Once they vest they're just regular shares, keep em if you're confident that they will go up (the gain is tax free), or sell if that makes you feel more comfortable.
RSUs are income. Not selling is equivalent to taking that portion of your income and using it to buy stock. If that's what you'd do with the money anyway because you like the investment, then keep the RSUs. If you think there is a better place for your income, then sell them immediately.
If you have been awarded restricted shares, you are required to retain your shares for a fixed period of at least one year. You are not permitted to dispose of your shares during this period, except in limited circumstances (such as death or company reorganisation).
Once your RSUs have vested, you'll likely be eager to sell your shares and cash out. However, doing so requires the completion of a withholding period.
With restricted stock and RSUs, you almost always forfeit whatever stock has not vested at the time of your termination, unless your grant specifies another treatment or the company decides to continue or accelerate vesting.
Double taxation on RSUs occurs because they are taxed at two different times: At Vesting: When RSUs vest, they are considered ordinary income, and their value is included in the employee's wages. This is reported on the employee's W-2 form, and the employer withholds federal, state, and sometimes local taxes.
Your shares may vest (become unrestricted) over a specific time frame and cadence or once an IPO, acquisition, or other liquidity event occurs. Consequently, you can't trade unvested RSUs before that vesting trigger; you're tied to their vesting schedule.
RSUs are taxed as income to you when they vest. If you sell your shares immediately, there is no capital gain tax, and you only pay ordinary income taxes. If instead, the shares are held beyond the vesting date, any gain (or loss) is taxed as a capital gain (or loss).
RSUs are worth very slightly more than straight cash compensation due to the optionality. Your compensation will go up and down as the underlying stock moves, and you are allowed to switch jobs when the stock price moves downwards.
RSUs are restricted during a vesting period that may last several years, during which time they cannot be sold. Once they are vested, RSUs can be sold or kept like any other shares of company stock. Unlike stock options or warrants, RSUs always have some value based on the underlying shares.
Selling RSUs immediately upon vesting is a common approach for many individuals. The reason behind this strategy is to avoid any potential decline in the company's stock value. By selling right away, you can lock in the value of your shares and mitigate potential risks tied to stock market fluctuations.
Does 1 RSU Equal 1 Stock? It depends on the company and the grant agreement. One RSU might equal one stock but could represent more.
Selling RSUs at Vest
One strategy for managing RSUs is to sell them immediately upon vesting. Doing so has its advantages, including the potential for limiting your exposure to stock price volatility and preventing an over-concentration of your company's stock in your portfolio.
Once RSUs are vested, they are treated the same as if you had purchased company shares on the stock market. You can keep the shares or sell them. If you choose to sell, you could reinvest the money, open a savings account or set up a retirement account to enjoy tax-deferred growth.
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Stock options can be a worthwhile addition to your investment portfolio if you're confident in the company's growth and are willing to accept the associated risks. If you prioritize stability, RSUs may be the better choice.
If your company is public, you can usually sell the shares you receive from your RSUs as soon as you meet the vesting criteria and get your shares, as long as you comply with your company's trading policy (e.g., with some companies, you're only allowed to trade stock during certain times of the year).
Only a transfer agent can remove a restrictive legend. But the transfer agent won't remove the legend unless you've obtained the consent of the issuer—usually in the form of an opinion letter from the issuer's counsel—that the restrictive legend can be removed.
RSUs are one of multiple forms of equity compensation, which can also include stock options or other incentives tied to company performance. A common rule of thumb for these investments is not to sell them at a loss, as this can lead to a loss of principal.
Before the vested shares are actually deposited into a broker account for you by your employer, a certain percentage of your RSU compensation will be withheld for tax purposes. Similarly to a cash bonus, typically about 40% will be withheld for federal, state, local, social security, and medicare taxes.
An employee is awarded 600 RSUs with a four-year vesting period. After the vesting period is completed, the RSUs automatically convert into shares of company stock, granting the employee full ownership. Through graded vesting, RSUs vest incrementally over time in equal portions.
Since stock you receive through stock grants and RSUs is essentially compensation, you'll usually see it reported automatically on your W-2.