Understanding Your Tax Impacts As An Amazon Employee
Generally, RSUs are awarded at no cost without a Section 83 election.
Tip: A section 83 Election is an IRC provision that allows employees to pay ordinary income taxes on the total fair market value of the restricted stock at the time of granting rather than the time of vesting.
As you can see in the graphic, you are given the shares at no cost. However, once you are vested, it triggers a tax liability and you will pay ordinary income taxes on the amount of gain between fair market value at grant and FMV at vesting. Even if Amazon typically withholds 22 percent of the value for taxes, for some , this may not be enough, so be prepared for a higher tax liability in the higher vested years.
Additionally, when you go to sell the shares, you will pay capital gains taxes for the amount of gain between FMV at vesting and FMV at the sale. Capital gains taxes will vary depending on how long youve held the stock, your taxable income, and your filing status. f you sell the stocks right away once vested, youll pay ordinary capital gains taxes. If you hold onto the stock for longer than a year, youll pay long-term capital gains taxes. So, its important to prepare yourself for the liability.
Philip Morris International: 100 Percent Match On The First 5 Percent
Philip Morris International offers a company match after 90 days of service. The match is 100 percent of the first 5 percent of contributions made by the employee. New employees are automatically enrolled in the plan with a 3 percent contribution.
What Is Amazons 401 Plan
Like many major employers, Amazon offers its employees a 401 plan to help them save for retirement.
Under the plan, Amazon allows its employees to contribute between 1% and 9% of their salary to either a traditional or Roth 401, or use a combination of the two. Amazon employees can choose to invest their contributions in one or more of the following funds:
- Amazon.com Stock Fund
- American Beacon Small Cap Value Fund R6 Class
- American Funds EuroPacific Growth Fund Class R-6
- Oakmark International Fund Class Institutional
- RIMCO Total Return Fund Institutional Class
- State Street Russell Large Cap Growth Index Non-Lending Series Fund Class C
- State Street Russell Large Cap Value Index Non-Lending Series Fund Class C
- Vanguard Explorer Fund Admiral Shares
- Vanguard FTSE Social Index Fund Institutional Shares
- Vanguard Institutional 500 Index Trust
- Vanguard Institutional Total Bond Market Index Trust
- Vanguard Institutional Total International Stock Market Index Trust
- Vanguard Retirement Savings Trust III
- Vanguard Target Retirement Trust Select
- Vanguard Target Retirement Income Trust Select
Full-time and eligible reduced-time Amazon employees are automatically enrolled in the companys 401 plan 90 days after hire unless they unenroll or actively enroll themselves. Employees who are automatically enrolled will have their contributions invested into a target-date fund. Employees can also choose their own investments from the provided options.
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Check If Your Company Stacks Up
Companies with pension plans used to be the key to aging comfortably. But with the arrival of the 401k in 1978, workers took more control over their retirement savings and the best candidates began expecting more from their employers. Today, millions of Americans depend on their 401ks for security and independence in life after their earning years, and companies that lure the top talent are often the companies with the best retirement plans.
Andrew Lisa contributed to the reporting for this article.
What Is An Rrsp
Its an investing and retirement savings account registered with the Canada Revenue Agency that provides Canadians benefits to save for retirement. The money you put towards an RRSP isnt taxed as a part of your income, so you pay less income tax.
Its different from a typical savings account as its a place to put your investments where any growth isnt taxed until you take your money out. Usually youll be retired by the time you withdraw your money, so youll generally pay less tax than in your higher earning years and get to keep more of your money for retirement.
Read Also: How Does 401k Retirement Work
Can I Take My Pension Early
Generally, the answer is no. You must wait until the retirement age specified in the pension plan. However, according to the Consumer Financial Protection Bureau, some unscrupulous operators have come up with the idea of a pension advance. In order to get some ready cash, future pensioners can use as collateral some or all of their as-yet-unreceived pension payments. This only eats into your retirement fund, and the offers usually come attached to high fees and interest rates. If you have a military pension, the offer is actually illegal.
Conocophillips: 6 To 9 Percent Match
ConocoPhillips employees can receive a 6 percent contribution if you contribute 1 percent of your salary. Additionally, Conoco offers contributions of 6 percent, 7 percent and 9 percent based on years of service and age. Employees are fully vested after three years and 1,000 hours of service each year.
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Employee And Family Assistance Program
Amazon cares about your health and well-being, both on and off the job. The Employee and Family Assistance Program is available 24/7 to you and your family at no cost to help make life a little bit easier. Use the EFAP to access confidential, professional counseling and support for your health, wellbeing or work-related issues.
Maternity and Parental LeaveFollowing all local and statutory requirements, Amazon offers up to 20 weeks of paid parental leave, plus up to an additional eight weeks of flexible work time when returning to work.
