If you work at a tech company, chances are RSUs, restricted stock units, are part of your compensation package. And while they can be a powerful wealth-building tool, too often I see talented professionals miss out on maximizing their value due to uncertainty or inaction.
Let’s break down what RSUs are, why they matter, and how to make thoughtful financial planning decisions around them.
What Are RSUs, Exactly?
RSUs are company shares granted to you as part of your compensation. Unlike stock options, RSUs don’t require you to purchase the shares, they’re given to you, but only after they vest.
Vesting typically happens over time. A common schedule is 4 years with a 1-year cliff, meaning you earn 25% of your RSUs after one year, and then the rest monthly or quarterly over the remaining 3 years.
Once RSUs vest, they’re considered income, and taxed accordingly.
Tax Implications: Don’t Get Caught Off Guard
Here’s the big surprise: when your RSUs vest, the value of those shares is taxed as ordinary income, not capital gains. That means:
- You may owe federal, state, and payroll taxes the moment they vest.
- Your company may withhold taxes by selling a portion of the shares, but this might not be enough, especially if you’re in a high tax bracket.
Tip: Set aside additional cash to cover any tax shortfall, especially if your employer only withholds at the statutory 22%.
Should You Hold or Sell Your RSUs?
This is the million-dollar question, and the answer depends on your overall financial picture. But here are some key considerations:
Reasons to sell right away:
- You’re overly concentrated in your employer’s stock (common in tech).
- You need to build liquidity for goals like buying a home, funding a 401(k), or creating an emergency fund.
- You want to diversify into a broader investment portfolio.
Reasons to hold:
- You believe in the long-term upside of your company.
- You’re OK with the risk and have other assets to balance your portfolio.
- You’ve already accounted for taxes and have no immediate liquidity needs.
My rule of thumb? Don’t let RSUs grow to more than 10–15% of your net worth. Concentrated positions can be dangerous, even in companies you love.
RSUs & Financial Planning: The Specialized Playbook
To truly get ahead, treat your RSUs like any other part of your financial plan:
- Coordinate with your cash flow: RSUs can supplement your income, just don’t rely on them for essentials unless they’re vesting regularly and predictably.
- Align with your goals: Use RSU proceeds to fund goals, pay down debt, invest, or build your safety net.
- Plan for taxes proactively: Consider working with a CPA or financial advisor to create a tax strategy, especially if you’re in a high-income year.
- Look ahead to liquidity events: If your company is pre-IPO, know your options, and risks. Liquidity may be years away, and tax implications could vary.
Bottom Line
RSUs can be one of the most valuable (and most overlooked) pieces of your compensation puzzle. Whether you’re early in your career or a seasoned tech professional, a strategic approach can turn this benefit into lasting wealth.
If you’d like help integrating your RSUs into your broader financial plan, I’m here to guide you.
Need help making sense of your RSUs?
Let’s connect for a free consultation and build a plan that fits your goals, tax situation, and life beyond the tech world. Feel free to reach out on at platinumpointfin.com or email us at charlie.burguieres@prudential.com.
Securities and investment advisory services offered through LPL Enterprise, a Registered Investment Advisor, Member FINRA/SIPC, and an affi liate of LPL Financial.
LPL Enterprise and LPL Financial are not affiliated with Platinum Point Financial. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Charlie Burguieres, CFP®
Platinum Point Financial
