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Restricted Stock Units: What Women in STEM Careers Need to Know

September 14, 2022

Depending on your employer or your industry, you might be offered different types of compensation. Most people are familiar with employers who do some sort of 401(k) matching, but what if your company offers you Restricted Stock Units?

What are Restricted Stock Units (RSUs)?

RSUs are stock-based compensation in which an employee is granted shares in the company, but they are “restricted.” Shares are released from those restrictions based on various factors such as time with the company, or performance of the employee. Once they are unrestricted, or granted, the employee owns the shares and can hold them or sell them.

This type of compensation is pretty typical of any public or private company that issues stock and has shareholders – especially tech companies expecting high growth.

As more and more women enter STEM careers (“Since 1970, the representation of women has increased across all STEM occupations and they made significant gains in social science occupations in particular – from 19% in 1970 to 64% in 2019.”), it’s important for employees to understand how their compensation works.

Here’s what you should know about RSUs.

Let’s break down the pros and cons of Restricted Stock Units:

PROS:

  • Once your shares vest, you own the stock and can do with it what you wish.
  • You get to (potentially) participate in the growth of the company for which you work.

CONS:

  • Although they are part of your compensation, they have no value until they vest.
  • They are only as valuable as the stock price of the company, which can vary.
  • You will owe taxes on the value of the shares when they vest, no matter what you choose to do with them.
  • You lose unvested shares if you quit your job

Also keep in mind that shares are taxed as ordinary income in the year they vest, and you are not able to control that as you might with stock options. The value of the stock can go down, but you will still owe tax on the value of the shares at the time they vested. You will also owe capital gains taxes on any growth that occurs between vesting and when you sell the shares. (I like to call this “a nice problem to have.”) 

Here's how I can help

Working with a financial planner can be a huge help when it comes to eliminating the confusion surrounding RSUs. For example, I can help you determine whether or not to sell when your shares vest. I’ll also take a look at your portfolio; accumulating many shares is great but can be a problem for your portfolio if you have too concentrated a position. And as far as taxes, I can help you create a tax-efficient strategy for selling shares and understanding how the RSUs fit into your overall financial plan.

Ready to take a look at where you are with your financial plan? So am I. CLICK HERE to make an appointment!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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