Qualified Stock Options purtchased through my Roth IRA
"No, you cannot. ISO are given to you in your capacity as an employee (that's why it is ""qualified""), while your IRA is not an employee. You cannot transfer property to the IRA, so you cannot transfer them to the IRA once you paid for them as well. This is different from non-qualified stock options (discussed in this question), which I believe technically can be granted to IRA. But as Joe suggests in his answer there - there may be self-dealing issues and you better talk to a licensed tax adviser (EA/CPA licensed in your State) if this is something you're considering to do."
My employer matches 1 to 1 up to 6% of pay. They also toss in 3, 4 or 5 percent of your annual salary depending on your age and years of service. The self-directed brokerage account option costs $20 per quarter. That account only allows buying and selling of stock, no short sales and no options. The commissions are $12.99 per trade, plus $0.01 per share over 1000 shares. I feel that's a little high for what I'm getting. I'm considering 401k loans to invest more profitably outside of the 401k, specifically using options. Contrary to what others have said, I feel that limited options trading (the sale cash secured puts and spreads) can be much safer than buying and selling of stock. I have inquired about options trading in this account, since the trustee's system shows options right on the menus, but they are all disabled. I was told that the employer decided against enabling options trading due to the perceived risks. Vesting As you may know a stock option is the right to acquire a given amount of stock at a given price.  Actually acquiring the stock is referred to as exercising the option.  Your company is offering you options over 200,000 shares but not all of those options can be exercised immediately. Initially you will only be able to acquire 25,000 shares; the other 175,000 have conditions attached, the condition in this case presumably being that you are still employed by the company at the specified time in the future.  When the conditions attached to a stock option are satisfied that option is said to have vested - this simply means that the holder of the option can now exercise that option at any time they choose and thereby acquire the relevant shares. Dividends Arguably the primary purpose of most private companies is to make money for their owners (i.e. the shareholders) by selling goods and/or services at a profit.  How does that money actually get to the shareholders?  There are a few possible ways of which paying a dividend is one.  Periodically (potentially annually but possibly more or less frequently or irregularly) the management of a company may look at how it is doing and decide that it can afford to pay so many cents per share as a dividend.  Every shareholder would then receive that number of cents multiplied by the number of shares held. So for example in 4 years or so, after all your stock options have vested and assuming you have exercised them you will own 200,000 shares in your company.  If the board declares a dividend of 10 cents per share you would receive $20,000.  Depending on where you are and your exact circumstances you may or may not have to pay tax on this. Those are the basic concepts - as you might expect there are all kinds of variations and complications that can occur, but that's hopefully enough to get you started. I have managed two IRA accounts; one I inherited from my wife's 401K and my own's 457B.  I managed actively my wife's 401 at Tradestation which doesn't restrict on Options except level 5 as naked puts and calls. I moved half of my 457B funds to TDAmeritrade, the only broker authorized by my employer, to open a Self Directed account.  However, my 457 plan disallows me from using a Cash-secured Puts, only Covered Calls.  For those who does not know investing, I resent the contention that participants to these IRAs should not be messing around with their IRA funds.  For years, I left my 401k/457B funds with my current fund custodian, Great West Financial.  I checked it's current values once or twice a year. These last years, the market dived in the last 2 quarters of 2015 and another dive early January and February of 2016.  I lost a total of $40K leaving my portfolio with my current custodian choosing all 30 products they offer, 90% of them are ETFs and the rest are bonds. If you don't know investing, better leave it with the pros - right?  But no one can predict the future of the market.  Even the pros are at the mercy of the market. So, I you know how to invest and choose your stocks, I don't think your plan administrator has to limit you on how you manage your funds. For example, if you are not allowed to place a Cash-Secured Puts and you just Buy the stocks or EFT at market or even limit order, you buy the securities at their market value. If you sell a Cash-secured puts against the stocks/ETF you are interested in buying, you will receive a credit in fraction of a dollar in a specific time frame.  In average, your cost to owning a stock/ETF is lesser if you buy it at market or even a limit order.  