Should I hold my RSUs when they vest?

As with any type of investment, you want to be sure that your RSUs are part of your greater financial plan. It’s recommended that you have a plan in place before your stock vests. So, it could help to set concrete goals that you want to accomplish with your RSUs.

Do you lose restricted stock?

In most cases, restricted stock units: Don’t expire. They convert to shares after a vesting period. Have the same fair market value during the vesting period.

Given that RSUs are taxed as ordinary income and there is no tax benefit for holding them, I recommend you sell as soon as you vest and use the proceeds to fund your other financial goals.

How does a restricted stock plan work?

RSUs give an employee interest in company stock but they have no tangible value until vesting is complete. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes. The employee receives the remaining shares and can sell them at their discretion.

What happens when a restricted stock unit vests?

About Restricted Stock Units A Restricted Stock Unit is a grant valued in terms of company stock, but company stock is not issued at the time of the grant. When Restricted Stock Units vest, the employee receives the shares of company stock or the cash equivalent (depending on the company’s plan rules) without restriction.

Can a company sell restricted stock to an employee?

Restricted stock cannot be sold by the grantee until the shares are vested. In nearly all cases, the company has the right to repurchase all unvested shares if the employee leaves the company prior to becoming vested. A person with a vested interest in restricted stock is considered a company shareholder.

When do you get taxed on restricted stock units?

RSUs must vest before you can receive the underlying shares. Job termination usually stops vesting. With RSUs, you are taxed when you receive the shares. Your taxable income is the market value of the shares at vesting.

When do shares of stock vest in a company?

Under a standard four-year time-based vesting schedule with a one-year cliff, 1/4 of your shares vest after one year. After the cliff, 1/36 of the remaining granted shares (or 1/48 of the original grant) vest each month until the four-year vesting period is over.