RSUs Quick Start Guide

Last updated: January 27, 2025 • 2 min read for busy professionals

Sometimes you just need the essentials—fast.
Our Quick Start Guides are designed for exactly that. In just 2 minutes, you’ll grasp the basics of key equity compensation topics. Ready for more? Dive into our calculators for personalized insights or explore our comprehensive guides to dig deeper.

Remember: RSUs are real money. $100,000 in RSUs = $100,000 in cash, just with more steps and strings attached.

The Essentials

RSUs (Restricted Stock Units) are shares of company stock given to you as part of your compensation. Unlike cash, they come with strings attached – primarily a vesting schedule that determines when they’re actually yours.

Three Things You Must Know

1. Vesting Basics

  • RSUs vest (become yours) over time, typically 4 years
  • Common pattern: 1-year cliff, then quarterly vesting
  • Example: 1,000 RSUs → 250 after year one, then ~62 every three months

2. Taxes

  • Taxed as regular income when they vest
  • Tax bill based on shares’ value on vesting day
  • Your employer usually sells some shares to cover taxes (“sell-to-cover”)
  • Any later gains/losses = capital gains/losses
  • Tax note: RSUs are typically withheld at supplemental wage rates (22% or 37% federal). This might not cover your full tax obligation if you’re in a higher tax bracket. Consider consulting a tax advisor about estimated tax payments.

3. Key Decisions

  • When RSUs vest, you have two choices:
    • Sell immediately: Lock in value, avoid concentration risk
    • Hold: Potential for growth (and lower future tax rate if held >1 year)

Quick Decision Framework

Hold your RSUs if:

  • You believe in company’s growth
  • Can afford the risk
  • Aren’t too concentrated in company stock (<10-20% of portfolio)
  • Want potential long-term capital gains treatment

Sell your RSUs if:

  • Need the money
  • Already have lots of company stock
  • Want to diversify
  • Prefer predictable value

Common Pitfalls to Avoid

  • Forgetting about vesting schedule tax hits
  • Not checking tax withholding rates
  • Letting emotion drive hold/sell decisions
  • Ignoring concentration risk

Next Steps

Immediate Actions:

  • Find your vesting schedule
  • Check tax withholding settings
  • Calculate your company stock concentration
  • Set up your sell/hold strategy
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