Should I Also Have An Individual Disability Insurance Policy
In todays economy, your most valuable asset is the human capital, which is often overlooked when discussing job opportunities and benefits.
Accounting for the fact that one in four people will become unable to work for any length of time over the course of their careers, individual DI is a cost-effective way to ensure the continuity of income.
While its possible to obtain benefits from Social Security Disability Insurance, its often not a dependable option as initial claims are frequently denied, and theres an elimination period of five months.
Given the limitations of Amazons disability insurance policies, you should consider adding an extra layer of protection by having an individual disability insurance policy as part of a comprehensive financial plan.
Heres what you should know about individual DI:
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Navigating The Amazon 401 Plan
Employer Retirement Plans form the backbone of most Individual’s Savings and Retirement Plan. Where a Defined Benefit Plan used to provide retirement security via “income for life”, now most people rely upon a Defined Contribution plan for retirement security. Like most 401 Plans, Amazon’s is chock-full of bells and whistles that both entice and benefit their Employees. Any Amazon Employee would be wise to be well-versed in Amazon’s 401.
Life And Accidental Death And Dismemberment Insurance
- Amazon currently provides two times your annual base salary for Basic Life and AD& D Insurance at no cost to you.
- You can buy supplemental life insurance coverage for yourself, payable to your designated beneficiaries if you die. You can buy coverage in amounts of 1x to 10x your base annual earnings, up to $2,000,000.
- You can buy life insurance to cover your spouse/domestic partner in amounts of $25,000 or ½ to 5x your base annual salary, up to $250,000 not to exceed 100% of your total amount of life insurance .
- You can buy life insurance to cover your children in certain amounts up to $20,000.
- An accelerated death benefit is available in certain situations involving a terminal illness.
- You can buy supplemental AD& D insurance to cover just yourself, or yourself and your eligible dependents, of 1x to 10x your basic annual earnings, up to $2,000,000.
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What Is The Difference Between A Group Rrsp And An Individual Rrsp
A group RRSPusually offered through your employeris different from one you might open on your own in two ways: Group RRSPs usually have lower management fees when compared to retail, and allow your employees to contribute through payroll. Thats a plus because it means your RRSP contributions are deducted before tax ispotentially reducing the amount of income tax from your pay.
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Amazon’s 401 Plan Is Pretty Brutal Too
The workplace culture now under scrutiny for its reportedly brutal tendencies is paired with a comparatively stingy and risky retirement plan.
Suzanne Woolley and Margaret Collins and Spencer Soper
To judge by Amazons 401 plan, the giant online retailer doesnt have much in common with its more benevolent Silicon Valley peers. The workplace culture now under scrutiny for its reportedly brutal tendencies is paired with a comparatively stingy and risky retirement plan.
The match of employee contributions into their 401 plans is below average and made entirely in Amazon stock, which leaves employees dangerously exposed to the companys fortunes. In fact, Amazons 401 came last in Bloombergs ranking of the plans offered by the top 50 companies in the S& P 500.
Best Retirement Plans From Google Apple And Other Major Companies
Learn about the best 401k plans and other retirement benefits offered by major employers. Plan Your Retirement
Today, most employer retirement plans come in the form of 401ks, as companies with pensions are becoming harder and harder to come by. Employees at businesses that dont offer 401ks will have to open an IRA or Roth IRA on their own.
When comparing different types of retirement plans, keep in mind that the amount your employer matches will have a big impact on your life after your earning years have passed. Because of compound interest, a variation of just a few percentage points could mean the difference of hundreds of thousands of dollars over the course of a career.
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How Should You Invest
One of the most difficult decisions youll have to make for your 401 account is how to invest your contributions. Theres no one right answer, but there are a few factors to consider to help you choose the right investments for you:
- Time horizon: Your time horizon is the number of years before you expect to use your investments. In the case of retirement funds, your time horizon is the number of years before you plan to retire. In general, the longer your time horizon, the more aggressive you can afford to be with your investments.
- Diversification: Diversification is a critical component of investing. The general concept is that you spread your money across many assets, both across and within asset classes. The more diversified you are, the less the performance of a single investment will impact your entire portfolio.
- Risk tolerance: Your risk tolerance is how comfortable you are with risk. Investors with a higher risk tolerance are comfortable taking a greater risk for a higher potential reward, while those who are more risk-averse will accept a lower potential return in exchange for a lower risk.
For investors who are uncomfortable choosing their own investments, a target-date fund can be a great option. A target-date fund is a type of mutual fund thats associated with a particular retirement year. The fund manager builds a diversified fund, adjusting the holdings as the time horizon shrinks.
This Report Analyzes And Compares Amazon’s Employee Health Insurance And Employee Benefits With Its Industry And In Washington State
Providing a smart employee benefits package is critical for attracting top talent and retaining valuable employees. Today, employee benefits play a vital role when candidates consider accepting a job offer.
