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Deciding to sell company stock can be tricky. So how do you put a proper plan in place to extract value from your vested RSUs and better secure your financial future?
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What to Do with Your RSUs

Financial Planning
Stock Options
Tax Planning
Investing
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Notice: The content of this post is over two years old, information may not be up to date.

Deciding to sell company stock can be tricky. As an employee you are closer to your company than any number of companies or strategies you could invest in. This closeness provides an allegiance to the company stock. You may even feel worried that if you sell now, you might give something up should the share price go higher. Timing is everything.

While holding a large percentage of your net worth in your company stock has the potential to lead to massive financial gains, it has an even greater chance of putting your long term financial goals in jeopardy. So how do you put a proper plan in place to extract value from your vested RSUs and better secure your financial future?

Common Client Scenarios:

  1. Someone has a significant vest upcoming. This might be their first RSU vest since their company has gone public or their first vest since joining a company.
  2. Someone has been receiving vested stock for a while and has never done anything with the net shares. As a result, they now have a significant amount of company stock with more RSUs vesting.

Consider Every Angle

Framing this entire process correctly is a great first step. Ask yourself: “If my company paid me a large, taxable cash bonus- would I take the entire proceeds and purchase only my company stock?” For most, the answer to this question is no. However, this is what you are opting to do when you decide to not sell vested RSU. 

Prioritize Goals

Accruing the most amount of company stock possible is not the main goal. Financial goals usually look like this:

  • Build long term wealth
  • Make work optional
  • Secure retirement
  • Save for children’s education
  • Purchase real estate

Ask yourself what are your personal financial goals?

Tax Planning

Everyone wants to avoid the unwanted surprises at tax time. A proper plan takes into account taxes at time of vest and at time of sale. A personalized tax projection is a great tool to make sure that you don’t end up owing taxes. The purpose of a tax projection is to determine how much you may owe in additional tax as a result of the vest and/or sale. This additional tax does not get automatically withheld at vest or at time of sale. Once you know how much you may owe additionally, you can set that money aside. We prepare a tax projection at every step along the way. This is a major benefit of using an investment and planning firm that is also a CPA firm.

Investment Strategy

At the core of a successful long term financial strategy is an investment portfolio. Your investment portfolio drives the success of your personal financial goals. When you retain too much in your company stock, your financial outcome is too dependent on the outcome of a single company. A decision to reinvest money outside of your company is usually a good idea.

When designing a long term investment portfolio, diversification is your friend. A diversified portfolio doesn’t just own one company, it owns many. A diversified portfolio owns companies across different sectors, industries, and geographies. In addition to stock, a diversified portfolio may also own other assets like real estate, municipal bonds, or treasury bonds. 

Finally, many who are receiving significant amounts of RSUs will also be in the highest tax brackets—at both the Federal and the state level. This means they will want their investment portfolios to be as tax efficient as possible. A more tax efficient investment portfolio means that you keep more of your gains. An inefficient investment portfolio means that you’re potentially losing your investment gains in the forms of unnecessary taxes. 

Ongoing Planning

For RSUs in particular, it’s important to remember that vesting is not a singular event. Not only does a grant have multiple vesting periods, but the longer you are at the company the more grants you will accrue. It’s not uncommon for a long-time employee to have several RSU grants vesting concurrently. If the company stock has appreciated, prior grants will be worth more.

Successful RSU planning doesn’t just happen once, it is a continual and repeated process. Identification of your changing financial goals, taking advantage of tax planning, and ongoing investment management adjustments are all the basis of achieving long term financial success.

Let’s design an actionable plan for your company stock.

–––

Brickley Wealth Management is a Registered Investment Adviser*. Advisory services are only offered to clients or prospective clients where Brickley Wealth Management and its representatives are properly licensed or exempt from licensure. The information throughout this website is solely for informational purposes. The content is developed from sources believed to provide accurate information, and we conduct reasonable due diligence review however, the information contained throughout this website is subject to change without notice and is not free from error. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Readers should conduct their own review and exercise judgment prior to investing and should carefully consider their own investment objectives and not rely on any post, chart, graph or marketing piece to make a decision. No investment or tax advice may be rendered by Brickley Wealth Management or Brickley & Company unless a client service agreement is in place. We are not providing any personalized investment advice through this website. Please consult your investment, tax, or legal advisor for assistance regarding your individual situation. Brickley Wealth Management does not provide legal advice, and nothing in this website shall be construed as legal advice. For more information on our firm and our advisers, please see the latest Form ADV and Part 2 Brochures and our Client Relationship Summary https://adviserinfo.sec.gov/firm/summary/287487. For a copy of our Privacy Notice, please go here.

*Please note that the term "registered investment adviser" and description of our firm and/or our associates as "registered" does not imply a certain level of skill or training.

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Key Financial Terms 
Related to this Post:

This is some text inside of a div block.

Diversification

Spreading investments across different assets to reduce risk.
This is some text inside of a div block.

Net Worth

Net Worth is the total value of an individual's or entity's assets minus liabilities, representing the financial position and overall wealth.
This is some text inside of a div block.

Portfolio

A collection of financial assets. This can include stocks, bonds, mutual funds, exchange-traded funds (EFTs), real estate, and other types of investments.
This is some text inside of a div block.

Restricted Stock Unit (RSU)

Restricted Stock Unit, a form of employee compensation involving company stock that vests over time.
This is some text inside of a div block.

Tax Bracket

Income range used to determine the tax rate applied to your income. The higher your income, the higher the tax rate.

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Contact@brickleywealth.com
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Brickley Wealth Management is a Registered Investment Adviser*. Advisory services are only offered to clients or prospective clients where Brickley Wealth Management and its representatives are properly licensed or exempt from licensure. The information throughout this website is solely for informational purposes. The content is developed from sources believed to provide accurate information, and we conduct reasonable due diligence review however, the information contained throughout this website is subject to change without notice and is not free from error. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Readers should conduct their own review and exercise judgment prior to investing and should carefully consider their own investment objectives and not rely on any post, chart, graph or marketing piece to make a decision. No investment or tax advice may be rendered by Brickley Wealth Management or Brickley & Company unless a client service agreement is in place. We are not providing any personalized investment advice through this website. Please consult your investment, tax, or legal advisor for assistance regarding your individual situation. Brickley Wealth Management does not provide legal advice, and nothing in this website shall be construed as legal advice. For more information on our firm and our advisers, please see the latest Form ADV and Part 2 Brochures and our Client Relationship Summary https://adviserinfo.sec.gov/firm/summary/287487. For a copy of our Privacy Notice, please go here.

*Please note that the term "registered investment adviser" and description of our firm and/or our associates as "registered" does not imply a certain level of skill or training.

2020 Brickley Wealth Management. All rights reserved.

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