More than 70% of vested startup stock options are never exercised, according to new data from Carta published Sept. 10 [1]. The equity grant at the center of your offer letter usually remains paper wealth that never converts to a single dollar.

Why it matters: Founders sell equity as a massive financial benefit, but Carta’s data shows most of it goes unclaimed. The variable that separates employees who buy their shares from those who walk away is not the grant size. It is access to a standard retirement account.

Employees with a 401(k) retirement plan through their employer purchase options at a 26.1% rate, compared to 22.8% for those without one [1][2]. A financial cushion gives workers the freedom to hand over cash for shares they may never be able to sell. Close to half of United States (US) companies on Carta’s platform offer no 401(k) at all [1]. This forces most startup employees to bet their long-term security on a single, hard-to-sell asset that may never pay out.

The big picture: A 401(k) turns into cash at retirement, holds diverse investments, and ignores single company failures. Startup equity is the exact opposite—highly concentrated and dependent on a company sale or public offering that may never happen [1]. Carta and Vestwell’s joint data proves these two benefits do not replace each other. They compound.

By the numbers:

  • 70%+ abandoned: Over 70% of vested (earned over time) option grants are never exercised, and the ones that are bought often fail to generate meaningful wealth [1][2].
  • 3.3-point bump: Having a 401(k) lifts the exercise rate from 22.8% to 26.1%—driven by a cash cushion rather than a bigger grant [1][2].
  • A missing safety net: Close to half of US companies on Carta offer no 401(k) plan. Only 39% of startups with fewer than 25 employees offer one [1].
  • $100k by year four: The median 401(k) saver earning over $200,000 holds more than $100,000 after four years. Workers earning under $75,000 save just $1,825 in year one [1][2].

The playbook:

  • Negotiate the 401(k) match: This match funds the cash you will need to buy your options when the time comes. Ask about the retirement match and its vesting schedule in the same breath you ask about the stock’s strike price (the fixed cost to buy a share).
  • Model your exact costs: Buying options costs cash. You pay the strike price multiplied by your shares, plus taxes. If the company offers no 401(k) and you cannot fund the purchase yourself, the grant is effectively worthless. Run the math before you count options as income.
  • Book unexercised equity at zero: Until you buy and hold the actual shares, an option is just a choice, not an asset. Discount it heavily when comparing a startup offer against liquid public company stock.

The catch: A 401(k) does not make bad options good. Buying underwater options—where the strike price sits above the current market value—will still burn you [2]. The same is true if you pay the Alternative Minimum Tax (AMT), a mandatory tax on paper gains, for stock that later drops in value. Finally, the exercise gap is a correlation. Employees who buy their shares may simply earn higher salaries and enjoy more financial security from the start.

  • The Big Shift: Carta’s Sept. 10 data reveals that over 70% of vested startup options are never exercised, and having a standard 401(k) retirement plan often decides who cashes in.
  • Why It Matters: Paper equity that never converts to cash is worthless. Close to half of US startups offer no 401(k), forcing employees to bet their financial future on a single, risky asset.
  • The Winning Moves:
  • Negotiate the 401(k) match: Use employer retirement contributions to build the cash cushion required to buy your shares.
  • Model exercise costs upfront: Calculate the strike price plus taxes immediately to see if you can actually afford to buy the grant.
  • Book options at zero: Treat unpurchased equity as a lottery ticket, not a guaranteed asset, during compensation comparisons.
  • The Catch: A 401(k) does not make it smart to buy options when the company value drops, and the higher exercise rate is partly driven by employees who already have higher salaries.

Go deeper:

Related reading

Sources

[1] Carta — “State of Employee Equity and 401(k) Plans” (Sept 10, 2026): https://carta.com/data/state-of-employee-equity-401k [2] Vestwell — “Equity Is Not a Retirement Plan: New Data Shows Why Both Matter” (Sept 2026): https://www.vestwell.com/blog/Equity-Is-Not-a-Retirement-Plan-New-Data-Shows-Why-Both-Matter