Many undervalue these plans. Even smart bogleheads.
Several folks have said "15% return".
Techinically it is a 15% discount which equates to a 17.6% return. (You get 1 dollar and pay 85 cents for it. What is 1/.85?).
Then consider you are putting money in gradually, not all at once, so if you equate to a bank account where you slowly deposit and consider the fact you only are out - on average, half the money at once - it is a 35.2% annual return. If you were asked if you wanted to make payroll deposits with each paycheck making 35.2% APR interest would you sign up?
It sounds like your plan is buying at the 15% discount quarterly - so paying you quartetly. So that 35.2% APR is 140.8% APR interest. (Yes there are taxes like normal interest; and you might have to pay brokerage commissions that would reduce this). If you are not maxing this out you are suboptimal.
Max it out and cash out immediately. Think of it as a bonus. Don't leave free money sitting on the table.
Several folks have said "15% return".
Techinically it is a 15% discount which equates to a 17.6% return. (You get 1 dollar and pay 85 cents for it. What is 1/.85?).
Then consider you are putting money in gradually, not all at once, so if you equate to a bank account where you slowly deposit and consider the fact you only are out - on average, half the money at once - it is a 35.2% annual return. If you were asked if you wanted to make payroll deposits with each paycheck making 35.2% APR interest would you sign up?
It sounds like your plan is buying at the 15% discount quarterly - so paying you quartetly. So that 35.2% APR is 140.8% APR interest. (Yes there are taxes like normal interest; and you might have to pay brokerage commissions that would reduce this). If you are not maxing this out you are suboptimal.
Max it out and cash out immediately. Think of it as a bonus. Don't leave free money sitting on the table.
Statistics: Posted by SmileyFace — Sat Jun 15, 2024 5:47 am — Replies 26 — Views 1109