This month, data from the Bureau of Labor Statistics (BLS) gave the Seattle-area this great new distinction: highest tech wages in the United States — and probably the world. Per the BLS report, the average “wage” earned by an IT worker in King Country was $5,364 per week in 3rd quarter 2019 — equating to about $280,000 a year. That is exceptionally high, and substantially more than even Wall Street weekly wages at $3,437 (see “Financial Activities, New York, NY”).
How can this be when Seattle-area tech salaries, on average, are widely reported to be between $100,000 and $150,000? The answer is: A lot of compensation that is not regular salary, especially in the form of “equity compensation” — stock options, RSUs, RSAs, etc. — as well as annual bonuses. Equity comp continues to be a key way to lure talent, especially now that more than 130 out-of-town tech companies have opened development operations in Seattle to tap into the growing base of tech workers moving here (per Geekwire). Highly skilled and/or experienced employees will continue to benefit the most from equity comp grants, and they are a small percentage of the overall tech workforce.
Consider that nearly a quarter of Seattle-area tech workers are brand new to the field – less than 1 year of experience, based on a fall 2019 survey by the career site Vice (reported in the Puget Sound Business Journal.) The percentage of “newbies” doubled in just one year – it was roughly 12% in 2018. On the other end of the spectrum, just 4% of Seattle-area tech workers are seasoned veterans with more than 15 years of experience (down from 7% in 2018).
Do You Have Plan for Your Equity Comp?
If your salary consists of equity compensation — stock options, RSUs, RSAs, etc. – you really should have a plan for making the most of your allocations, such as what percentage you cash out and when, taxes due, and also under what circumstances will you forfeit unvested options.
What we have observed are one of two tendencies, and perhaps you fall into one of these camps:
(1) Overestimating the value of equity comp in making big financial decisions. As in: “Sure, I can afford that $2 million house since most of my RSUs vest in the next three years”;
(2) Underestimating the value of equity comp or leaving it on autopilot. “Way too busy working to figure out what to cash out, and I don’t actually need that money right now anyway.”
We find there are risks to both the above tendencies. For people with significant equity compensation accumulated over many years, an autopilot approach can mean missed opportunities. Likewise, newer employees who base major financial decisions on the value of restricted stock can end up in a bind.
Here at LNWM, we can help you actively manage your equity comp in a way that reduces risk and supports your financial and life goals. This is especially important now that equity valuations are near record highs and markets are becoming more volatile.
Remember: Equity comp is a means, not an end, and it must be thoughtfully managed to attain your goals. You can use stock awards to qualify for a larger mortgage, make gifts of stock, sell and diversify your investments, fund a trust for future generations and/or charities — or all of the above. The important thing is to align your equity comp with your overall financial plan, instead of letting it drive major financial decisions or go on autopilot. We can help you do that.