Amazon Equity & Financial Planning

Astra Wealth Partners helps you optimize your financial decisions during your time at Amazon, such as reviewing your Personal Compensation Summary, developing a strategy for diversifying your RSUs, opting into a Mega Backdoor Roth, or deciding whether or not to elect into the Pilot Cash program. We have helped our Amazon clients reduce concentration risk due to a high amount of one’s net worth tied up in Amazon while maintaining tax efficiency. On top of equity compensation, we provide expertise in retirement planning, investment management, tax planning, and any other personal finance or wealth management questions you may have.

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RSUs, or restricted stock units, are a type of equity grant that gives you shares of Amazon once you have met the time-based vesting requirement at no cost. Your grant is based on a fixed number of shares on a pre-determined date. The initial hiring grant is a 4-year vesting schedule, with 5% in the 1st year, 15% in the 2nd year, and 20% every 6 months across years 3 and 4. Afterward, Amazon offers 2-year refresher grants with quarterly vesting (although we have seen uneven weighting from the 1st and 2nd years). Upon vesting, you will owe ordinary income tax on the entire amount based on the current share price. Your cost basis will also be the current share price at vesting. As with regular stock, you can decide to hold your stock and wait at least one year to obtain favorable tax treatment.

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Mega Backdoor Roth

A Mega Backdoor Roth is a strategy to contribute more than the elective deferral limit for a 401k into a Roth account. Although the elective deferral limit for a 401k is $23,000 in 2024, the combined contribution limit is $69,000, which includes elective deferrals, employer matches, and after-tax contributions. For example, if you max out your elective deferrals at $23,000 and receive a $3,000 employer match, you have a $43,000 limit remaining for after-tax contributions. 

After-tax contributions are not Roth contributions; thus, you will not receive tax-free withdrawals from earnings in retirement. Furthermore, as the name implies, they are taken out of your paycheck after paying taxes. However, they have a cost basis, so you will not be taxed on the original contribution amount during withdrawal. Because of this cost basis, if you convert your after-tax contributions to a Roth immediately afterward (when there are no earnings), your entire conversion will be effectively tax-free. 

With your Amazon Fidelity 401k account, you can automatically convert your after-tax contributions into a Roth 401k account via an in-plan rollover. As a result, this strategy allows Amazon employees to potentially contribute ~$40,000+ of Roth contributions on top of their normal 401k contributions.

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