Five Strategies to Prevent Regret After Your RSUs Vest
Having a plan to cover taxes, diversify and set goals can help improve future outcomes with your restricted stock units.

Employees of publicly traded technology companies are familiar with the roller-coaster ride stock prices have been on in recent years.
In 2022, many tech giants watched their stock prices tumble by 40% to 50%, leaving employees who had a large stake in company shares and restricted stock units (RSUs) wondering what to do. In addition to seeing drastic drops in net worth, uncertainty about job security also became a real concern. Regret was the overwhelming sentiment.
Fast-forward to 2023, and so far, it’s been a different story. Tech stocks at large have made an impressive comeback. This might present a second chance for those who can still remember how bad they felt after 2022. A second chance is a rare opportunity when it comes to investing and building a financial plan with equity compensation, so there should be some sense of urgency to build a prudent strategy as soon as possible.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How can tech workers use their experience of the last two years to construct a sound financial plan with company stock and RSUs?
When RSUs vest, a tax bill follows
Let’s start with a simple question: If given a $50,000 bonus, would you use the entirety of it to buy your company’s stock? Reasonable people would likely answer no to that question. Yet tech employees who receive stock as part of their compensation have essentially been doing this every year. That is due to the popularity of the RSU grant.
Most stock compensation we see in the technology sector is in the form of RSUs. When RSU grants turn into vested shares, their market value is immediately taxed as ordinary income. Just like a standard bonus check, employees have no control over the timing or tax withholding on RSUs as they vest. This is why we draw the comparison of RSUs vesting to using an entire bonus to buy company stock.
Most people we encounter have never changed the default option for what to do with their RSUs at vesting. The option we most often see is “sell to cover taxes.” This means a portion of the shares are sold on the vesting day to pay estimated taxes at the federal supplemental wages withholding rate, which is 22% up to $1 million of income and 37% for wages of more than $1 million. In this scenario, the remainder of the money stays in company stock. Over time, if not managed, this can cause a large portion of your overall portfolio to be allocated to company stock.
Owning a piece of the company you work for has many positives. It provides motivation to grow the top line and be more mindful of the bottom line. However, when inaction leads to a concentrated stock position, bad things can happen. As you may have witnessed in 2022, paying taxes on a stock valued at $200 that went down to $100 is frustrating. At the same time, seeing a large portion of your net worth cut in half also hurts.
It's tough to sell when things are going well
In good times like 2021 and 2023, it is easy to ignore the vesting schedule and keep accumulating the stock. We realize it is very difficult to sell when recent performance is strong. We also realize how bad the regret feels when portfolios drop significantly. The emotional highs and lows of the stock market are only intensified when a high percentage of your portfolio is in one stock.
In the financial planning profession, we refer to this as concentration risk, which is the risk of owning too much of a single stock or sector. Concentration can result in a fast track to wealth creation or wealth destruction. Without a plan, you won't know if or how this risk can impact you.
As a reminder, your total company stock holdings include the shares you own, your expected paychecks and future invested shares.
Instead of the old-school method of spending a lot of time trying to predict the future financial prospects of a company to determine whether you should buy, sell or hold, planners will use a disciplined decision-making process to help decide what amount of company stock is prudent for your plan.
Whatever your goal, make informed decisions
If your sole goal is to become fabulously wealthy, concentrated bets are a potential option. However, you risk losing it all. If your goal is to live a financially independent lifestyle, you would likely decide to strategically diversify your portfolio to avoid potential calamity. That strategy comes with the downside of giving up the chance of future significant outperformance. The key is to have a discussion, model projected outcomes and make an informed decision for your situation.
Company stock can present an incredible opportunity to improve your financial plan. If 2022 put a strain on your investment portfolio, here are some financial planning strategies you can consider to improve future outcomes:
Create an investment purpose by putting goals and vision in the driver's seat. It's hard to position your money and investments if you do not have a purpose for them. Determine where you are and where you want to go. Then you can better understand how your company stock fits (or doesn't fit) into your overall investment plan. You can’t control the performance of your company stock, but you can control how you invest your money.
Be tax-efficient when trimming your stock portfolio. Whether it has fallen in value or is highly appreciated, pay attention to what shares you sell. Your various lots of shares will have different cost bases, which determine the amount you’re taxed for capital gains. You want to sell shares in a tax-smart manner.
For example, if you sell the lowest basis shares at a gain, you might increase your tax bill. On the flip side, you might have an opportunity to harvest losses on some high-basis shares. It’s important to discuss this with your tax and financial adviser to make sure you’re maximizing after-tax proceeds when selling shares.
