By Rohan Rashid, Financial Advisor & David J. Blount, CFP ®
As a valued crew member of the JetBlue family, you have access to a unique benefit that can significantly boost your financial future: JetBlue's Employee Stock Purchase Plan (ESPP). This program allows you to purchase JetBlue stock at a discount through regular payroll deductions - providing a prime opportunity to invest in your company's future and leverage this benefit for your own personal financial goals. By tying employee and company interests together, ESPPs help foster a mutually beneficial ownership culture.
This guide offers insights and suggestions to help you maximize the value of your stock purchase opportunities through JetBlue's ESPP. Our office has experience assisting JetBlue crewmembers with analyzing their employee benefits and incorporating them into their comprehensive financial plans. Read on for tips tailored specifically for JetBlue crewmembers looking to optimize this program as part of their wealth-building strategies.
Understanding Employee Stock Purchase Plans
In an ESPP, participating employees make regular contributions during an offering period through payroll deductions. Those are then used to purchase company stock at a discounted price.
The company sets the terms of the ESPP, including the contribution limits, purchase intervals, and discount rates. Many companies offer ESPPs with discounts of 5-15% off the current market price. This upfront discount provides employees an incentive to buy the stock and instant return on investment compared to purchasing the stock outside of the plan at the full market price.
When the stock purchase date arrives, the accumulated payroll deductions are used to buy company shares on behalf of employees at a discounted rate. So, in addition to the upfront savings from the discount, employees can benefit from potential future stock price appreciation by continuing to hold the stock. On the other hand, they can also share in the losses if the stock declines in price.
However, it's important to remember that equity compensation like ESPPs should be viewed as one piece of a diversified investment portfolio. There are risks associated with any single stock, so prudent planning should account for those risks. Our office can help you analyze how an ESPP fits within the context of your broader financial goals.
Your Benefits at JetBlue
JetBlue provides its employees a generous Employee Stock Purchase Plan with the following key terms:
Most Pilots and Crewmembers of JetBlue are eligible to join the ESPP. This gives you an opportunity to share in JetBlue's success.
You can contribute up to 10% of your gross wages to purchase JetBlue stock at a discount. Contributions accumulate in your account over 6-month offering periods beginning in May and November.
On the purchase date at the end of the period, your contributions are used to buy JetBlue stock at 85% of the market price. This 15% discount is a valuable benefit that allows you to maximize your investment with an immediate profit.
You are limited to $25,000 in stock purchases each year and 4,000 shares per purchase date.
If you leave JetBlue, your contributions in the offering period are refunded. However, crewmembers on approved leave can still participate if they receive wages.
3 Strategies to Take Advantage of the ESPPs
The 15% discount on stock purchases through JetBlue's ESPP presents a great opportunity to grow your wealth. For example, if you contribute $10,000 during an offering period, at a 15% discount through the ESPP, you will receive roughly $11,800 worth of JetBlue shares at the market price on the purchase date. That is an immediate $1,800 of profit. Here are some smart strategies to consider maximizing those extra earnings:
Consider utilizing the extra earnings to increase your life insurance coverage, which can provide greater financial security for your family. Depending on your role, JetBlue provides crewmembers with an amount equal to their annual salary or up to $150,000 in basic life insurance. That may not replace enough income if you have dependents and want to provide for them over the long term. A general guideline is to have 10-12 times your salary in total coverage. For instance, a healthy 50-year-old male could potentially use the additional ESPP earnings to cover premiums on a $2 million 20-year term life policy. This can help ensure your family has adequate protection for many years to come.
You may also consider putting the extra earnings toward accelerating payoff of high-interest debt like credit cards. If you contributed the annual ESPP maximum, you could potentially apply $3,600 extra per year toward debt payments. For example, adding that to a $20,000 credit card balance at 22% APR could save around $792 in additional interest versus just making minimum payments. That brings the total potential savings and earnings benefit to almost $4,400 annually.
If you itemize your taxes and give to a church or other charity on a regular basis then you may consider using ESPP proceeds for making those charitable constitutions. In so doing you may be eligible to deduct your principal investment and long-term gains from your taxes. While ESPP shares are not directly tax-deductible as charitable contributions, donating them after meeting the specified holding periods can provide tax benefits. Always consult a tax professional to navigate your specific situation effectively.
