ESPP, PP and New Cash

[Bean]

Given the choice which of these two scenarios would you choose:

A: Add ~$20k a year to a PP split evenly over 12 months.
*Gives me the most liquidity
*Boiler plate risk/return of PP

B: Put ~$10k every 6 months into a Employee Stock Purchase Plan that gives you a 15% discount on shares you purchase and can be sold right after you get them. Then roll the proceeds into the PP.
*Gets me a 6 month return of around ~17% (annualized) on new cash
*6 months before I have access to the money
*There may be a small window of a day or two, between the share grant and when I can sell

Anyone ever struggle with this? 

[Pointedstick]

I do! I opened door #2 for years (with minor modifications, like only selling after a year) but recently pulled out of my ESPP in favor of maximizing my 401k and Roth IRAs and contributing more to my taxable account.

A co-worker just attended a seminar on the tax implications of doing what you suggest and found out about some tax on the 15% discount if you sell it as a short-term capital gain that sharply reduces the advantage. If this is true, then you don't gain as much by doing this and introduce risk if the stock falls precipitously in the day or two before you can sell it. My own company stock has done this enough times that I'm not comfortable with it.

[Khisanth]

If you can wait 6 months, the ESPP thing is usually a pretty good performer. Selling your ESPP shares that quickly is considered part of your Salary income, so your company reports that on your W-2 and is taxed as such.

I still think it's a good deal, and I'm in a 35% tax bracket. My company has a rolling 2-year plan, so I believe I get the lowest stock price on the ESPP start/end dates spanning two years, which means possibly significantly more than a 15% discount.

I'm fortunate to be able to max out on the 401k and ESPP though. So if your cash needs might be hindered by a lower paycheck, it's something you'll need to consider.