sell shares or continue holding them, similar to other investments. Over time, you could amass a sizable concentration of a single stock, which experts say could be risky.

‘Pick a strategy’ for RSUs and taxes

If you’re granted RSUs, you should plan to incur regular income taxes on the market value of shares as they vest. Your company’s tax withholding may not be enough, experts say.
“Companies have a flat withholding rate” of 22% or 37%, explained Bruce Brumberg, editor-in-chief and co-founder of myStockOptions.com, which covers RSUs and other equity compensation.
“You have to be aware of that and pick a strategy,” he said. If your company only withholds 22% and your tax bracket is higher, you may need to make quarterly estimated tax payments.

If you sell your shares, the taxes depend on how long you’ve owned the shares. Your purchase date, or “basis,” is the shares’ market value at vesting.
You could pay long-term capital gains for profitable shares — taxed at 0%, 15% or 20% — if you owned the shares for more than one year. But you’ll owe regular income taxes on short-term gains from shares owned for one year or less.
Whether you’re vesting or selling shares, you’ll need to weigh your complete tax situation — and how the additional income could impact things like college financial aid, eligibility for certain tax breaks and more.

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One of Americans’ biggest retirement fears is running out of money.
BlackRock hopes a new strategy to allow for paycheck-like distributions from retirement savings will help.

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BlackRock, the largest asset manager, has launched a new product to help workers access their retirement savings through a regular income stream that mimics a paycheck they receive during their working years.
Experts say that while the new choice could be helpful, its success will be defined by whether consumers actually take advantage of it.

The BlackRock product, LifePath Paycheck, aims to simplify the process of withdrawing funds from lifetime investments. The process is the aftermath of a broad shift from defined benefit plans like pensions to defined contribution plans like 401(k) plans.
“We’re talking about a revolution in retirement,” BlackRock CEO Larry Fink wrote of LifePath Paycheck in his recent annual letter to investors.
The strategy provides guaranteed income through a target-date fund, which typically comprises a mix of stocks, bonds and other investments that become more conservative as an investor nears their anticipated retirement age.
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Employees who sign up for LifePath Paycheck through their employer-provided retirement plan will start making allocations to lifetime income starting at age 55. Then, starting at age 59½ and up until the year they turn 72, they may regularly withdraw from that sum.

While they receive that income, the rest of their retirement savings may continue to grow.
A recent BlackRock survey found that 60% of employees worry they may outlive their retirement savings.
In a similar vein, research from the Transamerica Center for Retirement Studies has found that the greatest retirement fear for workers 50 and up is running out of their savings and investments.
BlackRock said that around 500,000 employees now have access to the strategy through 14 retirement plan sponsors.
For now, the LifePath product is limited to plans offered through employers. But BlackRock would eventually love to make a similar option available through funds for individuals who do not have access to employer plans, Anne Ackerley, head of retirement at BlackRock, said during a Wednesday presentation in New York.

While the development may start in the U.S. first, Fink predicted in his annual letter that it will likely spread to other countries.
“I believe it will one day be the most used investment strategy in defined contribution plans,” Fink wrote.

Investor utilization key to success

Experts say much of the strategy’s success will depend on whether employees opt in.
For sustainable energy company Avangrid, implementing LifePath Paycheck has provided a way to smooth its recent transition from a defined benefit to defined contribution plan, said Paul Visconti, senior director of total health and retirement programs at the company.
“Adding this feature to it really … gives some of the legacy employees some of that comfort they have from the legacy pension plan,” Visconti said.
He added that the company hopes the feature will help attract and retain employees in a competitive industry. Because LifePath Paycheck just went live at Avangrid on Monday, the company does not yet have data on how many employees aged 55 and older may have already signed up. However, the company has been actively educating its 8,000 employees on the offering.
Annuity options in retirement plans will likely become as widely embraced as target-date funds are today, predicted Jason Fichtner, chief economist at the Bipartisan Policy Center and executive director at the Alliance for Lifetime Income’s Retirement Income Institute.
Annuity income helps retirees understand how much they can spend. It also allows them to withstand risks better across their investment portfolio, he said.
Moreover, having income through an annuity may help workers create an income bridge that enables them to delay claiming Social Security retirement benefits, according to research published last year from the Bipartisan Policy Center and BlackRock.
Social Security benefits are a “life annuity” that increases annually with inflation, “a rare feature on the private market,” the research notes. Moreover, every year a retiree delays benefits from their full retirement age — typically 66 or 67 — up to age 70, they get an 8% increase. That’s a guaranteed return that’s hard to match elsewhere.