Consider selling future RSUs at vesting. As new shares vest, sell them. Use those dollars to fund important goals or move them into a diversified investment allocation. We have found this balanced approach to be one of the better behavioral ways to reduce concentration risk. If your company stock takes off, your current shares will benefit, and future vesting amounts will be larger, but you’ve also taken action to lower your exposure.
This won't be an instant way to diversify, but it may gradually reduce concentration. Whether or not you hold a large position in company stock, this can be a reasonable strategy with RSUs.
Be proactive, not reactive. Don't decide what to do after RSUs vest. Without a proactive game plan, you’re likely to take no action and hold the shares. Create a plan for the RSUs before vesting. Maybe you want to supplement future wealth flexibility, top off the children's education accounts, start a travel fund or do some home updates. Not every dollar has to go into a long-term investment.
Prioritize your goals and determine how your RSUs can help fund or even accelerate those goals. Set calendar reminders on vesting dates to make sure you take some type of action.
Get help from a financial planner who specializes in equity! Most of the time, you already know what you need to do, but don’t have the accountability or the ability to craft a plan with your equity. If this sounds like you, seek out a CFP® professional who specializes in equity compensation.
Kevin Caldwell is a founder of Tampa-based financial planning firm Golden Road Advisors.
Travis Gatzemeier is a CERTIFIED FINANCIAL PLANNER and founder of Kinetix Financial Planning. Travis specializes in helping growth-minded entrepreneurs and equity-compensated professionals build financial flexibility and reduce taxes. He has been in the financial services industry since 2010 and has been recognized as a top 100 financial adviser by Investopedia.
related content
- All About RSUs: How They Work and What You Should Know
- Three Steps to Weave Equity Compensation into Your Financial Plan
- Planning for Early Retirement When You Have Equity Compensation
- Managing a Concentrated Stock Position: Too Much of a Good Thing
- Want to Get Rich and Stay Rich? Avoid 10 Investing Mistakes
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Kevin Caldwell is a founder of Tampa-based financial planning firm Golden Road Advisors. With over a decade in the financial services industry, Kevin provides knowledgeable guidance in comprehensive financial planning services to assist clients. He focuses on behavioral investment consulting, aiming to help clients make sound investment decisions while embracing emotions, but not succumbing to them at the detriment of their long-term financial well-being.
-
Nvidia Stock's Been Growing for Years. Just Look At Its 100,000% Return
Nvidia shareholders have had to stomach intense volatility over the years, but they have come out on top thanks to the AI chipmaker's bellwether status.
By Louis Navellier Published
-
The 'Concerning Trends' in Retirement Now
Americans are less satisfied with their life in retirement and cite inflation and higher healthcare costs as just two of the problems they're facing.
By Janet Bodnar Published
-
10 Tax Topics Every Retiree Should Know About
A little knowledge can go a long way toward saving on your tax bill. Print this out and take it to your tax planner so you can have a productive chat.
By Michael Miller Published
-
Facing a Layoff? Ask Your Employer These Questions Now
If you're being laid off or forced into early retirement, don't make any decisions without proper guidance — and that starts by asking some key questions.
By Ben Maxwell, ChFC®, AAMS® Published
-
Have $1M+ Saved? Consider a Financial Planning One-Stop Shop
A 'one-stop shop' team — including a financial planner, estate planning lawyer, CPA and more — could serve all of your tax, estate and retirement planning needs.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Five Ways to Safeguard Your Portfolio in Market Downturns
The stock market is nothing if not volatile these days. When it takes a dip, a well-managed, properly diversified portfolio could help you ride out the storm.
By Joel V. Russo, LUTCF Published
-
This Underused IRA Option Offers Tax Benefits and Income Security
Looking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
By Jerry Golden, Investment Adviser Representative Published
-
These Four Books Explore How to Leverage Our Outrage Positively
The authors offer some powerful tools to help us find solutions to discord rather than remaining silent or blowing up in anger.
By H. Dennis Beaver, Esq. Published
-
Financial Pitfalls to Avoid in Your 30s, 40s and 50s
As you pass through each decade of working life and build wealth for retirement, watch out for the financial traps that can hinder your progress.
By Julia Pham, CFP®, AIF®, CDFA® Published
-
Five Key Retirement Challenges (and How to Face Them Head On)
Life will inevitably throw challenges at you as you get older. But making a flexible retirement plan — and monitoring it regularly — can help you overcome them.
By Walt West Published