This Kestrel Bay Retirement Advisors glossary explains the retirement planning terms that tech employees meet when they hold stock options, RSUs and an employee stock purchase plan, and too much of their net worth in one stock. Each definition is short, written in plain English, and says why the term matters to you.
The terms run alphabetically. Tax-year figures are for 2026; anything not on that list says to check the current limit. This is general education, not individualized investment, tax or legal advice.
1
- 10b5-1 trading plan
- A 10b5-1 plan is a written, pre-arranged schedule for selling company stock, used by insiders and others who face trading blackouts. It lets you diversify on a set timetable instead of waiting for an open window.
4
- 401(k)
- A 401(k) is an employer retirement plan funded from your paycheck, pre-tax or Roth. The 2026 employee limit is $24,500, or $32,500 at age 50 and over. It's usually the first place to put money after capturing any employer match.
- 401(k) rollover
- A 401(k) rollover moves money from an old employer plan into an IRA or a new plan without paying tax, if done correctly. A direct transfer is safest. A check made out to you can trigger withholding and a tight 60-day deadline.
8
- 83(b) election
- An 83(b) election lets you pay tax on restricted stock at grant instead of vesting, filed within 30 days. It can save tax if the shares rise later. If they fall, the tax you paid is gone, so it's a real gamble.
A
- Alternative minimum tax (AMT)
- The alternative minimum tax is a parallel tax calculation that disallows some deductions and counts some income, such as the spread when you exercise incentive stock options. Exercising ISOs and holding the shares can trigger it, so we estimate it first.
- Asset allocation
- Asset allocation is the split of your portfolio among stocks, bonds, cash and other holdings. For this reader, employer stock counts as part of the stock slice, so a portfolio that looks balanced may not be.
B
- Backdoor Roth IRA
- A backdoor Roth IRA means contributing to a traditional IRA and then converting it to Roth when income is too high for direct Roth contributions. The 2026 Roth phase-out starts at $153,000 single, so many tech earners use this route.
- Bargain element (spread)
- A bargain element, or spread, is the gap between the market price and your option's exercise price. Exercise at $10 when the stock trades at $40 and the spread is $30 a share. That spread is what the tax rules focus on.
C
- Capital gains tax
- Capital gains tax applies to profit when you sell an investment for more than its basis. Gains on assets held over a year are long-term and usually taxed at lower rates than ordinary income. Check the current brackets for exact rates.
- Cliff vesting
- A cliff vest is a vesting schedule where all your equity becomes yours on one date, often after one year. Leave before that date and you can forfeit everything. It's worth knowing before you accept an offer or plan a job change.
- Concentrated stock position
- A concentrated stock position is a holding large enough that one company's bad year could seriously hurt your finances. As a rule of thumb, when more than a fifth of your net worth sits in one stock, diversifying usually comes first. Investing involves risk, including loss of principal.
- Cost basis
- Cost basis is what you paid for an investment, used to figure taxable gain when you sell. For RSU shares, basis is usually the value when they vested. Reported basis can be wrong, so check it before filing.
D
- Deferred compensation
- Deferred compensation is pay you've earned but agree to receive later, often in retirement, under an employer plan. It's usually an unsecured promise from the company, so you carry the company's credit risk on top of your stock risk.
- Disqualifying disposition
- A disqualifying disposition happens when you sell ISO or ESPP shares before meeting the required holding periods. Part of the gain is then taxed as ordinary income. It's sometimes the right choice if reducing risk matters more than the tax saving.
- Donating appreciated stock
- Charitable giving of appreciated stock means donating shares you've held more than a year directly to a charity or donor-advised fund. You generally skip the capital gains tax on the shares. Giving $20,000 of stock with $15,000 of gain avoids tax on that $15,000.
- Donor-advised fund (DAF)
- A donor-advised fund is a charitable account where you give assets, take the deduction that year, and recommend grants to charities over time. Funding it with appreciated shares can cover several years of giving in one tax year.
E
- Employee stock purchase plan (ESPP)
- An employee stock purchase plan lets you buy company stock through payroll deductions, often at a discount. A 15% discount on $10,000 of stock is $1,500 of built-in gain. Selling soon after purchase locks that gain in and cuts concentration.
- Equity compensation planning
- Equity compensation planning is the work of deciding when to exercise, hold or sell stock options, RSUs and ESPP shares, with taxes estimated first. At Kestrel Bay Retirement Advisors, we map each vest and exercise date against your expected income that year.
