Sell Your RSU and ESPP As They Vest

By: Joe Morgan

Jun 16, 2022 | Company StockRSUsESPPLong-Term Portfolio

Prefer to listen rather than read? Pair this post with Deliberate Money Moves Podcast: Sell Your RSU and ESPP As They Vest.

Your Company Stock awards are part of your total compensation for work. They are not a bonus and they are not lottery tickets. You work hard for your company and part of your pay includes these stock awards.

RSU and ESPP, for the most part, are fully taxed as they vest. This means the IRS taxes you as if you received a paycheck in the amount of the stock on the vesting date.

Essentially, Company Stock is a Paycheck

In other words, you would have the exact same tax situation if you took your entire paycheck and bought Company Stock with it. I’ll bet you’ve never done that, so why do you hold onto stock awards past vesting?

Instead, you might have built up a significant amount of stock over time which means you have that exposure to the company’s future health. You are also exposed in the sense that your paycheck comes from the very same company.

This is something to consider when thinking about the financial risk of your situation. The best and first way to begin diversifying out of Company Stock is to sell your RSU and ESPP as they vest. There is basically no difference in tax when doing this and you get to reinvest the proceeds in your diversified Long-Term Portfolio.

Here’s this week’s Best Financial Life tip of the week: Sell Your RSU and ESPP As They Vest.

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