By Marlene Y. Satter
Employees who participate in their company’s employee stock purchase program may have more confidence and control over their financial well-being
That’s according to Fidelity Investments research that looked at the behaviors of some 300,000 employees over a two-year period.
Among its findings, Fidelity determined that 48 percent of employees who purchased company stock through an ESPP sold all their shares within two years, demonstrating the role company stock can play within an employee’s overall financial plan.
In spite of the preponderance of stock sellers, it wasn’t a case of employees flipping stocks; only six percent of the employees who sold all their shares did so within 10 days of purchase.
The research did find that employees in ESPPs that offer a higher discount are more likely to sell sooner. Employees can often purchase company stock through their ESPP at a discount, and Fidelity
found that nearly 40 percent of employees with a 15 percent discount sold all their shares within 90 days, compared with just 25 percent of employees in plans with a 5 percent discount.
However, higher discounts also contribute to higher employee participation rates — and employees at companies with ESPPs are less likely to borrow from their 401(k)s.
Plans with a 15 percent discount, the research found, have double the participation rates of plans with just a 5 percent discount. In addition, employees faced with urgent expenses can cash in shares from an ESPP without the retirement repercussions associated with 401(k) loans
, and can also avoid the need to repay a loan if they change jobs.
According to the research, younger employees were more likely to sell off stocks they had purchased than older ones; more than half — 57 percent — of employees under 30 sold all their shares within two years, while 58 percent of employees more than 60 years old hung onto all the shares they purchased.
Originally posted on BenefitsPro.com