In this video, I explain when you should sell your restricted stock units.
When should you sell your restricted stock units transcript:
I’m Tom Lo with Vested Financial Planning. When should you sell your restricted stock units?
So this is one of the most common questions I get from my clients. The short answer is I typically recommend you sell your RSUs as soon as you vest.
Let me explain why. So RSUs or restricted stock units are your company equity in the form of company stock and so the way they work is as soon as you vest, you own the stock even if you leave the company. The key thing to understand about RSUs is they are taxed as ordinary income. So they’re taxed just like your salary. It’s sometimes helpful to think about RSUs as a cash bonus in the form of company stock.
So let me give you an example. So let’s say you get a hundred thousand dollars of RSUs. As soon as you vest, what the company typically does is they’ll sell about $30,000 worth to cover taxes, withholding, and you’re left with $70,000 of company stock.
Alternatively, let’s say you get a hundred thousand dollar cash bonus from the company. The company withholds about $30,000 to cover taxes and withholding, and they pay you $70,000. You then take the $70,000. You go out in the stock market, you buy $70,000 of company stock. You are also left with $70,000 of company stock.
So the key question to ask yourself is if I got a cash bonus for my company today, would the first thing you do with that cash bonus be to go out and buy your company stock. If not, then you should think about selling your RSUs. If you want to learn more contact me here.