My RSUs Are Vesting, What Should I Do?

It’s the middle of the quarter, which means it’s time for RSU vesting for many tech executives. If your RSUs are vesting, you might be wondering: Should I sell or hold? How will this impact my taxes? What’s the best strategy to maximize wealth while managing risk?

This guide answers those questions and more, to help you make informed decisions about your equity compensation.

1. How Are RSUs Taxed?

RSUs (Restricted Stock Units) are taxed as ordinary income when they vest, based on their fair market value. Here’s what you need to know:

Withholding Tax: Your employer typically withholds a portion of the RSUs for federal and state taxes, but this may not cover your full tax liability. 22% is standard, with the option to increase to 37% for vesting >$1M.
Estimated Tax Payments: If withholding isn’t enough, you might owe additional taxes when filing. Consider making estimated payments to avoid penalties.
Alternative Minimum Tax (AMT): If you also hold Incentive Stock Options (ISOs), RSU vesting could affect your overall tax exposure.

2. Should I Sell My RSUs Immediately?

Before deciding whether to sell or hold, assess your financial goals:

Upcoming Expenses: Need liquidity for a home purchase, tuition, or other commitments? Selling RSUs can provide immediate cash.
Emergency Fund: Ensure you have a sufficient cash reserve before taking on risk by holding company stock.
Diversification Goals: Holding onto RSUs increases your exposure to a single company. Selling shares can help balance your portfolio.

3. How Does the Stock Price Impact My Decision?

Stock price volatility is a major factor when deciding whether to sell your RSUs:

If you believe the stock is High: Selling now locks in gains and reduces exposure to a potential downturn.
If you believe the stock is Low: Holding in hopes of a rebound may increase risk—assess your long-term outlook on the company.
Market Trends: Research industry and company performance to make an informed decision.

Crystal Ball Approach:

No one can predict where the stock price will go next. Stocks move for countless reasons—some obvious, others impossible to foresee. Instead of trying to time the market, ask yourself this: If you received the same amount in cash today as your RSUs, would you use it to buy more company stock?

If the answer is no, then consider selling at vest and redeploying into a diversified portfolio aligned with your goals.

4. How Do I Manage Concentration Risk?

Holding too much of your wealth in company stock is risky. Here’s how to mitigate it:

Sell and Diversify: Selling vested RSUs and reallocating the proceeds into a diversified portfolio reduces risk.
Use a 10b5-1 Selling Plan: Automating sales at predetermined times helps avoid emotional decision-making and can optimize tax efficiency.
Charitable Giving: If you don’t need the cash but are concerned about concentration, consider donating shares to a Donor Advised Fund to minimize concentration risk, avoid tax on the unrealized gain, and accomplish giving goals at the same time.

Final Thoughts: Align RSU Strategy with Your Financial Plan

Your RSU strategy should align with your broader financial goals. A tax-smart wealth management approach ensures you maximize value while managing risk.

By working together, we can help you maximize your RSUs while safeguarding your overall financial well-being. Schedule a consultation with Old Peak Finance to develop a tax-efficient RSU strategy that works for you.

Further reading: Understanding Restricted Stock Units (RSUs): A Guide for Our Clients