Most of the participants of the IRA funds rely too much on their portfolio manager because they don't know how to manage. If you try to educate yourself at a minimum, you will have a good understanding of how your IRA funds are tied up to the market.  If you know how to trade in bear market compared to bull market, then you are good at managing your investments.  When I started contributing to my employer's deferred comp account (457B) as a public employee, I have no idea of how my portfolio works.  Year after year as I looked at my investment, I was happy because it continued to grow.  Without scrutinizing how much it grew yearly, and my regular payroll contribution, I am happy even it only grew 2% per year.  And at this age that I am ready to retire at 60, I started taking investment classes and attended pre-retirement seminars.  Then I knew that it was not totally a good decision to leave your retirement funds in the hands of the portfolio manager since they don't really care if it tanked out on some years as long at overall it grew to a meager 1%-4% because they managers are pretty conservative on picking the equities they invest.  You can generalize that maybe 90% of IRA investors don't know about investing and have poor decision making actions which securities/ETF to buy and hold. For those who would like to remain as one, that is fine.  But for those who spent time and money to study and know how to invest, I don't think the plan manager can limit the participants ability to manage their own portfolio especially if the funds have no matching from the employer like mine. All I can say to all who have IRA or any retirement accounts, educate yourself early because if you leave it all to your portfolio managers, you lost a lot.  Don't believe much in what those commercial fund managers also show in their presentation just to move your funds for them to manage.  Be proactive.  If you start learning how to invest now when you are young, JUST DO IT! My understanding was that if they cash out they only have to pay capital gains tax on it, which is lower than income tax for their bracket. You also have to think about tax on dividends from these stock options, which is only 15%, which is paltry to regular incometax rate that the rich pay on their salaries. According to Wikipedia:  Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, qualified dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers  Anyways, SOMETHING needs to be done. "Your employer can require a W8-BEN or W-9 if you are a contractor, and in some special cases.  I believe this bank managing your stock options can as well; it's to prove you don't have ""foreign status"".  See the IRS's W-9 instructions for details." This is not right. Inferring the employee stock pool’s takeaway is not as easy as just taking a fraction of the purchase price. As an example, that wouldn’t account for any preferred returns of other ownership classes, among other things.   All considered though, it’s reasonable to assume that the employee stock pool will get some premium. Best of luck. You also need to remember that stock options usually become valueless if not exercised while an employee of the company.  So if there is any chance that you will leave the company before an IPO, the effective value of the stock options is zero.  That is the safest and least risky valuation of the stock options.   With a Google or Facebook, stock options can be exercised and immediately sold, as they are publicly traded.  In fact, they may give stock grants where you sell part of the grant to pay tax withholding.  You can then sell the remainder of the grant for money at any time, even after you leave the company.  You only need the option/grant to vest to take advantage of it.  Valuing these at face value (current stock price) makes sense.  That's at least a reasonable guess of future value.   If you are absolutely sure that you will stay with the company until the IPO, then valuing the stock based on earnings can make sense.  A ten million dollar profit can justify a hundred million dollar IPO market capitalization easily.  Divide that by the number of shares outstanding and multiply by how many you get.  If anything, that gives you a conservative estimate.   I would still favor the big company offers though.  As I said, they are immediately tradeable while this offer is effectively contingent on the IPO.  If you leave before then, you get nothing.  If they delay the IPO, you're stuck.  You can't leave the company until then without sacrificing that portion of your compensation.  That seems a big commitment to make. Stuff I wish I had known, based on having done the following: Obtained employment at a startup that grants Incentive Stock Options (ISOs);  Early-exercised a portion of my options when fair market value was very close to my strike price to minimize AMT; made a section 83b) election and paid my AMT up front for that tax year. All this (the exercise and the AMT) was done out of pocket. I've never see EquityZen or Equidate mention anything about loans for your exercise. My understanding is they help you sell your shares once you actually own them. Stayed at said startup long enough to have my exercised portion of these ISOs vest and count as long term capital gains;  Tried to sell them on both EquityZen and Equidate with no success, due to not meeting their transaction minimums.  