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Ask HN: Has anyone heard of taking out a loan to maximize ESPP contributions?
Was thinking about this the other day. If your typical Employee Stock Purchase Program (ESPP) nets you a 15% minimum essentially-guaranteed return but you can't afford to max out your paycheck contributions, why not find a loan for 10% or less to subsidize your paycheck so that you CAN max out contributions? From the bank's perspective, the only risk to mitigate would be the employee getting fired or the company going under. Seems like a win-win, but has anyone heard of such a practice?
- mankash666 9y agoWhat % of employees eligible for ESPP even need the few hundred $ extra per paycheck that they won't max out ESPP? They probably fall into these categories: 1> Unplanned financial crisis 2> New hires, typically from college with loans I'd guess the market isn't big enough
- matmann2001 9y agoI'm thinking there might be more than you think, though you are probably right that the distribution would skew towards younger employees. Even 10% of a paycheck is decent sized chunk to have tied up in ESPP. Especially if you are doing other %-based contributions like 401K/IRA. Especially in areas where housing can cost 25% or more of your monthly earnings.
- mankash666 9y ago@matmann2001 - you'll need to get more numbers to assess the total assessable market (TAM). ESPP eligibility might be a low% of the workforce given that SMBs employ much more than public companies. even among public companies, ESSP is only offered by a double digit % at best. Despite this, if the TAM is convincing, let's chat
- matmann2001 9y agoCNBC article from last year: https://www.cnbc.com/2016/12/14/employee-stock-purchase-plans-are-underutilized.html https://www.cnbc.com/2016/12/14/employee-stock-purchase-plan... Notably, Fidelity alone administers ESPP for 678,000 employees. Fidelity found that only 1/3 of employees with access to ESPP actually use it.