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Lesson 16. Frequently Asked Questions > The 30-Second Recap - Pg. 85

Frequently Asked Questions 85 Answer: This is one of the most common ways for people to cash out of their options. A brokerage firm appointed by your employer "lends" you the money to exercise the options and immediately sells the stock for you. It repays itself plus a commission, and you get what is left. Despite the fees involved, this is the most efficient way to exercise your options and sell the stock. Question: How long should I wait before exercising my options and selling the stock? Answer: Unfortunately, there's no single answer that is right for everyone. You need to put your whole financial situation on the table and look at all the pieces as they relate to each other. If this sounds overwhelming, you might consider using a financial planner to help you sort out the details. If you go this route, only use fee-based financial planners. You will pay more, but they won't try to sell you products you don't need for a commission. Caution Selling your stock should be a rational, well-thought-out decision, not an emotional reaction to the market. Question: How important are tax considerations in the decision to sell or not? Answer: They are very important because taxes take the biggest bite out of your gross profits of all the expenses associated with exercising options and selling the stock. You want to think about how you can keep your taxes as low as possible. To do that, you must know your tax bracket and whether the tax is ordinary income or long-term capital gain. Later in life, potential estate taxes can destroy all you have spent a lifetime working toward. The 30-Second Recap