Fidelity study: The ‘golden handcuffs’ are real

A newFidelity Investments study of more than 25,000 workers found that 61% of employees expect company stock to help fund their retirement. But only 48% feel confident making decisions about it.

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The Confidence Gap

Released May 4, the study found that 78% of participants understand basic plan tasks like accepting a grant. But many workers feel less confident when it comes to taxes, selling shares, and retirement planning. Also, nearly half have already sold shares to cover short-term needs like emergencies or debt. Another 58% said they have used stock plan proceeds for major life expenses such as a home purchase, education costs, or weddings.

The findings suggest company stock is increasingly serving multiple financial roles at once, including retirement savings, emergency liquidity, and funding for major life milestones. That can make it harder for workers to determine how much equity they should actually hold as retirement approaches.

Read: Record Number of Americans Tapping Their 401(k) Early, According To New Study

The study also found that stock plans are influencing how workers think about employment itself. Nearly two-thirds said equity benefits factor into whether they accept a job, and more than half said stock plans make them more likely to stay with an employer (sometimes referred to as ‘golden handcuffs’). 50% now factor stock plan value into their overall compensation calculations, according to the study.

For many workers, company stock is also becoming an entry point into investing. 43% said a stock plan was how they first entered the stock market, and 34% later invested beyond the plan itself. But Fidelity’s data suggests participation and confidence are not necessarily moving at the same pace.

What This Means for Older Americans

For workers over 50, the tax decisions around company stock are often the least understood and the most consequential.

If you’re holding appreciated company stock in a 401(k), there’s a tax strategy worth knowing about before you retire. It’s called Net Unrealized Appreciation, or NUA. Under IRS rules, workers who qualify may owe ordinary income tax only on what they originally paid for the stock, while future gains may qualify for lower long-term capital gains tax rates when the shares are eventually sold.

The strategy does not apply to every situation, but for workers with highly appreciated company stock, the difference can be significant. A tax or financial planning professional can help determine if it applies to your situation.

The findings suggest many workers are relying on company stock as a retirement asset before fully understanding their options.

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