Social Security is “unequivocally” the first place people should look to make the most of their retirement income, said David Blanchett, managing director and head of retirement research at PGIM DC Solutions.
“Will it help people to buy this product? It would likely help them to delay claiming Social Security more,” Blanchett said.
It’s up to individuals to actively convert their savings to lifetime income. And few participants tend to take that step, he said.
“Very few people who end up in this product actually receive any kind of paycheck, because they don’t always know what they’re signing up for,” Blanchett said.
While many people like the idea of guaranteed fixed income, they often don’t seek products on their own that will provide that income stream from their retirement plan savings once they retire, said Dan Doonan, executive director at the National Institute on Retirement Security, a nonprofit research and education organization.
The annuity choices consumers face are “incredibly complex,” as they have to take into account who to buy from and assess whether they’re getting a good deal, Doonan said. Having an employer plan that provides these options can help remove those uncertainties and may result in higher utilization, he predicted.
“People are much more likely to do these things when they’re part of the plan they have at the office at work,” Doonan said.
BlackRock’s move will likely push other groups to enhance their retirement plan annuity options, Doonan predicted. “It might look very different in 10 years,” he said.

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Women and Wealth Events
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A song on Taylor Swift’s new “Tortured Poets Department” album, which goes, “I cry a lot but I am so productive, it’s an art,” is resonating with many women on TikTok.
As of April 25, more than 98,000 short-form video posts on the social media platform featured the lyric from “I Can Do It With a Broken Heart,” along with a glimpse of the daily grind.

Taylor Swift accepts the Best Pop Vocal Album award for “Midnights” onstage during the 66th Grammy Awards at Crypto.com Arena in Los Angeles on Feb. 4, 2024.
Kevin Mazur | Getty Images

When Taylor Swift on April 19 surprised the world with “The Tortured Poets Department,” a double album complete with 31 self-composed songs, there was one line on “I Can Do It With a Broken Heart” that hit home with her — mostly female — listeners: “I cry a lot, but I am so productive, it’s an art.”
As of April 25, more than 98,000 short-form video posts on TikTok featured the lyric along with a glimpse of the user’s daily grind.

“It resonates with both millennials and Gen Zers, which I think indicates that Gen Z is feeling the same ‘girl-boss’ pressures that millennials famously grew up with,” said Casey Lewis, a social media trend forecaster.

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There’s a reason so many working women, regardless of age, can relate to the 14-time Grammy winner’s lyrics, according to Eve Rodsky, the author of “Fair Play” and an expert in domestic labor and partnership equity.
“We have been gaslighted to believe that having it all means doing it all,” she said. “The good news is that people like Taylor are calling this out.”

‘Maximize every minute’: pressures Taylor sings about

Women are steadily working more, but they continue to pick up a heavier load when it comes to household chores and caregiving responsibilities, according to a recent Pew Research Center survey and analysis of government data.
“I’m a millennial and I grew up like I needed to maximize every minute of the day,” Lewis said. “It’s interesting to see [Taylor] sing about those pressures.”

In February 2024, the labor force participation rate for women between the ages of 25 and 54 hit 77.7%, according to data from the U.S. Bureau of Labor Statistics. That’s just shy of the June 2023 peak of 77.8%.
And yet, even in cases where women are now breadwinners, the division of labor at home has barely budged, the Pew report found.
“We are expected to wear many hats and achieve the same benchmarks at work, but often without the care infrastructure, employer support, or equitable division of labor in the home to make it happen,” said Heather Boneparth, co-author of The Joint Account, a money newsletter for couples. 
“But we also live in an environment of layoffs and rising costs, so not being productive isn’t really an option,” she added.

We have been gaslighted to believe that having it all means doing it all. The good news is that people like Taylor are calling this out.

Eve Rodsky
author of “Fair Play”

Working women are shouldering more burdens

Members of Gen Z and millennials are the first two generations that grew up alongside the internet, making them uniquely exposed to, and aware of, what’s going on in the economy, experts say.
“Part of that is thanks to the platform TikTok. Even though you’re not reading the news, you’re still seeing how the economy is impacting peers. It gives you a peek into many different worlds,” Lewis said.

