How Most Tech Execs Lose Half of Their IPO Wealth To Taxes

True Root Financial is a fiduciary financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.

More tech employees lose wealth after an IPO than build it. Not because their companies fail, but because they fail to plan.

You’ve been told this is your big break. The IPO means validation. Liquidity. Financial independence. But nobody talks about the other side:

• The tax bomb waiting to explode
• The AMT that hits before you even sell a single share
• The lock-up window that traps your wealth while the market shifts under your feet
• The emotional rollercoaster of watching your company’s stock drop 40% while you’re not allowed to sell.

If you are a tech professional interested in learning how we can help you claim your financial independence by investing wisely, minimizing taxes, and maximizing your equity compensation, please book a no-obligation call here.

Are You “Paper Rich” or Real Rich?

It feels amazing to log into your company dashboard and see those six- or seven-figure numbers. But here’s the catch: until you plan for taxes, vesting schedules, and liquidity, that number is fiction. I’ve seen employees hold millions in unvested RSUs and think they’re financially free, only to owe hundreds of thousands in taxes they didn’t expect.

• RSUs are taxed as income when they vest.
• NSOs are taxed when you exercise them.
• And ISOs, the golden ticket, can trigger Alternative Minimum Tax (AMT) even if you haven’t sold anything.

Imagine owing $70,000 in AMT before you’ve cashed out a single dollar. It happens all the time.

A Fiduciary Financial Advisor helps you model that before it happens. Because when you’re playing with IPO-level numbers, ignorance is expensive.

The Clock Is Already Ticking

If your company has announced its IPO, you’re already on a countdown. Every decision you make between now and the lock-up expiration matters.

• Should you early-exercise ISOs before the IPO?
• Should you sell immediately after the lock-up, or hold for long-term capital gains?
• Should you prepay estimated taxes or wait until filing season?

Get one of these wrong, and you could hand six figures straight to the IRS. Most tech employees don’t realize that tax rates can nearly double depending on how long you hold. This is where Comprehensive Financial Planning matters. It’s not about picking stocks, it’s about making sure your life, taxes, and equity strategy are all moving in sync.

Are You Also Thinking? “I’ll Just Wait Until It Rises Again”

Let’s talk psychology.

You’ve worked hard for years, and now your company finally IPOs. You see the share price climb, then fall, and you freeze.

You tell yourself: “It’ll go back up.”

It might. Or it might not.

I’ve had clients watch their equity drop from $200 to $40 a share during a lock-up. By the time they could sell, their $1.2 million paper value was worth less than $200,000, and the tax bill didn’t care. That’s why diversification isn’t about fear. It’s about survival.

You’re already deeply invested in your company, your salary, your career, your reputation. Don’t also tie your entire financial future to it.

The Silent Killer: AMT And The IRS

Let’s dig deeper into that three-letter monster: AMT (Alternative Minimum Tax).

AMT was designed decades ago to prevent the ultra-wealthy from paying nothing in taxes. But now, it mostly punishes tech employees who exercise ISOs.

Here’s the nightmare:

You exercise your options thinking you’re doing the smart thing early. But because the company’s fair market value has jumped, the IRS counts that gain as income for AMT purposes, even though you haven’t sold a share.

You could owe tens of thousands in taxes, without any liquidity. Worse, if the stock later drops before you sell, you’ll owe taxes on value you never actually received.

This is why planning around AMT is non-negotiable. A Fiduciary Financial Advisor who specializes in equity compensation can run scenario analyses showing exactly when to exercise and how much tax you’ll trigger, before you pull the trigger.

The Hidden Window Nobody Talks About

After the IPO, you’ll likely be in a lock-up period, typically 90 to 180 days where you’re legally restricted from selling shares. During that time, your company’s stock could swing wildly. You’ll watch others trade freely while you’re stuck on the sidelines. The key is to have a liquidity plan ready for Day 1 after the lock-up expires.

Here’s what that means:

• Know exactly how many shares you’ll sell.
• Set aside enough for taxes immediately.
• Diversify into a broader investment plan, one that doesn’t depend on your employer’s stock price.

This is how tech professionals turn one-time events into long-term wealth.

The Cost of Doing Nothing

Every week, I meet brilliant engineers, designers, and product leads who waited too long. They were “too busy.” They didn’t want to “jinx” the IPO. They thought the company’s stock would keep climbing. Now they’re sitting on half the value, still holding shares they can’t sell without triggering another tax event.

Here’s the truth: doing nothing is still a decision.

And often, it’s the most expensive one.

A Fiduciary Financial Planner Can Help You:

• Identify your real after-tax number (not just paper value)
• Build a liquidity strategy that covers taxes, lifestyle, and goals
• Design a diversified investment plan that protects your wealth
• Coordinate with your CPA to minimize AMT exposure.

Your Next Steps:

Integrate your IPO outcome into a broader Comprehensive Financial Plan, retirement, real estate, family, philanthropy. Your goal isn’t just to survive the IPO. It’s to turn it into the foundation for permanent financial independence.

Because when the IPO dust settles, there will be two kinds of tech professionals:

• Those who guessed.
• And those who planned.

Which one do you want to be? Book a free consultation below to discuss it further in detail:

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