Introduction to Tech Worker Wealth
Tech worker wealth management has gotten complicated with all the compensation structures flying around these days. As someone who has worked with hundreds of Amazon, Microsoft, and startup employees in Seattle, I learned everything there is to know about what actually matters for building wealth in tech versus what the generic financial advice misses entirely. Today, I will share it all with you.
That’s what makes Seattle tech compensation endearing to us finance folks — the numbers are big, but the complexity is bigger. RSUs, ISOs, ESPPs, vesting schedules, blackout periods. Most general financial advice wasn’t written for someone getting half their income in stock grants.
Understanding Equity Compensation
Probably should have led with this section, honestly. Equity compensation comes in several forms, each with different tax treatment.
Restricted Stock Units (RSUs)
RSUs are the most common equity compensation at established Seattle tech companies. When RSUs vest, you receive actual shares. The value at vesting counts as ordinary income — subject to federal income tax and FICA taxes until you hit the Social Security wage base.
Seattle tech workers face a top marginal rate of 37% federal plus 3.8% net investment income tax. The good news? Without state income tax, this compares favorably to California tech workers facing an additional 13.3% state tax. Washington’s lack of income tax is a genuine competitive advantage for building wealth.
Companies typically withhold shares for tax payments at vesting. The supplemental income withholding rate is 22% federal — almost never enough for high earners. Plan for additional tax payments at filing time. I’ve seen people shocked by five-figure tax bills in April because they didn’t plan for this.
Stock Options
Some companies, particularly startups, grant stock options rather than RSUs. Options give you the right to purchase shares at a set price (the grant or strike price) once they vest.
Incentive Stock Options (ISOs) get favorable tax treatment if you meet holding requirements. Non-Qualified Stock Options (NQSOs) are taxed as ordinary income on the spread between exercise price and market value at exercise.
Option exercise decisions involve complex considerations — tax implications, company outlook, portfolio diversification. Early exercise, when available, can reduce tax obligations but introduces risk if share value declines. This is where having a financial advisor who understands tech compensation really helps.
Employee Stock Purchase Plans (ESPPs)
Many Seattle tech companies offer ESPPs allowing you to purchase company stock at a discount, typically 10-15% below market price. Some plans have lookback provisions that can increase the effective discount substantially.
ESPP participation almost always makes financial sense if you can afford the payroll deduction. The discount represents an immediate return on investment. I tell almost everyone to max this out if their cash flow allows it.
Concentration Risk: The Elephant in the Room
Tech workers often hold substantial portions of their net worth in employer stock. This concentration creates significant risk that most people ignore until it’s too late.
Understanding the Risk
Your job and your investment portfolio both depend on the same company’s success. If the company struggles, you could simultaneously lose your job AND see your savings decline substantially. Double jeopardy.
History provides examples: Enron employees who held company stock in retirement accounts lost everything. Amazon employees during the 2000 dot-com crash saw stock decline 90%. More recently, Meta employees watched their equity drop 70%+ while layoffs hit. This isn’t theoretical risk.
Diversification Strategies
Systematic selling of vested equity helps reduce concentration. Establish a regular schedule — perhaps selling 25% of vested shares quarterly or monthly — rather than trying to time the market. Remove emotion from the decision.
If your company allows it, 10b5-1 trading plans create automatic, predetermined sales that don’t require blackout period restrictions. These plans must be established when you don’t possess material non-public information.
Target overall company stock exposure of 10-20% or less of total portfolio, depending on your risk tolerance. Yes, this means selling winners sometimes. That’s the point.
Tax-Efficient Investing for High Earners
High incomes create both opportunities and constraints.
Retirement Account Maximization
Max out all available retirement accounts before investing in taxable accounts. For 2025, this includes 401(k) contributions up to $23,500 ($31,000 if over 50), plus any employer match.
If your company offers a mega backdoor Roth option (after-tax 401(k) contributions with in-plan Roth conversion), use it. This can add an additional $46,000 or more to retirement savings annually, growing tax-free. Many tech workers don’t know this exists.
Consider traditional versus Roth 401(k) contributions carefully. Washington’s no-income-tax status means you won’t get state tax benefits from traditional contributions, but federal deductions still matter at high income levels.
Managing Cash Flow Volatility
Tech compensation fluctuates. Base salary is stable, but bonuses and RSU values swing with company performance and stock prices. Plan for this volatility:
- Keep 6-12 months expenses in liquid savings
- Budget based on base salary, treat equity as bonus
- Don’t lifestyle-inflate based on peak equity values
- Build flexibility into fixed expenses
Working with a Financial Advisor
Generic financial advice rarely addresses tech-specific situations. Look for advisors with experience in equity compensation, who understand RSU vesting schedules and can help with diversification timing.
Fee-only fiduciary advisors align their interests with yours. Avoid advisors who earn commissions on products they recommend. In Seattle’s tech community, finding someone who actually understands your compensation structure is worth the search.
The Bottom Line
Tech worker wealth building comes down to a few key principles: understand your equity compensation tax treatment, manage concentration risk systematically, maximize tax-advantaged accounts, and plan for income volatility. Execute these consistently, and the wealth accumulation takes care of itself.