At the same time, stress levels for working women have increased with long working hours, contributing to poor mental health, according to Deloitte’s most recent Women at Work report published this year.
Women are shouldering most of the responsibility for child care, domestic tasks, and, increasingly, care for aging parents — even if they’re the primary earner, the Deloitte report found.
This year, half of women who live with a partner and have children at home bear the most responsibility for child care, up from 46% last year. At the same time, 37% of women said they feel like they have to prioritize their partner’s career over their own — another increase from 2023 — in part because their partner earns more but also due to societal or cultural expectations.
“That’s going in the wrong direction,” said Deloitte’s Global Chief Diversity, Equity and Inclusion Officer Emma Codd, who is also a working mother.
“We need to be able to talk about it,” Codd said, and Taylor Swift’s new track is a good motivator, she added.
Correction: An earlier version of this story inaccurately characterized the labor force participation rate among women aged 25 to 54 in June 2023.

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Borrowers hoping for student loan forgiveness have just a few more days to act before an April 30 deadline.
Those who before the deadline request a so-called loan consolidation — which will combine their federal student loans into one new loan — could get their debt canceled sooner than they would have otherwise.
Some people could even see their debt canceled immediately.

Woman doing bookkeeping at home.
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Borrowers hoping for student loan forgiveness have just a few more days to act before an April 30 deadline.
Those who ahead of the deadline request a so-called loan consolidation — which will combine their federal student loans into one new loan — could get their debt canceled sooner than they would have otherwise. Some could even see their debt canceled immediately.

Here’s what you should know.

Consolidation can get you closer to loan forgiveness

Income-driven repayment plans, which date back to 1994, set borrowers’ monthly payments based on a share of their discretionary income. Those payments are typically lower than they would be under a standard repayment plan — and, in some cases, they can be zero. Depending on the plan, borrowers can get any remaining debt forgiven after 10, 20 or 25 years.
One complicating factor for borrowers in these programs is that they often have multiple loans that have been taken out at different times, said higher education expert Mark Kantrowitz in an earlier interview with CNBC.
“They get at least one new loan each year in school, on average,” Kantrowitz said.
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As a result, it’s common for a borrower to be on multiple timelines for forgiveness, one for each of those loans.
For now, the Biden administration temporarily offers borrowers the chance to combine their loans and get credit going back as far as their first loan payment on the oldest of their original loans in that bundle.
This could be a good deal for many, experts say.
For example, say a borrower graduated from college in 2004, took out more loans for a graduate degree in 2018, and is now in repayment under an income-driven plan with a 20-year timeline to forgiveness.
Consolidating before May 1 could lead them to qualify for forgiveness on all those loans, experts say, even though they’d normally need to wait at least another 14 years for full relief.
Usually, a student loan consolidation restarts a borrower’s forgiveness timeline, making it a terrible move for those working toward cancellation.

What to know about consolidating your student loans

All federal student loans — including Federal Family Education Loans, Parent Plus loans and Perkins Loans — are eligible for consolidation, Kantrowitz said.
You can apply for a Direct Consolidation Loan at StudentAid.gov or with your loan servicer.
“So long as the application is submitted by April 30, they should be fine, even if the servicers take longer to process it,” Kantrowitz said.

Some borrowers who took out small amounts may even be eligible for cancellation after as few as 10 years’ worth of payments, if they enroll in the new income-driven repayment option, known as the SAVE plan.
Consolidating your loans shouldn’t increase your monthly payment, since your bill under an income-driven repayment plan is based on your earnings and not your total debt, Kantrowitz said.
The new interest rate will be a weighted average of the rates across your loans.

Before consolidating, consider getting a complete payment history of each loan. In doing so, according to experts, you can make sure you’re getting the full credit you’re entitled to.
You should be able to get a history of your payments at StudentAid.gov by looking into your loan details. You can also ask your servicer for a complete record. The payment history counts when your loans first entered repayment, not when the loan was borrowed.
If a borrower believes there is an issue with their payment count, they can talk to their loan servicer or submit a complaint with the Department of Education’s Federal Student Aid unit.
You should never have to pay a fee to consolidate your loan, Kantrowitz said. Anyone who tries to get you to do so is likely a scammer, he said.

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The Biden administration has a new proposal to forgive student debt for millions of Americans.
At the same time, this fall’s incoming college students could end up borrowing $37,000, on average, a new study finds.
As problems with the new FAFSA persist, families are even more worried about how they will pay the tab.

Every year, millions of new students are pumped into the student loan system while current borrowers struggle to exit it.
This year, the Biden administration’s new student loan forgiveness plan could start clearing debt for millions of borrowers as soon as this this fall — just as incoming college freshmen start racking up new balances on their path to a degree.

