Alex Crouch, CFP®

RSUs - What You

Need To Know
And What To
Do With Them
 Alex Crouch, CFP®

Work in tech?

There’s a good chance you get paid

in RSUs.

So you need to know how they work.

And how to use them to build wealth.

 Alex Crouch, CFP®

Here’s what you need to know:

1. What are RSUs?

2. What are they worth?
3. What’s a vesting schedule?
4. How are they taxed?
5. What do you do with them?
 Alex Crouch, CFP®

What Are RSUs?

Your company wants to align your

incentives with their own.

And they want you to be invested in

seeing the company grow.
 Alex Crouch, CFP®

So the obvious solution?

Give you company stock!
That way:
Stock goes up > Your pay goes up
Stock goes down > Pay goes down
 Alex Crouch, CFP®

What Are They Worth?

Who knows!
You’ll probably receive a grant of
RSUs stated in a $ amount - like
$100K of Amazon RSUs.
But that doesn’t mean you’ll be able
to sell them for $100K.
 Alex Crouch, CFP®

Instead their value will depend on

how the company stock performs
after you receive them.
Hopefully the stock skyrockets!
But maybe it craters…
Either way - you can’t sell until they
vest.
 Alex Crouch, CFP®

What’s a Vesting Schedule?

Basically, the stock isn’t officially

yours until the RSUs vest.

And they don’t vest until you’ve met

certain requirements.
 Alex Crouch, CFP®

Usually you just have to stay at the

company for a period of time.

But sometimes vesting is

performance or event based.

E.g. RSUs vest when company IPOs

 Alex Crouch, CFP®

A common vesting schedule:

You get: RSUs worth $100K
4 Year vest w/ a 1 year cliff.
This means:
You’ll get ¼ of your RSUs after 1 year.
Then you’ll get more either monthly,
quarterly, or annually until you’ve
received all RSUs by the end of year 4.
 Alex Crouch, CFP®

And once they’ve vested…

They’re yours!

Then you’ll need to decide if you

want to keep them vs. sell them.

But first…
 Alex Crouch, CFP®

How Are They Taxed?

Sigh - so many misconceptions here.
Let’s clear this up:
When your RSUs vest they are taxed as
income.
Then they’re taxed a 2nd time on the
gain/loss from vesting when you sell.
 Alex Crouch, CFP®

Here’s the most common tax

mistakes I see with RSUs:

1. Not withholding enough tax

when they vest.

2. Holding RSUs > 1 year thinking

that will reduce tax bill. (It won’t)
 Alex Crouch, CFP®

Not Withholding Enough Tax

Because they’re considered income, it’s
important to withhold enough taxes
when RSUs vest.
If you don’t, you could get hit with a big
surprise tax bill…and possibly penalties.
The default tax withholding is usually
22%. This isn’t enough for high earners.
 Alex Crouch, CFP®

Holding RSUs > 1 Year

This is a huge misconception.

Holding your RSUs won’t reduce the

tax owed when they vest.

There’s no tax benefit to holding

them after they’ve vested.
 Alex Crouch, CFP®

What Do You Do With Them?

You’ve got 2 options:

1. Keep Them
2. Sell Them
 Alex Crouch, CFP®

Pros of Keeping Them:

- Your stock could go up

- Forced savings
 Alex Crouch, CFP®

Your Stock Could Go Up

Most people I talk to believe in their

company and expect the stock to go
up long term.

If it does, the value of your RSUs

increases. Obvious, right?
 Alex Crouch, CFP®

Forced Savings
This is the biggest pro in my mind.
By holding RSUs, it acts as a forced
savings account.
After all, you can’t spend money when
it’s locked away in RSUs.
I’ve seen this be powerful over 5+ years.
 Alex Crouch, CFP®

Pros of Selling Them:

- Reduces Risk

- More Consistent Outcomes

-Better Mental Health

 Alex Crouch, CFP®

Reduces Risk:

Are you comfortable knowing the

same company that cuts your
paycheck is the one who’s stock
you’re relying on to grow wealth?

What happens if you get laid off?

 Alex Crouch, CFP®

More Consistent Outcomes:

If you sell your RSUs and invest in a
diversified portfolio, you’ll get more
consistent returns over time.
General rule of thumb:
No stock should be more than 5-10%
of your overall portfolio.
 Alex Crouch, CFP®

Better Mental Health:

Do you suffer from “I anxiously check

my company stock price everyday
and stress when it’s down”?

Then selling may be the right choice -

for your mental health alone.
 Alex Crouch, CFP®

Hold vs. Sell

Either way, you should have a plan

for how to use your RSUs that fits
into your bigger financial picture.

And no

“I’ll figure it out later” isn’t a plan :)

 Alex Crouch, CFP®

Disclaimer:
Nobody knows what they’re doing.
Trust me.
You might think everyone else has it
figured out, but they don’t.
Don’t feel bad!
 Alex Crouch, CFP®

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