- Exercise price (strike price)
- The exercise price, or strike price, is the fixed amount you pay per share to buy stock under an option grant. Options with a $10 strike on a $40 stock cost $10,000 to exercise 1,000 shares, before any tax is considered.
F
- Fair market value (FMV)
- The fair market value (FMV) is the price a willing buyer and seller would agree on for an asset. For private-company options, the 409A valuation sets it, and it drives your tax at exercise.
- Full retirement age (FRA)
- Full retirement age is when you can claim your full Social Security retirement benefit. For anyone born in 1960 or later it is 67. Claiming earlier shrinks the monthly check permanently, so the choice belongs in the same plan as your withdrawals.
H
- Health savings account (HSA)
- A health savings account is a tax-advantaged account for medical costs, available with a qualifying high-deductible health plan. The 2026 limit is $4,400 self-only or $8,750 family. Money can be invested and grown for later medical bills in retirement.
I
- Incentive stock option (ISO)
- An incentive stock option is an employee option that can get special tax treatment if you hold the shares at least two years after the grant and one year after exercise. Exercising ISOs can trigger the alternative minimum tax.
- Income-related monthly adjustment amount (IRMAA)
- IRMAA, the income-related monthly adjustment amount, is a surcharge on Medicare premiums for higher earners, based on income from two years earlier. In 2026 a single filer above $109,000 pays more than the $202.90 standard Part B premium. A large stock sale can trigger it.
L
- Lock-up period
- Lock-up period is a window after an IPO when employees can't sell their shares, commonly several months. Your net worth may look large on paper while you can't spend or diversify any of it, so plan cash needs separately.
M
- Modified adjusted gross income (MAGI)
- Modified adjusted gross income (MAGI) is your adjusted gross income with certain deductions added back. It decides Roth IRA eligibility and Medicare surcharges. A big RSU vest or stock sale can push it up for the year.
N
- Net unrealized appreciation (NUA)
- Net unrealized appreciation, or NUA, is the growth in company stock held inside a 401(k). Special rules can tax that growth at capital gains rates when you take the shares out in a qualifying distribution. It's a niche move, worth a tax review first.
- Nonqualified stock option (NSO)
- A nonqualified stock option is an employee option that doesn't get ISO tax treatment. At exercise, the spread is taxed as ordinary income and usually withheld from pay. Exercising 1,000 options with a $30 spread adds $30,000 of income.
R
- Rebalancing
- Rebalancing means selling some holdings that have grown and buying others to bring your mix back to target. Before Kestrel Bay Retirement Advisors suggests a fund change, we estimate the tax bill of the switch in a taxable account.
- Required minimum distribution (RMD)
- Required minimum distributions are yearly withdrawals the IRS makes you take from pre-tax retirement accounts. They start at age 73, or age 75 if you were born in 1960 or later. Roth conversions made earlier can shrink the balance they apply to.
- Restricted stock unit (RSU)
- Restricted stock units are a promise of company shares that arrive on a vesting schedule. When they vest, the market value counts as ordinary income. If 200 shares vest at $50, you have $10,000 of wages, usually with shares withheld for tax.
- Roth conversion
- A Roth conversion moves money from a pre-tax account, such as a traditional IRA, into a Roth account and adds the amount to that year's taxable income. Converting $50,000 adds $50,000 of income, so timing it in a lower-income year matters.
- Roth IRA
- A Roth IRA is an individual retirement account funded with after-tax dollars, where qualified withdrawals are tax-free. The 2026 combined IRA limit is $7,500. Income limits start at $153,000 for single filers, so higher earners may need another route.
T
- Tax-efficient withdrawal strategy
- Tax-efficient withdrawal strategy is the order and mix of accounts you draw from in retirement to keep lifetime taxes low. Kestrel Bay Retirement Advisors models taxable, pre-tax and Roth accounts together, because pulling only from one can push you into a higher bracket.
- Tax-loss harvesting
- Tax-loss harvesting is selling an investment at a loss to offset taxable gains elsewhere. A $10,000 loss can cancel a $10,000 gain from selling company stock. The wash-sale rule blocks it if you rebuy the same security within 30 days.
V
- Vesting
- Vesting is the process by which you earn the right to equity, usually over a schedule such as four years. Unvested grants are forfeited if you leave. Each vest date is also a tax event, so mark them on your calendar.
W
- Wash-sale rule
- The wash-sale rule disallows a loss if you buy the same or a substantially identical security within 30 days before or after the sale. Buying your employer's stock through an ESPP or RSU vest can accidentally trigger it.