Restricted Stock Units vesting- always sell immediately?

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Gadget
Posts: 117
Joined: Fri Mar 17, 2017 1:38 pm

Restricted Stock Units vesting- always sell immediately?

Post by Gadget » Wed Feb 14, 2018 9:56 am

I believe I researched this from other threads and found that there is no advantage to holding restricted stock units that vest. As soon as they vest, they are taxed like ordinary income. So in effect, it is like getting a cash bonus that you buy company stock with. I believe for the bogglehead that believes in diversification, they should always sell vested stock as soon as they can. Whether or not it has gone up or down since the grant date. Correct?

Scenario: Each year I get a bonus of company stock. It vests 25 percent every 4 years after being granted the bonus. So each year I get 25 percent of a bonus from a previous year times four. Like a mini retention incentive.

I have to wait until next month to sell all vested stock due to insider trading restrictions. But as soon as the green light is given, I believe I should sell everything (no basis on how I think company stock will do. Strictly bogglehead philosophy).

Even if the stock has decreased since the original grant date, I will not be able to tax loss harvest unless it drops since the vesting date, correct? I think that is my only source of possible confusion. I think cost basis for the stock starts on the day it vests, not the grant date from 4 years ago.

Dudley
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Re: Restricted Stock Units vesting- always sell immediately?

Post by Dudley » Wed Feb 14, 2018 10:07 am

My personal experience, and so advice, regarding company stock is to sell whatever you can asap, just accept paying whatever tax is owed (if you let tax tail wag dog you can get bit), and then run for the hills (i,e, diversify safely out).
I believe when the company gives you the stock its simply income. Beyond that point - if you choose to hold it - its probably capital gain/loss.

KyleAAA
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Re: Restricted Stock Units vesting- always sell immediately?

Post by KyleAAA » Wed Feb 14, 2018 10:20 am

I believe you are correct. You'll owe income tax on the value at the vest date regardless of whether or not you sell.

toast0
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Re: Restricted Stock Units vesting- always sell immediately?

Post by toast0 » Wed Feb 14, 2018 10:45 am

When the RSU vests, you accrue ordinary income for the fair market value on the vest date. The vest date is also the acquisition date for those shares, and the cost basis is also the fair market value, so any capital gains or losses start then. There are a couple methods to determine the fair market value depending on how your employer manages the withholding requirements.

If you're comfortable agitating, try to get your company to move future RSU grants so that they vest within the trading windows (or move the trading windows); my employer has that, and it's quite useful.

cadk
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Re: Restricted Stock Units vesting- always sell immediately?

Post by cadk » Wed Feb 14, 2018 10:46 am

I believe I researched this from other threads and found that there is no advantage to holding restricted stock units that vest. As soon as they vest, they are taxed like ordinary income. So in effect, it is like getting a cash bonus that you buy company stock with
Correct. A lot of companies will actually automatically sell some RSU automatically on your behalf to cover the taxes. e.g. if 100 RSU vest, 43 of them will be sold to cover the taxes.

Random Poster
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Re: Restricted Stock Units vesting- always sell immediately?

Post by Random Poster » Wed Feb 14, 2018 11:01 am

Note that if you have multiple tranches of RSUs vesting within 30 days of each other, you could get hit by wash sale rules if you immediately sell each round of vested RSUs at a loss.

Jack FFR1846
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Re: Restricted Stock Units vesting- always sell immediately?

Post by Jack FFR1846 » Wed Feb 14, 2018 11:03 am

I'm fortunate that my company announces financials, the window opens, then RSUs vest. I have some tomorrow, actually. I'm set up to sell on vest as there is no restriction for me to hold. I do indeed sell.

My plan is to wait for the settlement, transfer and then I ACH over to Schwab and buy SCHB as part of my taxable investment.
Bogle: Smart Beta is stupid

Gadget
Posts: 117
Joined: Fri Mar 17, 2017 1:38 pm

Re: Restricted Stock Units vesting- always sell immediately?

Post by Gadget » Wed Feb 14, 2018 4:40 pm

That would be much nicer if our stock vested within the trading window. It would also be nice if it vested all at the same time instead of over about 30 days so I have to watch for wash sales and trading windows.

Some of the old timers claim that if you can show that you have a history of selling stock as soon as it vests, the trading window doesn't apply. But if you received a trading window restriction on day 1, how can you start a history of selling immediately...

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