Considerations for Your Restricted Stock Units


Restricted stock units (RSUs) are an increasingly popular form of compensation given to key employees and company executives. If maintained properly, RSUs can be effectively leveraged for a child’s education, purchasing a home, retirement, estate planning, or a host of other important financial goals. While they are versatile and tremendously beneficial, RSUs can be vastly misunderstood and under-utilized without proper management. This complexity often leads one to overlook this part of their portfolio, and consequently miss out on crucial planning techniques and opportunities.

Because of the complex investment and tax implications surrounding RSUs, they are difficult to optimize and therefore, one should seek expert advice to help use them to achieve financial goals.

RSUs Defined

RSUs are a form of compensation that allow employees to share partial ownership of their employer via shares of common stock. The benefit is designed for long-term retention, and is therefore often awarded to employees deemed crucial to the future of the business. Typically, companies will not grant employees a specific number of shares each year. Rather, they will grant employees a certain dollar value in benefits, and that dollar value represents the number of shares they are granted on the grant date. This incentivizes future growth, retention, and improved employee performance.

Compared with Options

RSUs are different than stock benefit counterpart, stock options. While options come in a couple of different forms, the idea is that one receives the “option” to purchase shares at a strike price, and then sell the stock at its fair market value (FMV). A majority of the time, when individuals exercise the stock by buying at the strike price, they will then sell at FMV and realize immediate value.

One key reason that companies are generally moving away from options is that if the stock’s FMV dips below the strike price, the options are worthless. While RSUs maintain some value even in down markets, options do not offer the same type of compensation to workers who would prefer to have something rather than nothing if their company stock price drops. Because of this, options would no longer be the long-term incentive they are designed to be. RSUs have slowly taken over this role in many companies, but they are complicated and require an intimate understanding of the investment and tax considerations to effectively manage them.

Investment Considerations

When one receives a substantial amount of company stock, it becomes easy to allow that one company’s ownership to account for a sizable portion of one’s liquid net worth. By overweighting one security (or even one asset class) in one’s portfolio, there is considerable investment risk because the performance of that one company dramatically affects one’s overall portfolio and therefore, one’s ability to achieve their financial goals. Instead, one should opt for effective diversification within their portfolio. Because of statistical risk, a good rule of thumb is to not allow ownership in one company to account for more than 10% of one’s total portfolio.

By not overleveraging one position in one asset class, and instead diversifying across multiple securities in multiple asset classes, one could reduce risk on the portfolio and potentially increase the likelihood of achieving one’s financial goals. Rather than passively load up on one company’s stock, it’s paramount to seek expert opinion. This is especially true when one also considers taxes.


As with most forms of compensation, one must pay Uncle Sam. With some exceptions, taxes are not usually paid when stock is granted. Generally speaking, when stock is delivered, or “vested,” the shares are treated as ordinary income, and are therefore taxed according to one’s income tax bracket. The stock then becomes treated as a non-qualified asset. The vested shares may be sold or traded, and therefore incur a taxable capital gain or loss vis-à-vis the stock’s price on the vesting date. One should consult an accounting professional for details into their specific tax situation.

This is another reason proactive financial planning is exceedingly important. Depending on one’s financial goals, there may be ways to help mitigate some of these taxes. But, like most things in life, each situation is different and there is no formula that works for everyone. It requires intimate knowledge, attention to detail, and careful analysis of the situation to ultimately reach the optimal plan. Therefore, taking a proactive approach is a key component of achieving those goals.

Now what?

Individuals who are busy with their daily lives may not have the time or information needed to make the most informed decisions regarding these benefits, and should consult with a qualified financial advisor. Unfortunately, RSU planning is often left an afterthought for so many intelligent, hardworking people, yet it could have massive payoff for all sorts of financial goals. Whether it’s saving for a child’s education, buying a home, retirement or estate planning, or just a separate “rainy day” fund, understanding the nuances surrounding RSUs is critical to maximizing the benefit and ultimately achieving one’s financial goals.

If you receive RSUs and have questions about your benefit, contact a qualified financial professional to discuss how to make them work toward your goals. After all, you earned it.

BGWA. 2020.18

Back to Insights

Burnham Gibson Wealth Advisors, LLC, is an independent, privately-held firm offering financial planning and investment advice for individuals, and retirement plan services to corporations.

Check the background of your financial professional on - FINRA BrokerCheck.

  Connect with us on LinkedIn

Investment advisory and asset management services are offered by investment adviser representatives (IARs) through Burnham Gibson Wealth Advisors, LLC (Burnham Gibson), a registered investment adviser, and indirect subsidiary of Baldwin Risk Partners, LLC and BRP Group, Inc. Please note that although Burnham Gibson Wealth Advisors, LLC is a “registered investment adviser”, readers should be aware that registration with the SEC or any state securities authority does not imply a certain level of skill or training. Additional information about the Adviser is available on the SEC's website at

Burnham Gibson IARs are also, separately and apart from Burnham Gibson, registered representatives who offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI and TN), as well as agents who offer insurance and annuity products through Equitable Network, LLC, which conducts business in CA as Equitable Network Insurance Agency of California, LLC, in UT as Equitable Network Insurance Agency of Utah, LLC, and in PR as Equitable Network of Puerto Rico, Inc. For more information about Equitable Advisors, LLC, you may visit to review the firm’s Relationship Summary for Retail Investors and General Conflicts of Interest Disclosure. Equitable Advisors and Equitable Network do not provide ERISA fiduciary, tax or legal advice and are not affiliates of Burnham Gibson, Baldwin Risk Partners, LLC and BRP Group, Inc. Individuals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-153660 (10/20) (Exp. 10/24)

Please note that any BGWA IAR holding the QKA (Qualified 401(k) Plan Administrator) and/or the CPFA (Certified Plan Fiduciary Advisor) professional designation does so only in his or her capacity as an IAR with BGWA and entirely outside of Equitable Advisors and Equitable Network. Neither designation reflects any Equitable Advisors or Equitable Network service or product offering. CERTIFIED FINANCIAL PLANNER Board of Standards Inc. owns the CFP® and CERTIFIED FINANCIAL PLANNER™ certification marks in the U.S., which it awards to individuals who successfully complete the CFP Board's initial and ongoing certification requirements. The CLU®, ChFC®, Chartered Life Underwriter® and Chartered Financial Consultant® marks are the property of The American College, which reserves sole rights to its use, and is used by permission.

Please note that although Burnham Gibson Wealth Advisors, LLC is a “registered investment adviser”, readers should be aware that registration with the SEC or any state securities authority does not imply a certain level of skill or training. Additional information about the Adviser is available on the SEC’s website at