Restricted Stock Units (RSUs) can be a valuable part of your compensation package—but if you’re not careful, they can lead to surprise taxes or too much risk tied to your company’s performance. Whether you’re nearing retirement or mid-career, these five simple strategies will help you make the most of your RSUs.
1. Align RSUs with Your Financial Goals
Before making decisions about your RSUs, consider what role they should play in your bigger financial picture.
- Are you planning to use the value for retirement?
- A future home?
- Pay down debt?
- Helping with a child’s education?
Link your RSU strategy to specific goals. This gives your decisions a purpose and helps you evaluate whether to sell, hold, or reinvest. If your company were to give you a cash bonus, what would you do with it? At vesting, these are taxed just like you received cash, but it is given in the form of stock.
Pro Tip: Integrate RSUs into your broader financial plan—including 401(k) and deferred compensation contributions, emergency savings, and your risk tolerance.
2. Know Your Vesting Schedule—and Plan for Taxes
Your RSUs vest on a schedule—typically over several years. When they vest, their value is considered income and subject to federal, state, and payroll taxes.
KEY POINT: Whether you sell the RSU or hold, the vested amount will be added to ordinary income for that year. Often times, the company withholds 22%. If you are in a higher tax bracket, this could lead to underpayment penalties and interest.
Set calendar reminders for vesting dates.
Plan for income spikes that could push you into a higher tax bracket. Consider estimated payments if the tax withholding is less than your effective tax rate.
3. Don’t Let RSUs Skew Your Portfolio
It’s easy for RSUs to become an oversized portion of your net worth—especially if your company stock performs well. Do you want your paycheck, your health insurance, and your investments all tied to the success of one company?
If your company stock drops, your compensation and investments are hit.
Making sure you understand concentration and exposure can save you from big swings in the future.
4. Understand When to Hold vs. Sell
There’s no one-size-fits-all answer here. Holding RSUs may lead to long-term capital gains if the stock appreciates—but holding also increases risk.
Consider these questions:
- Do you need the cash soon?
- Do you believe your company stock will keep growing?
- Do you want to wait for lower capital gains taxes?
Holding >1 year can reduce taxes (20% long-term capital gains vs. up to 37% short-term), but it’s a trade-off.
5. Work with a Financial Advisor
RSU planning includes taxes, timing, and portfolio management. A financial advisor can help:
- Time your RSU sales to reduce tax liability
- Balance your overall investment strategy
- Ensure your RSUs align with your retirement plan
At Decima Wealth Consulting, we specialize in helping executives approaching retirement navigate complex equity compensation like RSUs, ESPPs, and deferred comp.
Conclusion
Your RSUs aren’t just “extra pay”—they’re a strategic asset. With the right guidance and a few smart moves, you can turn equity compensation into a powerful piece of your long-term financial plan.
