Quick financial question: anyone here part of an ESOP where they work?

[Javaman]

I have been doing my homework due to the fact that my employer is about to institute this program.

What are your feelings? concerns? etc.

Thanks,
Javaman

[Paulie]

1. Usually a good deal

Fully find your 401k first. Then put "some" money in the ESOP. Don't be greedy because you don't want to have your entire life savings end up being a single stock.

Make sure you stay at the company for the vesting period too. You don't to give anything back.

[JoePhilly]

3. YUP ... and as it "builds up", have a plan for selling chunks of it and moving them

to some other liquid investment as a way to diversify.

[JoePhilly]

2. It really depends on how they structure it.

Some companies allow you to target a certain % of salary to purchase the stock. Usually they sell you the stock at a discount from market price.

They might restrict your sale of that stock for a 6 months or even a year from initial purchase so you can't realize the discount immediately. Or if you sell a stock during that period, you have to drop out of the plan for some time period. I think some allow you to make the purchase with "pre-tax" dollars. Usually you can reinvest dividends.
I think some employers include a "matching" program so they might match your purchase up to some %.

The key risk that I think about is that investing in company stock puts all your eggs in one basket so to speak. Imagine the company struggles, its stock crashes, and you get laid off. You lose your job AND your stock savings all at once.

If you think the company is a good investment, particularly at the discounted price, its not a bad way to save money. It may be better than CDs or other accounts for liquid assets. But it might not be the best thing if its going to be your only liquid savings.