Why Regularly Selling Your RSUs is Likely the Smartest Financial Move
If Restricted Stock Units (RSUs) are part of your compensation, they can be a powerful tool for building wealth—but only if managed wisely. Holding them indefinitely may not be the best financial strategy. Selling RSUs at regular intervals can provide greater control, security, and flexibility while potentially reducing your tax burden. Here’s 5 reasons why it might be the smartest move for you:
1. Separate Your Income from Your Wealth
Your salary and RSUs are both tied to your employer—which can be risky. When (as all companies do unfortunately) your company faces challenges, layoffs could happen, and your employer stock value could drop at the same time as you experience a reduction in income. That’s a dangerous, and avoidable, financial position. Selling RSUs regularly helps you diversify your wealth from your income, protecting you in case your employer faces tough times.
2. Minimize Risk & Volatility
Holding a single stock can be risky, especially if your time horizon and risk tolerance don’t align with market uncertainty. Diversifying across a mix of U.S. and international stocks, bonds, cash, and other assets helps reduce volatility and minimizes the risk of significant losses, providing greater financial stability
3. Optimize Your Taxes
RSUs come with tax implications, and selling strategically can help you manage your liability. By spreading out sales over time, you may avoid large lump-sum gains that push you into a higher tax bracket—potentially outweighing any incremental stock value increase. A well-planned approach ensures you keep more of what you earn.
Additionally, most of the tax liability associated with RSUs comes from the fact that they are generally counted as income on your W-2 at the time they vest. As a result, they are subject to both income and payroll taxes, which make up the bulk of the tax burden. By selling shortly after vesting, most individuals do not significantly increase their tax liability—if at all.
4. Increase Financial Security
Holding RSUs can be great, but having accessible cash when you need it is even more important. Using RSUs as an 'emergency fund' or for short-term spending goals is risky because the stock market is so unpredictable. Even if you’re confident in your employer’s performance, a broader market downturn could pull your company’s stock price down with it regardless. The only truly safe place for emergency savings or short-term financial goals is an FDIC insured savings account—ideally one with a high yield!
5. Capture Market Value
Stock prices don’t always stay high. If you wait too long, you might miss out on potential gains. A disciplined approach to RSU liquidation helps you take advantage of favorable market conditions rather than leaving your wealth vulnerable to unpredictable shifts.
Take Control of Your Financial Future
Strategic RSU management can enhance both your wealth and financial security. If you're looking for expert guidance on how to maximize your employer stock, let’s connect and create a personalized strategy that aligns with your financial goals.
Take care and, as always, stay the course!
Colburn Wealth Management, LLC is a registered investment adviser. The information provided is for educational purposes only and should not be construed as an offer, solicitation, or recommendation for the purchase or sale of any security or investment strategy. All investments involve risk, including the potential loss of principal, and are not guaranteed unless otherwise stated. Before implementing any strategy discussed, consult with a qualified financial or tax professional. Past performance is not a guarantee of future results.