Initial contact with EquityZen was very friendly and helpful, and I even got a notice about a potential sale, but then they hired an intern to answer emails and I remember his responses being particularly dismissive, as if I was wasting their time by trying to sell such a small amount of stock. So that didn't go anywhere. Equidate was a little more friendly and was open to the option of pooling shares with other employees to make a sale in order to meet their minimum, but that never happened either.  My advice, if you're thinking about exercising and you're worried about liquidity on the secondary markets, would be to find out what the minimums would be for your specific company on these platforms before you plunk any cash down. Eventually brought my request for liquidity back to the company who helped connect me with an interested external buyer, and we completed the transaction that way. As for employer approval - there's really no reason or basis that your company wouldn't allow it (if you paid to exercise then the shares are yours to sell, though the company may have a right of first refusal). It's not really in the company's best interest to have their shares be illiquid on the secondary markets, since that sends a bad signal to potential investors and future employees. Here's an article on it that might help: http://thefinancebuff.com/restricted-stock-units-rsu-sales-and.html One of the tricky things is that you probably have the value of the vested shares and withheld taxes already on your W-2. This confuses everyone including the IRS (they sent me one of those audits-by-mail one year, where the issue was they wanted to double-count stock compensation that was on both 1099-B and W-2; a quick letter explaining this and they were happy). The general idea is that when you first irrevocably own the stock (it vests) then that's income, because you're receiving something of value. So this goes on a W-2 and is taxed as income, not capital gains. Conceptually you've just spent however many dollars in income to buy stock, so that's your basis on the stock. For tax paid, if your employer withheld taxes, it should be included in your W-2. In that case you would not separately list it elsewhere. Stock options represent an option to buy a share at a given price.  What you have been offered is the option to buy the company share at a given price ($5) starting a given date (your golden handcuffs aka vesting schedule). If the company's value doubles in 1 year and the shares are liquid (i.e. you can sell them) then you've just made $125k of profit.  If the company's value has gone to zero in 1 year then you've lost nothing other than your hopes of getting rich. As others have mentioned, the mechanics of exercising the option and selling the shares can typically be accomplished without any cash involved.  The broker will do both in a single transaction and use the proceeds of the sale to pay the cost of buying the shares.  You should always at least cover the taxable portion of the transaction and typically the broker will withhold that tax anyways.  Otherwise you could find yourself in a position where you have actually lost money due to tax being owed while the shares decline in value below that tax.  You don't have to worry about that right now. Again as people have mentioned options will typically expire 10 years from vesting or 90 days from leaving your employment with the company.  I'm sure there are some variations on the theme.  Make sure you ask and all this should be part of some written contract.  I'm sure you can ask to see it if you wish.  Also typical is that stock option grants have to be approved by the board which is normally a technicality. Some general advice: You only got 75 shares, so your basis is the fair market value of the stock as of the grant date times the number of shares you got: $20*75.  Functionally, it's the same thing as if your employer did this: As such, the basis in that stock is $1,500 ($20*75). The other 25 shares aren't yours and weren't ever yours, so they aren't part of your basis (for net issuance; if they were sell to cover, then the end result would be pretty similar, but there'd be another transaction involved, but we won't go there).  To put it another way, suppose your employer paid you a $2000 bonus, leaving you with a $1500 check after tax withholding. Being a prudent person and not wishing to blow your bonus on luxury goods, you invest that $1500 in a well-researched investment. You wouldn't doubt that your cost basis in that investment at $1500. Back in the late 80's I had a co-worked do exactly this. In those days you could only do things quarterly: change the percentage, change the investment mix, make a withdrawal.. There were no Roth 401K accounts, but contributions could be pre-tax or post-tax. Long term employees were matched 100% up to 8%, newer employees were only matched 50% up to 8% (resulting in 4% match). Every quarter this employee put in 8%, and then pulled out the previous quarters contribution. The company match continued to grow.  