Selling shares in a tender offer can be a big financial milestone. Suddenly, equity you’ve been holding for years turns into real cash in your account. But with opportunity comes responsibility: what you do next can have a lasting impact on your financial future.
Here are 3 questions you can ask yourself as you think about managing your proceeds:
1. Do I understand the tax impact?
Before you start planning how to use your proceeds, it’s important to know what portion is actually yours to keep.
- Capital Gains Basics: Tender offer proceeds are generally taxed as capital gains. If you held your shares for more than a year, you’ll likely pay the lower long-term capital gains rate (0–20% federally, depending on your income). If less than a year, the gains are taxed as ordinary income.
- Check Withholding: Your company may have already withheld some taxes. Review your transaction confirmation so you know what still needs to be covered.
- Plan Ahead: A tax advisor can help you calculate what to set aside for federal and state taxes and how to explore tax strategies like tax-loss harvesting or opportunity zone investing which may reduce your liability.
2. Have I thought about financial goals?
A cash windfall is a great moment to step back and realign your financial plan.
- Do you have an emergency fund? Many people set aside 3–6 months of living expenses in a safe, high-yield savings account, which can provide flexibility and peace of mind.
- Short- vs. Long-Term Goals: Do you want to buy a home? Pay for graduate school? Build toward early retirement? What’s your priority list?
3. How should I re-invest?
Once the essentials are covered, you may want to reinvest your proceeds thoughtfully and this might be the right time to partner with a professional financial advisor. Some options you may want to consider include:
- Diversifying: Avoiding overconcentration in one asset – especially if you still hold equity in your company.
- Example: High-Yield Savings account, a mix of index and active funds, alternative investments.
- Retirement Accounts: Max out contributions to tax-advantaged accounts like a 401(k) or IRA. For 2025, the IRA limit is around $7,000 (with catch-up contributions for persons age 50+).
Selling shares in a tender offer is a milestone worth celebrating. But the real value comes from how you manage the proceeds – balancing taxes, goals and investments. With the right plan (and in many cases the right financial advisor) you can turn a one-time liquidity event into lasting financial security.
