Thursday, September 11, 2008

My ESOP Account Down 20.82% for the Year

I contribute approximately $250/month into my company's ESOP. So far this year, I've accumulated 12.92844 shares of my company stock and the actual cost basis (including the company match) is $3,472.79. As of 9/7/08, the current value of the stock is $2,749.62. That's a loss of $723.17, or -20.82%. This is really depressing but I've decided to look at it differently for my own sanity.

My actual out-of-pocket contributions to the ESOP to date is $2,179.05 and the company match (30 cents to $1 contributed) is $1,293.74. (To my sharp-eyed readers: the reason why my company match amount totals more than 30% of my contribution amount is because my employer, for the first time I've ever been employed with this company, paid out a stock bonus due to a very profitable 2007.)

Since the company match is considered taxable income, I've calculated $362.24 of the company match as part of my cost-basis while $931.50 is treated as a windfall. So, if I re-adjust my actual cost basis to $2,541.29, I'm up by about 8% this year, all thanks to the generous company match and bonus.

I've pondered whether I should stop contributing to my ESOP and instead use the extra $250/month to pay off my debt. Afterall, if I use $250/month to pay off debt, I have a guaranteed a return on my money. In contrast, with the market being what it is right now, I have no idea whether I'll break even by continuing to contribute to the ESOP.

After considerable mulling, I've decided to continue to contribute to the ESOP. How many investment vehicles do I have where my investments can go down about 22% (after taxes) and I still come out even? Secondly, as you may know, I expect to be laid off at the end of the year. If anything, at least I could sell my company stocks if I ever need it. Since my EF is currently woefully inadequate, I guess this is another form of an automatic savings that I've implemented for myself for those inevitable rainy days...