About RSUs
Gain clarity and implement an action plan based on
your employer's equity compensation
What is a Restricted Stock Unit (RSU)?
Compensation from your employer in the form of company shares, with some restrictions in place
Restricted Stock Units (RSUs) stand as a form of employee compensation, intertwined with the company's stock shares. In the world of compensation, RSUs hold a special place, offering an engaging pathway for employees to become stakeholders.
RSUs are not just handed out freely; they are earned in two main ways. These units come to life through a carefully designed vesting plan; that could be closely linked to performance milestones. Or they could materialize over time, rewarding employee loyalty (Vesting Dates).
The true essence of RSUs lies in their transformation over time. Initially dormant, they gain value through vesting, bridging the gap between company and employee interests. Upon vesting, each RSU is assigned a Fair Market Value (FMV), underscoring their significance.
Incorporating RSUs into compensation packages adds a dynamic layer to the employer-employee relationship. They epitomize a shared journey, where dedication and achievement lead to tangible equity. As RSUs evolve, so does the partnership between the company and its valued team members.
Awards and Grants
Understanding the Value of your Restricted Stock Units (RSUs)
RSUs are thought of as a "full value" stock grant due to their inherent nature of being valued entirely based on the shares' worth upon vesting. This stands in contrast to stock options, which can be underwater. RSUs safeguard against being in a negative equity situation and are a consistent source of income, except in the case of the stock price plummeting to $0.
RSU Vesting Options
Graded
A vesting schedule wherein a specific portion becomes vested and attainable on an annual, monthly, or quarterly basis.
Example:
Year 1: 25%
Year 2: 25%
Year 3: 25%
Year 4: 25%
Cliff
A vesting schedule entails the complete vesting of a stock option or restricted stock/RSU grant in a single instance, following the fulfillment of vesting prerequisites. These prerequisites often encompass the duration of employment, achievement of performance objectives, or a blend of both factors.
Example:
Year 1: 0%
Year 2: 0%
Year 3: 100%
How Do We Apply
These Strategies?
Custom Strategies and custom solutions just for you
We establish clear objectives that define the role of your stock in your custom financial plan, aligning its potential gains with your income, savings, and retirement strategy. Understanding the complexities of vesting and taxes, proactively evaluating potential impacts, and making informed decisions.
We look ahead by exploring exceptions and extended service options for increased rewards. Expertly manage tax-efficiencies, adhering to regulations while utilizing efficient methods to maximize your stock's value. Capitalize on the advantages of the 83(b) election for early capital gains (for Restricted Stock, not RSUs). Navigate tax planning strategically, adapting to your changing scenarios and safeguarding your prosperity with intelligent custom asset management strategies.
Consider holding or selling based on a balanced analysis of tax, financial, and corporate factors, combining immediate gains and future returns with diversification. Enjoy dividends and growth from your vested shares, even before full vesting (Company Specific). Maintain a well-rounded portfolio with guidance from professionals to ensure financial stability and equilibrium.
Key Options and
Strategies For Your RSU
Efficiently navigate your stock awards and establish
a strategic plan
Know the Tax Impact and withholding
Understand your RSU Awards and Vesting Schedule
Have A Custom Plan For The Shares After Vesting
Review Concentration Risk in Overall Asset Management Strategy
Learn More About How We
Incorporate Your RSU Into a
Comprehensive Financial Plan
We know the ins and outs of RSUs. Gain the clarity you deserve by letting us
help you navigate your situation and establish a plan that aligns with the rest of
your finances.
Frequently Asked
Questions
Like a figure print, this answer is unique to each household. The best way to treat the RSUs is as income and have it flow through the custom financial plan and custom asset management strategy targeting the household goals. That is where we come in.
This is quite common for the clients we work with. What started off as small amount has grown to a significant amount through stock price appreciation and additional vests over the years. They find themselves sitting on 6 – 7 figures in 1 or 2 stocks. Tax efficiencies are critical while we work through the custom financial planning and asset management process. While also being focused on the concentration risk.
RSUs are treated as income for the calendar year. Having the standard 22% tax withholding (if under $1 million.) is common. Additional household income, award vests, and promotions all can add to it. Tax efficiencies and tax planning are critical during the process and critical to stay on top of as each household's situation evolves differently.
Learn More About The Value and Uses Of Your RSUs
I should have been doing this 10 years ago!
Effective financial planning, investing, and tax management demand a distinct set of expertise and abilities that may not be inherent to individuals. Numerous highly intelligent individuals opt against being self-directed investors. It is prudent to seek expert guidance for matters concerning financial planning related to stock compensation and the associated tax implications. When in the process of selecting a financial advisor, there are two key inquiries to consider:
- How frequently does the advisor engage with equity compensation, particularly in relation to restricted stock, RSUs, and performance shares?
- Is the advisor able to furnish referrals from clients who have dealt with stock compensation?
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