A few more ideas include using the after tax profit to accelerate your mortgage pay-off, make a Health Savings Account (HSA) Contribution, fund a 529- College Savings Plan, buy long-term care insurance, and for other great ideas schedule a free consult by contacting us at 407-542-3249, email at service@davidblountIIPS.com or visit our website and submit a request here.
According to recent JetBlue filing data, 41% of eligible JetBlue employees participated in the ESPP program as of November 2022. If you are not participating in your ESPP then you should strongly consider utilizing this benefit to potentially boost your investment portfolio and your future financial growth. Careful planning is needed to determine the right strategies to optimize JetBlue's ESPP for your situation. Our team can help analyze the options so you can maximize this valuable benefit.
How We Can Help
The strategies we've outlined offer several smart options to optimize JetBlue's generous ESPP. But ultimately, the right approach depends on your specific financial situation and goals.
At Investment & Insurance Planning Services, our team takes a personalized, comprehensive approach to financial planning. We start by understanding your unique priorities and objectives. Then we evaluate your full financial picture - including retirement planning, insurance needs, debt management, and more. From there, we can advise how to best incorporate the ESPP into your broader strategy and financial future.
We would be happy to schedule a complimentary consultation to explore your situation in more detail. This will allow us to provide tailored guidance on how to maximize the value of this important employee benefit. The key is developing an integrated strategy personalized to your goals. Our team makes that our number one priority. We look forward to helping you pursue your financial vision.
Sources:
ESPP details taken from a 2023 SEC filing of JetBlue’s Proxy Statement
Life insurance premium based on an 11/9/2023 quote from $3,378.00 annual premium on a $2 million John Hancock Vitality Term '20/'23 policy for a 50-year-old male at a preferred rating.
Interest savings based on a 22% APR $20K Credit Card Balance with no additional payments made in the year.
About the Authors
Rohan
Rohan, a true Floridian, is the newest addition to our team of Financial Advisors at Investment & Insurance Planning Services, LLC (IIPS). He embarked on his journey with us as a Client Service Associate in 2021 and has since been dedicated to serving our clients with utmost diligence. Rohan holds a Bachelor of Science in Business Administration with a focus on Finance from the University of Central Florida, equipping him with a solid foundation in the financial field.
In his role as a Financial Advisor, Rohan brings a personalized approach to financial planning, tailoring strategies to each client’s unique needs. He is well-versed in our Invest-sure process, seeking to ensure that our clients receive the best advice for their financial goals. A firm believer in constant self-improvement, Rohan strives to make the most out of every opportunity, both in his professional and personal life.
Outside of work, Rohan is an avid explorer of Orlando’s vibrant culinary scene and cultural events. He relishes the opportunity to meet new people and learn from their diverse experiences. His zest for life and commitment to continuous learning make him a valuable asset to our team and a respected advisor to our clients.
David
David is President and CEO of Investment & Insurance Planning Services, LLC (IIPS), an independent and fee-based financial services firm that helps clients establish their financial goals and create custom financial plans to help them pursue those goals. They specialize in working with pre-retirees, individuals in a career transition, L3 Harris engineers, and JetBlue pilots. David’s motivation comes from seeing his clients pursue their goals. He says, “It’s very rewarding to help people make successful transitions from one career to another, start a small business, or retire.”
David received his bachelor’s degree from Troy University, and prior to becoming a financial planner in 2000, he had a nine-year career in the United States Coast Guard. He obtained the CERTIFIED FINANCIAL PLANNER™ designation in 2007. He has served as the guest financial expert on Orange Television’s Adult Lifestyle Magazine Show and frequently provides financial and retirement planning workshops. Outside of work, he enjoys spending time with his wife, Michelle, their two kids, Ryan and Alana, their dog, Jack, and visiting with friends. An avid outdoorsman, he enjoys fishing, hiking, exercise, and as a committed person of faith, he enjoys attending church and is passionate about helping people in his community. To learn more about David, connect with him on LinkedIn.
Parts of this article were enhanced with the help of artificial intelligence.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
The professionals at Investment & Insurance Planning Solutions do not provide fiduciary services to JetBlue’s retirement plan. Individual investment advisory services are provided separately from any retirement plan consulting services you may receive as a result of your participation in your employer’s retirement plan and involve a fiduciary standard of care, advisory agreement and/or an additional fee.
Descriptions of plan features and benefits are subject to the plan document, which will govern in case of inconsistencies.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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