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What Happens To Your Stock Options When You Retire or Leave Your Job?

What Happens To Your Stock Options When You Retire or Leave Your Job?

May 03, 2023

There are many different reasons why you may find yourself leaving a job which may lead to unanswered questions about your stock options and the rights you have to them.

Understanding Stock Options Expiration Dates

An expiration date is when the ability to exercise the stock options expires. For most companies, the expiration date is usually anywhere between 1-10 years after the grant date, whichever your company’s policy dictates. If you don't use your stock options within the designated period, they could become worthless and no longer available.

For example, if you've been granted stock options with a 4-year expiration date and you leave the company one year into your grant, you still have 3 years left before the stock options expire.

Difference between Leaving Voluntarily and Involuntarily

Voluntary reasons for leaving a job include retirement, resignation, or moving to another company. In this case, employees can keep the stock options granted before their departure. The employer usually gives you a maximum of 90 days to exercise your vested stock options.

If the period to exercise your option is under 90 days, you must exercise your stock options within that period or forfeit them.

When leaving involuntarily, the employee may also be allowed to keep their vested stock options for a maximum of 90 days. However, if you leave because of a disability, the employer may waive the expiration date to allow you to keep the stock options for an extended period. The intention being to give you enough time to replan and weigh your options.

Vested Stock Options

Vested stock options are those you have acquired rights to, either by meeting the vesting schedule or hitting certain performance targets. You can exercise vested stock options at any time before their expiration date.

Different types of vested stock options have varying terms of use. In most cases, incentive stock options (ISO) should be exercised within 90 days after you leave a company. You may also lose qualified status and favorable tax treatment.

For non-qualified stock options (NQSOs), the terms are more lenient. Most employers allow several months to exercise NQSOs after leaving the company.

Unvested Stock Options

Unvested stock options are those options you don't yet have the rights to, usually because of a lack of performance or not meeting certain criteria set by the company. When you leave a company, unvested stock options will be forfeited, regardless of why you left the compant. You lose any chance to exercise these stock options after leaving.

Restricted Stock Units (RSUs)

Other than forfeiture of unvested stock options when you leave a company, you can still exercise vested Restricted Stock Units (RSUs). RSUs are awarded to employees, but vesting only occurs after a set period.

If only part of the RSUs have vested, you can still receive it after leaving the company. Any unvested RSUs will be forfeited, though.

Clawback Provisions

Companies often have clawback provisions to protect them from unethical practices such as insider trading. If a former employee has engaged in these activities, the company can take legal action to get back any vested stock options.

Repurchase Rights for Private Companies

Employees may be offered repurchase rights in private companies when they leave or retire. Under this provision, employees can sell their shares back to the company at a pre-determined price. The employee would still have to pay tax on the income received from this sale.


Understanding the repercussions of leaving a job or retiring is essential for employees with stock options. Employers may provide different periods of time to exercise the options, depending on whether the departure was voluntary or involuntary. It’s also important to understanding the difference between vested and unvested stock options and how each will affect your portfolio after departing your job.