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Amazon Employee Benefits

Amazon provides its employees with a fairly standard benefits package. It’s not as generous as the benefits of some other large tech employers so it’s important that you take advantage of the benefits you do receive. Here’s a look at how you can optimize your benefits as an Amazon employee:

Amazon 401K 

Amazon offers a relatively low 401K match. The Company will match 50% of your eligible contributions up to 4% of your eligible pay. Thus the maximum match from Amazon is 2% of your salary. 

Employees can contribute from 1% to 90% of their eligible pay on a pre-tax basis, a Roth after-tax basis, or both, up to the annual IRS limits. For 2024, the limit is $23,000 ($30,000 if you turn 50 or older in 2024). 

Amazon Mega Backdoor Roth 

Amazon’s 401K plan allows employees to make Mega Backdoor Roth contributions. For 2024, the Federal limit for total contributions to a 401K is $69,000. To make a backdoor contribution you would first max out your normal 401K contribution of $23,000 while receiving Amazon’s match of up to 2% of your salary. Let’s say your salary is $160,000 and you contribute $23,000. Amazon would then match 2% of that $160,000 salary, which is $3,200. That would leave you an additional $42,800 you can contribute to hit the $69,000 401K limit. Thus you would make a $42,800 after-tax contribution to your 401K and use the plan’s option to roll that money into a Roth. Here’s an illustration of this example:

Here is an illustration of the steps you would take to implement the Mega Backdoor Roth at Amazon:

Restricted Stock Units (RSUs)

RSUs make up a large portion of total compensation at Amazon. Amazon’s vesting schedule is more heavily weighted towards later years than most tech companies with heavy stock compensation. 

Here’s the typical vesting schedule for Amazon RSU compensation:

  • Year 1:   5%
  • Year 2: 15%
  • Year 3: 40%
  • Year 4: 40%

Because Amazon’s RSUs are a big portion of many employees’ compensation packages and are heavily weighted to years 3 and 4, Amazon employees are more dependent on Amazon’s stock performance than employees of other companies. Given the fantastic performance of Amazon stock over the past decade, that hasn’t caused many complaints. However, that reliance on Amazon’s stock performance can go both ways and could be a significant risk for an employee moving forward. 

From a planning standpoint, I nearly always recommend Amazon employees sell their RSUs as soon as they vest. Vested RSUs are taxed as ordinary income so if you sell your units as soon as they vest there is essentially no additional tax impact. You should think of your vested RSUs as a cash bonus that Amazon has paid you. If you received an envelope full of cash, would you invest 100% of it into the stock of your employer? Given that your future compensation is already heavily tied to Amazon’s stock performance, from a financial planning standpoint it’s advisable to invest that money into an investment or allocation that better fits your overall financial goals and risk tolerance.

Health Insurance

Amazon offers several medical insurance plans for employees. One of my favorites is the high-deductible health plan that offers a Health Savings Account (HSA). Any contribution made to an HSA reduces your taxable income and if you spend the money on qualified medical expenses is completely tax-free. Any money you don’t spend can grow tax-free inside the HSA. Plus, Amazon will kick in free money into your HSA for you! Amazon has been contributing $500 for an individual, $1,000 for a married employee, and $1,500 for a married employee with kids. 

The 2024 contribution limit to an HSA is $4,150 for an individual and $8,300 for a family. That limit includes employer contributions made on your behalf. Statistically, most people will save money with an HSA plan even without the extra money that Amazon contributes on your behalf. However, you must always consider the unique health and medical needs of you and your family and review the various health insurance plans Amazon offers to see what is best for your situation.

Basic vision and dental are also offered as part of Amazon’s health insurance packages. 

Life Insurance

Amazon offers employees free life insurance equal to two times your annual base salary up to $300,000. Supplemental insurance in amounts of 1x to 11x your base annual earnings can be purchased, up to $2,200,000. For those with dependents who may need supplemental insurance, I would recommend comparing the cost of supplemental insurance offered through Amazon with a couple of outside providers to find the best option for you. 

Coverage is also available to purchase for spouses (up to $250,000) and children (up to $20,000).

Disability Insurance

Amazon provides both short-term and long-term disability coverage to full-time employees free of charge. Amazon’s disability insurance covers 60% of an employee’s salary but doesn’t include RSUs or other compensation. After 180 days on Amazon’s short-term disability plan, an employee will switch to the long-term plan. Amazon’s long-term disability pay includes salary and RSUs for up to two years. 

Pregnancy & Parental Leave

For birthing parents, Amazon provides paid pregnancy leave of 100% of your salary for up to 14 weeks while you’re on doctor-ordered short-term disability. RSU vesting will continue vesting according to your current schedule.

Following the birth or adoption of a child, parents receive 6 weeks of paid leave. RSU vesting suspends after 14 days of leave and resumes upon return to work with an adjusted schedule.

Conclusion

Hopefully, the information on this page has helped you optimize your Amazon employee benefits! If you want to explore our comprehensive wealth management services and discuss your financial situation, please schedule your free consultation call today.

Scott Caufield, CFA, CPA