Your UBS statement arrives in your inbox monthly, but how much do you know about it? At Lake Road Advisors, we want to make sure you can follow your statement and understand where your money is allocated — and how it’s performing. When you have a clear understanding of your assets, you can be empowered to ask questions and make meaningful adjustments to your financial portfolio.

To help, we’ve put together a brief overview of your statement. Let’s take a look:

Cash: Save just enough for an emergency, but no more

When you first look at your UBS statement, you’ll see the amount of cash you have saved. While cash is crucial for liquidity, having too much cash sitting idle prevents your money from growing. We don’t view cash as an investment. Instead, we see it as a store of value. We all need cash for current monthly expenses and for an emergency fund, but after that, we recommend allocating it elsewhere, such as:

• A high-yield savings account: Have an upcoming car purchase or saving for a new home in the next year? Don’t take market risk and instead park the funds in a high-yield savings account that could currently earn you about 4.75%. 
• Invest in a brokerage account: Have a longer-term goal? Do more with your money by investing in stocks, bonds, mutual funds, or ETFs.
• 529 fund for education: If supporting your kids in college is a financial goal, consider putting money into a 529 fund, which has tax advantages and can grow.

The bottom line: You don’t want much if any of your hard-earned money sitting idly in cash at UBS, especially since the returns are next to 0%. Think about what goal you want these monies to address and move the funds out.

Common Stock: Your ownership in the company and how it’s performing

Next, on your UBS Statement, you’ll see your common stock, which represents your ownership in Corning. When you own Corning common stock, you will receive a quarterly cash dividend (which is just the company distributing profits to you as an owner). 

On your statement, you should see:

• Number of shares: How many shares you own.
• Cost basis: This is the original price you acquired the shares at and is inclusive of factors like reinvested dividends. This is important for determining the taxable implications to you when you sell.
• Unrealized gain or loss: The amount the share has gone up or down in value since you acquired the shares.
• Holding period: The duration of time you’ve held the stock. Anything under 1 year is considered a short-term holding period.

Keep in mind that if you sell your common stock within a year, any profit you’ve made during that time is considered a short-term gain. It’s subject to ordinary income tax rates. If you hold onto your stock for over a year and earn a profit on it, it may qualify as a long-term gain. This means it’s potentially subject to more favorable capital gains tax.

When it comes to capital gains tax rates, the rate you’re subject to is dependent on your taxable income. Most people fall within the 15% rate, but it ranges from zero to 20%, depending on your income.

Restricted Stock Units (RSUs): Another type of compensation that will eventually turn into (aka vest) common stock

Corning also provides restricted stock units to some of its employees. This is another form of equity-based compensation that converts or vests into common stock at a future date. Usually, the future date requires you to meet certain conditions, such as staying employed at the company for a certain amount of years. Once you’ve completed the vesting period, the shares will convert to common stock.

Here’s what’s important to know: Once your shares vest, it triggers a taxable event where you realize ordinary income (equivalent to the number of shares times the current market price). The good news is that the firm will automatically sell a portion of your vested shares to cover the ordinary income taxes associated with this additional income. The bad news (potentially) is that this amount may not be enough to cover the taxes incurred, especially if you are in a top tax bracket.

It’s also important to remember that after your RSUs convert into common stock, they’re exposed to market fluctuations. 

Here’s an example. Let’s say Corning awarded you RSUs on March 1, 2015, with a three-year vesting schedule, and the grant date price was $20 per share. At that point, you’re not vested, and you don’t own the stock yet, meaning you don’t have to pay taxes on this income. 

Fast forward three years, and your RSUs are converted to common stock, which you now own. If the stock is trading at $50 per share, you are taxed at an ordinary income rate on the total market value of those shares. If you own 100 shares at $50 per share, you will have $5,000 in ordinary income, which is taxed. At this point, you can either hold onto the stock and maintain your risk, or you can decide to sell your shares.  

Now, let’s say you decide to hold onto your stock for over a year, and the value goes up to $100 a share. (Nice!) If you then sell the shares, you will then owe $50 in taxes at a long-term capital gain, which is a preferential rate. Disclaimer though: That gain isn’t guaranteed. Remember, the stock market goes up and down, and you can lose money too. 

In addition, when you look at your pay stub and see your shares vesting, you will most likely be withheld at a federal rate of 22%. If your federal tax rate is higher than that, you may be surprised next April when you owe on your taxes unless you reach out to your Human Resources department to increase your withholding.

Stock Options: A brief overview of your Corning options, another type of equity compensation

Many Corning employees will also see non-qualified stock options (NQOs) on their UBS statements. NQOs give employees a right to purchase company shares at a predetermined price, known as the grant or strike price. 

Usually, NQOs come with a vesting schedule as well. This means you may need to fulfill a certain time period working with the company before you can fully exercise your options. Once you’re fully vested, you have the option to buy the common stock of the company at a strike price. If the strike price is lower than the current market value, then your options are “in the money” and you have a profit. If the strike price is higher than the market price, they are “out of the money.”

If you are in the money and exercise the option, the difference between the exercise price and the fair market value is considered ordinary income for tax purposes. You will be taxed at this rate, whether you decide to hold or sell the shares. It’s very important that in this case you control when you receive the extra ordinary income, unlike when your RSUs vest.

As always, talk to a financial professional before making big decisions

At Lake Road Advisors, we know there’s a lot to consider on your UBS statement. That’s part of the reason we held this webinar to walk you through the details. Take a look and see if it helps clarify any of your questions.

If you have additional questions or need advice on how to move forward with your Corning compensation, reach out to a member of our team. We’re here to help you make the best decisions for you and your family. 

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network. They can be reached by phone at the Corning, NY office at (607) 438-2914, Ithaca, NY office at (607) 463-8400, or Portland, OR office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com/

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.