In fact, 2024 high school graduates going on to a four-year school will rely on loans even more, a new report shows.
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These college hopefuls could take on as much as $37,000, on average, in student debt to earn a bachelor’s degree, according to a NerdWallet analysis of data from the National Center for Education Statistics. The analysis was conducted before recent problems with the Free Application for Federal Student Aid.
Once families hit their federal student loan limits, they often turn to parent student loans and private financing to be able to send their children off to college, the report also found.

How student loan debt became a crisis

Tuition and fees have more than doubled over the past 20 years, reaching $11,260 at four-year, in-state public colleges, on average, in the 2023-24 academic year. At four-year private colleges, it now costs $41,540 annually, according to the College Board, which tracks trends in college pricing and student aid.

“Tuition has been going up faster than inflation for decades and incomes have not kept up,” said Sandy Baum, senior fellow at Urban Institute’s Center on Education Data and Policy. “It’s a serious problem.”

Without financial aid, the price tag at some four-year colleges and universities — after factoring in tuition, fees, room and board, books, transportation and other expenses — is now nearing $100,000 a year.
Because so few families can shoulder the rising cost, they increasingly turn to federal and private aid to help foot the bills.
“Tuition and fees is less than half of the total cost of college,” said Ellie Bruecker, interim director of research at The Institute for College Access and Success. “Students will still need financial aid to pay for other needs.”

How families pay for college

As of last year, the amount families actually spent on education costs was $28,026, on average, according to Sallie Mae’s annual How America Pays for College report — up more than 10% from a year earlier.
While parent income and savings cover nearly half of college costs, free money from scholarships and grants accounts for a more than a quarter of the costs and student loans make up most of the rest, the education lender found.
Scholarships are a key source of funding, yet only about 60% of families use them, Sallie Mae found. Those that did, received $8,149, on average.
The vast majority of families who didn’t use scholarships said it was because they didn’t even apply.

Why fewer students are filling out a FAFSA

To get college aid, students must first file a FAFSA.
The FAFSA serves as the gateway to all federal aid money, including loans, work study and scholarships and grants, which are the most desirable kind of assistance.
This year, problems with the new FAFSA have discouraged many high school seniors and their families from completing an application.

As of April 12, only 29% of the high school class of 2024 had completed the FAFSA, according to the National College Attainment Network, a 36% decline compared to a year ago.
With enrollment deadlines approaching, fewer students have figured out how they will pay for college next year.
“Even if all of this had gone perfectly, the financial aid system doesn’t have the same buying power it had years ago,” Bruecker said.
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It can be difficult to comprehend risk, but getting a grasp on it is critical to making good decisions.
Know the facts behind common misconceptions about investing and managing finances that stump many Americans.

Witthaya Prasongsin | Moment | Getty Images

Many U.S. adults are making financial decisions with a generally poor level of financial literacy, a new report finds. Part of the problem: People continue to believe common misconceptions about managing and investing their money.
The TIAA Institute-GFLEC Personal Finance Index gauges an individual’s knowledge of their personal finances. The index, which has been conducted annually since 2017, asks respondents questions about borrowing, saving, earning, investing and other money-related areas.

In the latest version, most people got the correct answers only about half the time. 
Comprehending risk consistently proves to be the most difficult concept for adults to grasp, said economist Annamaria Lusardi, who founded the Global Financial Literacy Excellence Center in 2011 and is a senior fellow at the Stanford Institute for Economic Policy Research. Yet, “when we’re trying to look at the basis of financial decision-making, a key question is the relationship between return and risk,” she said.

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Here are the facts behind three common misconceptions about investing and managing finances that stump many Americans: 

1. Diversification

MISCONCEPTION: Investing in a single company’s stock usually provides a safer return than a stock mutual fund or exchange-traded fund.
FACT: Investing in one stock is like putting all your eggs in one basket. It exposes your savings to significant loss if the company is in trouble. 

Many mutual funds and exchange-traded funds — especially ones that track a broad market index like the S&P 500 — hedge this risk through diversification, by buying the stock of many different companies.
When it comes to your retirement savings, target-date funds can be another smart option.
“You don’t have to be an investment guru, you can always start with the target-date fund that’s in most retirement plans to get you in the game for a young person,” said Paul Yakoboski, a senior economist with the TIAA Institute.  

Target-date funds have become the most popular investments in workplace retirement plans, such as 401(k)s. As investors approach retirement, the fund’s mix of investments becomes more conservative, decreasing the portion of stocks and increasing the portion of bonds or cash.

2. Return and risk

MISCONCEPTION: Over time, stocks generally give the highest return with little risk when compared with savings accounts and bonds.
FACT: The U.S. stock market is considered to offer the highest investment returns over time, but there is a higher risk as stocks are more volatile than bond prices or cash in a savings account. 

