Planning for RSUs – A Strategic Guide to Managing Equity Compensation

RSU Planning: How to Strategically Manage Your Equity Compensation

📈 RSUs Are More Than Just a Bonus—They’re a Planning Opportunity

If you’ve received Restricted Stock Units (RSUs) as part of your compensation, congratulations—you’re participating in one of the most common and potentially lucrative forms of equity compensation. But RSUs aren’t just “free money.” They come with tax implications, timing decisions, and financial planning opportunities that can significantly impact your long-term wealth.

Here’s how to think strategically about your RSUs.

🔐 Understand Your Vesting Schedule

RSUs don’t become yours until they vest. That means you need to know:

• • When your shares vest (e.g., annually, quarterly, cliff vesting)
• • How many shares vest at each interval
• • What happens if you leave the company early

📌 Planning Tip: Map out your vesting schedule alongside your career goals. If you’re considering a job change, understand what you might be leaving on the table.

💰 Plan for the Tax Hit

RSUs are taxed as ordinary income when they vest—based on the fair market value of the shares at that time. This can create a surprise tax bill if you’re not prepared.

Tax Planning Strategies:

• • Sell-to-cover: Automatically sell enough shares at vesting to cover taxes.
• • Withholding review: Make sure your employer’s withholding is sufficient—especially if you’re in a high tax bracket.
• • Estimated payments: Consider making quarterly tax payments if withholding is too low.

📌 Planning Tip: Work with a tax advisor to model your tax liability before vesting events.

📊 Diversify Your Portfolio

It’s easy to become overexposed to your employer’s stock, especially if you receive RSUs regularly. While it’s tempting to hold on and hope for growth, concentration risk can hurt you if the company’s stock declines.

Diversification Options:

• • Sell vested shares and reinvest in a diversified portfolio.
• • Use stop-loss orders or options strategies to manage downside risk.
• • Consider charitable giving of appreciated shares for tax efficiency.

📌 Planning Tip: Set a target percentage for company stock in your portfolio and rebalance regularly.

🧠 Align RSUs with Life Goals

RSUs can help fund major life goals—if you plan ahead.

• • Buying a home? Time your RSU sales to align with your down payment needs.
• • Saving for college? Use RSUs to build a 529 plan.
• • Retiring early? RSUs can be a bridge to financial independence.

📌 Planning Tip: Treat RSUs as part of your broader financial plan—not just a bonus.

📅 Timing Matters

The value of your RSUs depends on your company’s stock price at vesting. While you can’t control the market, you can control your reaction to it.

• High stock price at vesting? Consider selling to lock in gains.
• Low stock price? You may choose to hold—but be mindful of future tax implications.

📌 Planning Tip: Avoid emotional decisions. Create a written RSU strategy and stick to it.

✅ Final Thoughts

RSUs are a powerful tool—but only if you plan ahead. By understanding your vesting schedule, preparing for taxes, managing risk, and aligning with your goals, you can turn RSUs into a meaningful part of your long-term financial success.

📌 Need Help Creating Your RSU Strategy?

We help professionals like you make smart, tax-efficient decisions about equity compensation.

👉 Schedule a personalized RSU planning session by contacting us at 📞  443-406-6441 or 📧 info@alltaxaccounting.com.

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