Many companies offer today over-the-top perks, like yoga classes, haircuts, catered meals, and acupuncture. In this report, we focus however on traditional benefits. It’s a work in progress that we will expand and update on a regular basis.
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Amazon’s 401k Contributions As Compared To Other Companies
Similar to Amazon, Facebook, Microsoft, and Google match 50% of employee contributions. Unfortunately, Amazon’s maximum contribution is up to 4%, while competitors like Facebook and Microsoft offer 7% and 6%, respectively.
Facebook’s and Microsoft’s 401k vesting is immediate. With Amazon, on the other hand, you will not get your match until you stay with the company for three years. Amazon often pays out in company stocks, but employees are free to redirect according to their personal financial plan.
Check out our ranking of FAANG 401k plans for more detailed information.
Things You Need To Know About Amazon Restricted Stock Units
As we said above, Amazon Restricted Stock Units are a part of your compensation, but they arent worth anything until youre vested. Once youre vested, though, youre free to do what you want with the stock.
Each unit is worth the current price of an Amazon share on the date that you become vested. However, Amazon RSUs create a tax liability when you become vested. Youll pay taxes as you would on your ordinary income at that time.
Other things to know about Amazon RSUs are:
Make sure you understand what happens to your RSUs if you take parental leave
Your RSUs dont expire
Youll lose vesting if you leave Amazon before youre fully vested
You may have specific trading windows to trade the stock once youre vested to prevent insider trading
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Sustainable & Diversified Investing Within Your Amazon 401k
Sustainable Investing, also known as Socially Responsible Investing , means incorporating Environmental, Social, and Governance criteria into the investment selection process. Essentially, this allows you to invest in a way that aligns with your values without necessarily compromising diversification or returns.
There is currently one socially focused fund option within your regular Amazon 401, but by utilizing the Fidelity BrokerageLink option in your 401, you can gain access to hundreds of SRI mutual funds and ETFs.
What Happens To You 401 If You Quit
If you leave your job at Amazon, you have a few different options for what to do with the money in your 401 plan. First, you can simply decide to leave the money where it is. You might go this route if you arent moving to a company that offers a 401 or if the plan at your new company isnt as good as the Amazon plan.
Next, you can to a 401 plan at your new company. The benefit of this option is the simplicity You only have to keep track of one retirement account, rather than keeping track of one at each of your former jobs. To roll money from a former 401 to your Amazon 401 plan, contact your plan administrator, Fidelity.
Next, you can decide to roll the money into your 401 over into an IRA. You can choose between a traditional IRA or a Roth IRA, but keep in mind that if you roll the money over from a traditional 401 to a Roth IRA, youll have to pay income taxes on the entire amount.
Finally, you can take a lump-sum distribution from your Amazon 401 plan . While this option might seem the most attractive at the moment, it should be saved as a last resort.
First, cashing out your 401 is robbing your future self of retirement funds. And since time in the market is one of the most important factors for how your investments grow, cashing out what youve saved could result in a huge cut to your retirement savings. Another downside of cashing out your 401 is that in addition to paying income taxes on the amount you withdraw, youll also pay a 10% penalty.
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What Is An Amazon Rsu
An Amazon RSU is the right to receive a share or payout at a future date or subject, to some performance condition. It is gifted by Amazon at the start of your employment. For reference, one RSU equals one share of stock once you become vested.
You receive your shares upon being hired, but they arent worth anything just yet. Youll receive a vesting schedule based on your compensation. Your plan documents tell you the exact number of RSUs youll receive and how you may earn additional units.
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Do You Need Disability Insurance
Did you know that one in four people 20 years or older will become unable to work due to medical conditions at some point in their lives?
If this happens to you, a disability insurance policy will provide you with the necessary income to cover expenses such as your mortgage, car payments, and living expenses so you can avoid experiencing severe financial distress.
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Amazons 401 Contribution Matching
Like most companies that offer a 401 plan, Amazon matches its employees contributions up to a particular percentage of their salary. Currently, Amazon will match 50 cents on the dollar of the first 4% of your salary that you contribute to your 401 plan. Ultimately, this results in a maximum 2% contribution.
So how does this compare to other employers?
According to one study, the majority of employers in the United States offer between 3% and 6% for a promised match. The average promised match was 4.5%. This data is consistent with a similar study, which found the average 401 employer contribution rate to be about 4.7%.
As you can see, the average employer contribution is considerably larger than Amazons in fact, its more than twice the match that Amazon offers its employees.
In addition to contribution matching, another important concept when it comes to employer-sponsored retirement plans is vesting, which refers to the amount of time before you take ownership of a certain employee benefit.
In all 401 plans, you are immediately fully vested in your own contributions. In other words, you alone own that money. But thats not the case for any contributions Amazon makes to your 401 plan. Instead, you wont become vested in Amazons 401 contributions until youve worked for the company for three years.