Restricted stock units, RSUs, are a form of equity compensation commonly awarded to employees in the technology industry. They are used as supplemental compensation on top of a base salary and can be viewed as bonus compensation paid in company stock. RSUs can be extremely valuable and offer several planning opportunities to help you reach your financial goals. However, if you are not familiar with their mechanics, tax implications, and the decisions they require, you are likely left wondering: what do I actually do with these? This article will give you everything you need to know to maximize the benefit of your RSUs.

What Are RSUs?

Restricted stock units are a type of stock-based compensation that companies provide to employees as a reward for performance, tenure, or as part of a competitive total compensation package. They are called ‘restricted’ because they come with conditions, primarily a vesting schedule, that must be met before the shares belong to you and can be sold or otherwise used.

RSUs are particularly common in technology companies, both public and private. They give growth-oriented companies a way to compensate employees with equity alongside salary, allowing employees to participate in the company’s growth. Your employer will provide a grant document that outlines the number of shares, the vesting schedule, and any other terms, this blog is the foundation of your RSU planning.

How to Think About RSUs

From a financial planning standpoint, the simplest and most useful way to think about RSUs is as a bonus. When RSUs vest and are released to you, they are functionally identical to a cash bonus, the only difference is that they are delivered in the form of company stock rather than dollars. If you were to sell immediately upon vesting, the net proceeds would be equivalent to a cash bonus of the same value.

This framing is important because it changes how you think about the decision. If you received a cash bonus, would you take the entire amount and use it to buy your company’s stock? For most people, the answer is no and yet that is effectively what you are doing if you hold all of your vested RSUs without a plan.

RSUs can supercharge your financial goals, funding your child’s college education, remodeling your home, buying a property, or accelerating retirement savings. The key is having a plan before they vest, not after.

Millennial Wealth Tip: A fiduciary financial planner can help you build an actionable strategy around your RSUs before they vest – including understanding the tax implications so you are not caught off guard at tax time.

Vesting Schedules

Understanding how your RSUs vest is essential before making any decisions.

Time-Based Vesting: The most common structure. Your employer releases shares to you on a predetermined schedule, often with a one-year cliff (25% vests after year one) followed by quarterly or monthly releases over the remaining three years. The vesting schedule is outlined in your grant document.

Performance-Based Vesting: RSUs that vest only if specific company metrics – revenue, profitability, stock price targets – are achieved. These can also have a time-based component. They are harder to plan around because the outcome is uncertain.

Double-Trigger RSUs (Private Companies): Common at pre-IPO companies. These RSUs require two conditions to be met, a time-based vesting period AND a liquidity event (such as an IPO or acquisition), before they are released to you. Both triggers must fire. Planning around these requires making assumptions about the timing and nature of the liquidity event.

Millennial Wealth Tip: If you are considering leaving a company because of unvested RSUs, do not overlook them in your negotiation. We have helped many clients quantify the value of unvested equity and use it to negotiate a higher base salary or new equity grant from their next employer. Your total compensation, including unvested shares, is fair game in any job offer negotiation.

How RSUs Are Taxed

This is where many people get tripped up, so pay close attention.

RSUs are taxed as ordinary income in the year they vest at the fair market value of the shares on the vesting date. This income appears on your W-2, just like your salary. Your employer will typically withhold taxes automatically, often using a flat supplemental rate (currently 22% for federal), which may be less than your actual marginal rate if you are a high earner.

This under-withholding is one of the most common surprises we see when working with tech employees. If your marginal tax rate is 32%, 35%, or 37%, and your employer is only withholding 22%, you may owe a meaningful amount at tax time or face underpayment penalties if you are not making estimated tax payments.

After the shares vest, any subsequent gain or loss from holding the stock is treated as a capital gain or loss, short-term if held less than a year, long-term if held more than a year. The difference between the vesting date price and your eventual sale price determines the additional tax owed.

Deciding When to Sell

This is the question we get most often. The decision to hold or sell involves several considerations:

• Concentration risk: How much of your total net worth is tied up in your company’s stock? Most financial planners recommend keeping a single stock position below 10-15% of your overall portfolio. Tech employees with large RSU grants frequently find themselves significantly above this threshold.
• Tax timing: Long-term capital gains rates (0%, 15%, or 20% depending on your income) are meaningfully lower than ordinary income rates. If you can hold vested shares for more than a year, you may reduce your tax bill on any appreciation. That said, the risk of holding must be weighed against the potential tax savings.
• Your financial goals: Do you have near-term uses for the proceeds: a home purchase, tuition, debt payoff? If so, holding carries unnecessary risk. If your timeline is long, a systematic sell-and-diversify plan may make more sense than an all-or-nothing approach.
• Company outlook: What is your honest assessment of your company’s stock? Diversification exists for a reason – single stocks are volatile, and even great companies have bad years.

A common and practical approach is a systematic sell strategy: sell a predetermined percentage of vested shares immediately upon vesting, use the proceeds to diversify, and hold the remainder based on your tax situation and risk tolerance. This removes emotion from the decision and builds discipline into the process.

Incorporating RSUs Into Your Financial Plan

RSUs should not be managed in isolation, they need to be integrated into your broader financial picture. That means considering them alongside your 401(k) contributions, tax-loss harvesting opportunities, insurance needs, and short- and long-term goals.

In volatile markets, RSU vesting during a dip can actually create planning opportunities. Lower stock price at vesting means lower ordinary income recognized, and the potential for greater long-term appreciation if the company recovers. This is where having a plan in place ahead of time really pays off.

The Bottom Line: RSUs are one of the most powerful financial tools available to tech employees, but they require a plan. Understand your vesting schedule, know how you will be taxed, be honest about concentration risk, and make decisions that serve your broader financial goals rather than reacting in the moment. If your RSU grants are large enough to meaningfully impact your financial picture, the value of working with a knowledgeable financial planner will far exceed the cost.