When to Sell Your RSUs? How to Choose the Optimal Time
Restricted stock units (RSUs) are a critical component of your compensation package with any of the tech giants, adding the potential for a substantial sum upon vesting.
Knowing when to sell your RSUs optimally is essential for your bottom line. While some people may hold their stocks for a rainy day or with hopes that the company stock will rise in value, others contemplate selling them as soon as possible.
What should you know about the timing of RSU sales? From the nuts and bolts of when you might be permitted to sell to the impact of that sale, this detailed guide will help you make the call.
When Can You Sell Your RSUs?
Remember not to put the cart before the horse. In other words, you will ultimately need to wait until your RSUs vest before selling them! There are no cookie-cutter answers about when this will occur; it depends on your contract's vesting schedule and your employer's vesting schedule.
Look at your contract carefully to see when those stock units will fall into your portfolio. You might sometimes get a portion of your RSUs after the first year and a percentage of the remaining stocks for the following years until all units are vested.
Once they vest, you have two options: You can sell some or all of them right away or hold onto them for the potential of future earnings.
Here’s a quick look at how RSUs vest at some of the major tech companies:
What Will Impact the Best Time to Sell RSUs?
When your RSUs vest, you have to decide whether you should hold onto them or sell them—and when you should sell them if you do. Here are four guidelines that might help you make sense of the timing of your RSU sales.
Tax Strategy
Nobody wants to line Uncle Sam’s pockets with cash. This is especially true of hard-earned compensation; you worked hard for those RSUs.
The problem with waiting to sell them is that they can appreciate in value from the day they vest. While this might seem like a good thing at a glance, it also means that your sale will be subject to capital gains tax. High-income earners need a tax strategy to properly account for what might be owed.
This is why many people opt to sell RSUs immediately. If you take care of the sale quickly, there is no difference between the value on the day they vest and the day they sell. Knowing that your stocks can appreciate in value is great, but capital gains taxes eat into profit.
For more information on how to reduce taxes on RSU income, see our complete guide here.
Financial Goals
Maybe you’ve been waiting patiently for your RSUs to vest because you need a chunk of change for a personal situation. Some people immediately opt to sell their stock units because they need a quick cash infusion. It could pay down high-interest debt, serve as the down payment on a house, cover a child’s tuition, or pay off a car loan. The money is yours to spend as you see fit.
Sometimes, you might opt to hold onto your RSUs if you have no need for extra cash. Having some appreciated, long-term assets in your portfolio is ultimately good. You have the money there for a rainy day and can watch it grow alongside your career. When you sell your RSUs, you may have to pay capital gains tax, but you also stand to earn more if your company succeeds.
Diversification
If there’s one piece of investment advice that nearly everyone is familiar with, it’s that your portfolio should be sufficiently diversified. Before your RSUs vest, you might have various investments in your portfolio. If you are a senior staff member at a tech giant, you might earn significant RSUs tied to your employer that weigh heavily within your overall portfolio when all is said and done.
Remember that you do not want to concentrate too much on any one stock. This could spell trouble for your portfolio if the company takes a nosedive.
If you find that you’re heavily concentrated in your company’s stock, you might consider selling off some RSUs and reinvesting those funds elsewhere to better diversify your portfolio.
Company Performance
Take a step back from your daily responsibilities and consider the company’s role in the market. Are they doing well? Are they expected to continue doing well in the months and years ahead? If so, then it might make more sense for you to hold onto your RSUs for longer when they reach their peak value.
Yes, you may be taxed twice for the sale of the RSUs (once when they vest and once more for capital gains tax). However, this also means you’ve made money twice! The gains may be well worth the tax incurred.
Can Consilio Help with Your RSUs?
Consilio Wealth Advisors specializes in helping tech professionals understand and maximize their unique compensation packages. Workers at Google, Amazon, Microsoft, and Meta often receive RSUs alongside other benefits as part of their contracts.
If you work for one of these tech giants and find yourself scratching your head trying to figure out the best route forward, we have you covered. Our free, downloadable tech employer benefit guides are tailored to the needs of tech employees, covering topics like RSUs, HSAs, ESPP, and more.
You can also tune into our Top of Mind financial podcast, which covers the latest trends and insights to help you understand the state of the market.
We’re a fiduciary and wealth planning group, meaning that we help you make decisions that are in your financial best interest. Reach out to us today to schedule a meeting and see if we can help you identify when to sell your RSUs!
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