Was it smart? He still ended up with 8% going into the 401K. In those pre-Enron days the law allowed companies to limit the company match to 100% company stock which meant that employees retirement was at risk. Of course by the early 2000's the stock that was purchased for $6 a share was worth $80 a share... Now what about the IRS: Since I make designated Roth contributions from after-tax income, can I make tax-free withdrawals from my designated Roth account at any   time? No, the same restrictions on withdrawals that apply to pre-tax   elective contributions also apply to designated Roth contributions. If   your plan permits distributions from accounts because of hardship, you   may choose to receive a hardship distribution from your designated   Roth account. The hardship distribution will consist of a pro-rata   share of earnings and basis and the earnings portion will be included   in gross income unless you have had the designated Roth account for 5   years and are either disabled or over age 59 ½. Regarding getting just contributions: What happens if I take a distribution from my designated Roth account before the end of the 5-taxable-year period? If you take a distribution from your designated Roth account before   the end of the 5-taxable-year period, it is a nonqualified   distribution. You must include the earnings portion of the   nonqualified distribution in gross income. However, the basis (or   contributions) portion of the nonqualified distribution is not   included in gross income. The basis portion of the distribution is   determined by multiplying the amount of the nonqualified distribution   by the ratio of designated Roth contributions to the total designated   Roth account balance. For example, if a nonqualified distribution of   $5,000 is made from your designated Roth account when the account   consists of $9,400 of designated Roth contributions and $600 of   earnings, the distribution consists of $4,700 of designated Roth   contributions (that are not includible in your gross income) and $300   of earnings (that are includible in your gross income). See Q&As regarding Rollovers of Designated Roth Contributions, for   additional rules for rolling over both qualified and nonqualified   distributions from designated Roth accounts. I've been offered a package that includes 100k stock options at 5 dollars a share. They vest over 4 years at 25% a year. Does this mean that at the end of the first year, I'm supposed to pay for 25,000 shares? Wouldn't this cost me 125,000 dollars? I don't have this kind of money. At the end of the first year, you will generally have the option to pay for the shares. Yes, this means you have to use your own money. You generally dont have to buy ANY until the whole option vests, after 4 years in your case, at which point you either buy, or you are considered 'vested' (you have equity in the company without buying) or the option expires worthless, with you losing your window to buy into the company. This gives you plenty of opportunity to evaluate the company's growth prospects and viability over this time. Regarding options expiration the contract can have an arbitrarily long expiration date, like 17 years. You not having the money or not isn't a consideration in this matter. Negotiate a higher salary instead. I've told several companies that I don't want their equity despite my interest in their business model and product. YMMV.   Also, options can come with tax consequences, or none at all. its not a raw deal but you need to be able to look at it objectively. Your question doesn't make much sense. The exceptions are very specific and are listed on this site (IRS.GOV). I can't see how you can use any of the exceptions regularly while still continuing being employed and contributing. In any case, you pay income tax on any distribution that has not been taxed before (which would be a Roth account or a non-deductible IRA contribution). Including the employer's match. Here's the relevant portion: The following additional exceptions apply only to distributions from a   qualified retirement plan other than an IRA: The estimated cost of $200 sqft of living space is achievable by builders who are following one the their standard plans. They build hundreds of homes each year across the region using those standard plans. They have detailed schedules for constructing those homes, and they know exactly how many 2x4s are need to build house X with options A, F,  and P. They buy hundreds of dishwashers and get discounts. That price also includes the cost of the raw land and the required improvements of the property.  You need to know the zoning for that land. You need to know what you can build by right, and what you can get exceptions for. You don't want to pay $600 K and then find out you can only build a 1 level house and you can only use 1/4 acre. You would need to start with a design and then have the architect and the builder and a real estate lawyer look over the property. Then they can give you an estimate of what it would cost to put that design on that property.  83k sqft? I mean it can accommodate at least 10 houses. It depends on what is the minimum lot size. If the maximum allowable density is three houses per acre you can get 6 in 2.2 acres, but if the minimum lot size is supposed to be 5 acres, then you will need an exception just to build one house. And exceptions involve paperwork, hearings and lawyers.