- The way that your total compensation package is structured
at Amazon means that your first two years
of employment look a little bit different
than year three, four, and beyond
particularly in the way in which you get paid.
And because of that, you wanna think
about the way in which you invest
as an Amazon employee a little bit differently
from year to year.
We're gonna dive into an example here.
First, we do have to show you the disclaimers
and moving right along.
Don't wanna spend too much time on this
but if you work at Amazon,
I'm sure that you're aware that
you get paid a few different ways.
One base salary, every single month,
two you've got your year one and year two on-hire bonuses,
and then three, you've got those restricted stock units.
Those shares of Amazon that vest over time.
Again, I'm not gonna go too far into the weeds here.
I've already put out a great video talking
about how Amazon employees are paid,
but just as a very quick refresher year one and two
we've got those on-hire bonuses years
at the end of year one at the end of year two
and then going on from there every six months thereafter
for years three and four,
you've got those larger restricted stock units
that are vesting those shares
of Amazon that you'll be receiving.
Now the big takeaway from what we're looking at right here,
is just the fact that in those first two years
more of your compensation comes from those on-hire awards.
And then in subsequent years more of your compensation comes
from those restricted stock units.
Let's look at a specific example here.
In this example, we're looking
at somebody who their first year of employment
at Amazon's making $150k and then that goes up over time.
They have a year one and a year two on-hire bonus.
And then they have those restricted stock units 5%, 15%
and then really 40% in year three and 40% in year four.
It's broken down a little bit differently than that
but as an example, it works here.
So again, when we think about the on-hire bonus though
that's paid out just like the rest
of your base salary is paid out.
So if you had a $60,000 a year one on-hire bonus divide
that by 12, you're getting $5,000 per month.
Think of it just like a paycheck, right?
So when we think about it as a paycheck,
one of the big differences that we notice here is the fact
that more of our compensation is fixed and predictable
the first couple of years as an employee,
whereas in years, three, four, and
beyond much more of our compensation might be tied
to those restricted stock units
and therefore it's gonna be variable.
So if Amazon stock does well you're gonna do well
if Amazon stock doesn't do as well,
well that variable part of your compensation
obviously won't do quite as well.
So what I wanna do here is I wanna
isolate specifically year two and three
cause that's where that big jump takes place.
Where again, in year two
you've got that on-hire bonus still.
In year three you do not have that on-hire bonus.
So let's look at a rudimentary example where
somebody has a a certain amount
of money that they need to spend each year.
And if you're gonna do this for yourself
these numbers will obviously differ
and so will the spending figure.
But, there are definitely buckets that we wanna
be able to fill up.
There are buckets that we wanna invest into like,
the Amazon 401(k), the Mega Backdoor Roth 401(k) available
to Amazon employees, 10% of base salary
I've put out another video all about that.
And then this taxable brokerage account.
So think of this as just another bucket
that you can save into,
whether it's an individual account or a joint account
at Fidelity, Schwab, TD Ameritrade, you name it.
These are for dollars above and
beyond your 401(k) that you wanna save.
And then on top of that,
these are for dollars that you're gonna want to spend
before retirement potentially.
So, if you have a short-term or a mid-term goal
this is a great bucket for those dollars.
So, when we think about year two, again, we have a lot
of this, I'll call it the fixed compensation
that we know what to expect, and we're gonna save
above and beyond our spending figure into the 401(k),
into the mega backdoor Roth 401(k).
And then we have quite a bit of money available to save
into a brokerage account that might be in this example
something like $4,500 per month that we're able to set aside
above and beyond our spending needs.
And what's beautiful is these can be automated.
So we think about the 401(k), the Mega Backdoor Roth,
and then on top of that,
we can automatically set aside dollars
and invest those dollars into a taxable brokerage account.
Need to be a little bit more strategic though
with those restricted stock units when they vest.
Because again that is something
that cannot necessarily be automated.
You would need to go in, sell those restricted stock units
soon after they've vested.
And then if it made sense for you then diversify
into let's just say 10,000 companies
rather than just continuing to hold on to Amazon stock,
and letting that nest egg continue to grow
and to grow and to grow.
Something that we tried to avoid.
So we pull back year two, let's look at your three.
Again, the big thing to note here
is that our monthly paycheck is quite a bit lower because
we don't have those year two on-hire bonus dollars
that are coming in.
So again, we still have money to max out the Amazon 401k.
We still have dollars available
to max out that Mega Backdoor Roth.
But now, the dollars that we are saving automatically,
into that Taxable Brokerage account
are substantially smaller.
In this case, it might only be a
couple hundred dollars a month
rather than the couple of thousand dollars a month
in year two.
But that's because,
we have these larger restricted stock units
that we have these shares of Amazon that are vesting
at two and a half years, three years,
three and a half years and four years.
So again, we need to be strategic about what we're doing
with those dollars, while at the same time
making sure that we are automating the rest of the process.
This probably comes as no surprise right here
but in terms of investing and success as an Amazon employee,
in my eyes, it really comes down to making sure
that you automate and strategize.
You wanna come up with a plan,
and then you wanna automate that plan
so that you're not having to every single month,
think about the investment process.
You come up with a plan, you set that plan in place
and you automate as much of it as you possibly can.
This is something that we do with all of the Amazon
employees that we have the good fortune of working with.
If you do wanna have a conversation,
please feel free to reach out,
I've got my LinkedIn information right up here.
I promise I'm a real person.
We try to put out a lot of great content
as it relates to Amazon and good pieces of strategy
for Amazon employees.
If you do wanna talk about your specific situation
and please feel free, reach out, let me know
and also feel free to explore avieradvisors.com/amazon.
What a great information available for you there.
Hope this helps and hope to hear from you soon - cheers!