Young couple managing finance and investment online, analyzing stock market trades with mobile app on laptop and smartphone.
D3sign | Moment | Getty Images

“An asset that brings a higher return also has a higher expected risk,” said Lusardi, who is also a member of the CNBC Global Financial Wellness Advisory Board. “People feel like, I can get a higher return with no risk … but basically, a higher return is always a reward for higher risk.”
Investors with a longer timeline toward their goal often have greater opportunities to weather that risk. But if you have a short-term goal, experts typically advise keeping the money out of the market.
For savers and short-term investors looking for a steady return, high-yield savings accounts can be an attractive option, with top interest rates currently hovering between 4% and 5%, according to Bankrate. There’s almost no risk to money in federally insured deposit accounts, unlike investments that are subject to the daily changes in the stock, which can result in much higher risk. 

3. Compound interest

MISCONCEPTION: If you had $100 in a savings account and the interest rate was 4% a year, you’d have $104 after 5 years if you left the money to grow.
FACT: A $100 deposit left in a savings account earning an interest rate of 4% per year over 5 years would total $121.67 with compound interest.
Compound interest can make your savings grow faster since you’re earning interest on the original amount of money deposited plus the interest earned. Check out the Securities and Exchange Commission’s compound interest calculator to calculate the interest you’re earning on your savings. 
Compounding can be one of the greatest gifts for savers and investors, many financial advisors say. You’re not necessarily rewarded for complexity when it comes to your portfolio, said certified financial planner Preston Cherry, a member of the CNBC FA Council and the founder of Concurrent Financial Planning in Green Bay, Wisconsin.
“You’re rewarded for commitment, consistency, and compounding,” he said.
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If you work for a publicly traded company, you may have access to discounted company shares via an employee stock purchase plan, or ESPP.
While the benefit can be valuable, you need to know the rules and risks before opting into your company’s plan, financial experts say.

Morsa Images | E+ | Getty Images

If you work for a publicly traded company, you may have access to discounted company shares via an employee stock purchase plan, or ESPP.
While the benefit can be valuable, you need to know the rules and risks before opting into your company’s plan, financial experts say.

In 2020, roughly half of public companies offered an ESPP, according to a 2021 survey from the National Association of Stock Plan Professionals and Deloitte Tax.
If you have access to one, it’s worth considering because “there’s free money to be had,” said certified financial planner Matthew Garasic, founder of Unrivaled Wealth Management in Pittsburgh. 
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But whether and to what extent you decide to participate depends on other short-term priorities and “how comfortable you are sacrificing cash flow” during the offering period, Garasic said.
With limited income, yearly goals like investing up to your employer’s 401(k) match should come before your ESPP, said CFP Kristin McKenna, president of Darrow Wealth Management in Boston.

“People get really excited about them,” she said. “And it doesn’t always make sense.”

How employee stock purchase plans work

During an “offering period,” which is often six months, ESPPs collect after-tax contributions from each of your paychecks and use the money to buy discounted company stock on a specific date. Tax-qualified plans have a $25,000 yearly limit.
The best ESPPs offer a 15% discount with a “lookback provision,” which bases the stock purchase price on the value at the beginning or end of the offering period, whichever is lower, Garasic explained.
For example, with a $20 starting price and $22 ending price, you could get a 15% discount on $20 and pay $17, for total savings of $5 per share, which is a roughly 22.7% discount off the current market price.
Depending on your plan rules, it could be possible to sell quickly after purchasing to “lock in that immediate gain,” Garasic said. But you’ll owe regular income taxes on the discount, plus levies on the gain after the purchase date.
However, there’s no guarantee of future stock performance. If you hold it for longer, “you’re gambling on the stock price cooperating over that period,” Garasic said.

In 2023, some 85% of qualified ESPPs offered a 15% discount, up from 70% of ESPPs in 2020, according to a recent survey from the National Association of Stock Plan Professionals.  
The percentage of ESPPs with lookbacks has also increased, the same survey found. In 2023, 83% of plans offered a lookback, compared to 64% in 2020. 
Still, you should carefully read the plan documents before opting in. It’s important to know whether the plan is “qualifying,” which changes the tax treatment, the length of the offering period, purchase dates, how to make changes and what happens if you leave the plan, experts say.
The rules can be “overly complicated,” said McKenna from Darrow Wealth Management. “It just seems like killing a fly with a sledgehammer.”
“But it can certainly be a lever that some people want to consider,” she added. More