What Are RSUs?

A restricted stock unit is a form of stock-based compensation where your employer promises you shares of company stock on a future date — usually tied to a vesting schedule. You don’t own the shares when they’re granted. You own them when they vest. Until then, they’re a promise, not a position.

For executives and high-earning professionals, RSUs are often one of the largest components of total compensation. And unlike a bonus or salary increase, RSUs come with a lifecycle that requires a strategy at every stage — grant, vest, and sale. Getting any one of those wrong has real financial consequences.

How the RSU Lifecycle Works: Grant, Vest, Sale

There are three moments that matter with RSUs. Each one has different rules, different tax treatment, and different decisions to make.

The Grant. Your company awards you a set number of RSUs, typically as part of an annual compensation package. At this stage, you don’t own anything and no taxes are due. The grant is a promise: if you meet the vesting conditions — usually staying at the company for a specified period — the shares become yours.

One distinction worth knowing: an 83(b) election — which lets you pay taxes at grant rather than at vesting — does not apply to RSUs. That’s because RSUs don’t transfer actual property at grant; they’re a contractual promise. The 83(b) election applies to restricted stock (actual shares subject to vesting restrictions), which is a different instrument. If your company grants restricted stock rather than RSUs — more common at pre-IPO companies — the 83(b) election may be relevant, and the filing deadline is 30 days from the grant date. Worth confirming with your CPA which instrument your grant agreement specifies.

The Vest. When your RSUs vest, the shares become yours. This is a taxable event. The fair market value of the shares on the vesting date is treated as ordinary income per IRS guidelines and shows up on your W-2. Most employers handle withholding by selling a portion of your shares at vest — for 2026, the federal supplemental withholding rate is 22% on the first $1 million of supplemental wages (rates subject to change).

Here’s where it gets important: your cost basis resets to the fair market value on the vest date. Every dollar of growth above that basis, whenever you sell, is a capital gain. Below it, a capital loss. The vest date is the new starting line.

The Sale. You now own shares. You decide when to sell. If you hold for more than a year past the vest date, gains are taxed at long-term capital gains rates. Less than a year, short-term rates — which are the same as ordinary income. The holding period starts at vest, not at grant.

The Tax Moment You Need to Plan For

When RSUs vest, the fair market value is taxed as ordinary income — and your employer’s withholding may not cover your actual tax liability. For high-earning professionals, the gap between what’s withheld and what’s owed can be significant enough to require planning ahead of each vesting date. This is solvable, but it catches people who don’t map it in advance.

For the full breakdown of how the withholding math works, how capital gains apply after you sell, and strategies to consider, see how RSUs are taxed.

RSUs vs. Stock Options

RSUs and stock options both tie compensation to company stock, but the mechanics are different in ways that matter.

With stock options, you have the right to buy shares at a set price (the strike price). If the stock is above the strike price, the option has value. If it’s below, the option is worthless. You control the timing of exercise, which means you control when the taxable event occurs.

With RSUs, there’s no purchase. The shares are delivered to you at vest, and you owe taxes on the full fair market value regardless of what happens to the price afterward. There’s no strike price, no decision to exercise, and no scenario where they’re worth zero — unless the stock price itself goes to zero.

RSUs are simpler but less flexible. Stock options offer more control over timing but introduce more complexity. Many executives receive both. Understanding how RSUs compare to PSUs — performance-based stock units — adds another layer, particularly if your compensation includes performance-contingent equity.

Concentration Risk: The Accumulation Problem

Here’s the pattern we see: an executive receives RSU grants every year. Each grant vests over three to four years. The shares vest, and because there’s no immediate need for cash and no desire to pay taxes, they sit. Over time, company stock becomes 30%, 40%, or more of the total portfolio — without a deliberate decision to build that position.

That’s concentration risk. Your salary depends on the company. Your bonuses depend on the company. And now a significant portion of your investment portfolio does too. If the stock drops, your income and your wealth decline together.

A reasonable starting point: if your company stock exceeds 10–20% of your total investable portfolio — including taxable accounts and retirement accounts, excluding your home — it’s worth evaluating a sell strategy. Not because the stock is bad, but because the concentration is unintentional.

Want to hear how we think through the sell-at-vest decision in practice? We unpacked it on a recent episode of Off The Wall. Watch that episode here. 

The Sell-at-Vest Framework

One approach we use at Monument: consider selling RSUs at vest as the default, not the exception.

Selling at vest doesn’t mean you’re bearish on your company. It means you’re converting a concentrated, single-stock position into capital that can be allocated according to your actual goals — diversified, tax-efficient, and matched to your timeline. The vest is the moment you have maximum optionality. Every day you hold after vest is an active decision to stay concentrated.

There are valid reasons to hold: conviction in near-term appreciation, a blackout period that prevents an immediate sale, or a situation where the position is still a small fraction of your portfolio. But “I don’t want to pay taxes” is rarely a sufficient reason on its own. Taxes are the cost of converting paper wealth into real optionality. Investors may consider whether the tax cost of selling is worth the reduction in concentration risk.

What Smart Executives Actually Do

The professionals who handle RSUs well aren’t making one decision per year. They’re running a system: mapping vesting schedules across multiple grant years, estimating tax liability before the vest hits, building a sell strategy that accounts for blackout periods and wash sale rules, and integrating the proceeds into a diversified portfolio that reflects what they actually want their wealth to do.

RSUs aren’t a windfall. They’re a recurring, complex compensation event that compounds in both value and complexity over a career. Treating them as an afterthought is how concentration risk builds and tax surprises happen.

A fee-only fiduciary who understands equity compensation can map the full picture — grants, vests, tax implications, and portfolio integration — so that each decision builds on the last.

Prefer to listen on the go? We also covered what to do when RSUs vest on Between Sips. Listen on Apple Music or Spotify. 

If your RSU strategy is something you haven’t looked at recently, that’s a conversation worth having. Let’s talk.