Need Advice on RSUs and AA

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Topic Author
investor2018
Posts: 6
Joined: Thu Nov 29, 2018 6:23 pm

Need Advice on RSUs and AA

Post by investor2018 » Sat Nov 16, 2019 1:33 am

Hi All,

First of all thank you so much for valuable advice. I joined this forum a year back. We had large chunk of our savings into Megacorp RSUs. We have been selling those RSUs since then and investing into total stock index and total international index. All future RSU are set to sell immediately at vesting.

While selling the existing RSUs, I chose the latest ones (at least an year old) with minimum gains. Now I have four lots left. Three of these lots are the oldest with biggest gains and one is short term. The total value of these RSUs is $170K. If I sell them all, there will be capital gain tax of $18K including 3.8% net income tax.

SN Cost Basis Cost Basis Per Share Number of Shares Current Value Gain Gain Type Tax including Net investment tax
1 $3,307.3 330.73 10 $17,395 $14,088 Long Term $2,648.47
2 $14,839.7 529.99 28 $48,706 $33,866 Long Term $6,366.81
3 $19,668.6 517.59 38 $66,101 $46,432 Long Term $8,729.23
4 $36,923.1 1678.32 22 $38,269 $1,346 Short Term $522.14
Total $18,266.65

Below is the breakdown of our current assets allocations (excluding home equity).

Amount Percent
Cash (CDs) $178,911 17%
401K $208,472 19%
Taxable (index funds) $478,900 45%
529 College Fund (4 yr and 2 yr old kids) $34,200 3%
Megacorp Vested RSUs $175,000 16%
Total Assets (excluding home equity) $1,075,483 100%


Below are some of other information and questions I have:

Age: His - 38 yr, Her - 38 yr
Both are working and have two kids.

Open questions:

1. In order to reduce RSUs, should I sell all of the remaining 4 lots and take $18K hit in tax in one go? I do not anticipate our total income lowering in near future than what we have in 2019. Future income may increase.

2. We have about 20% in CDs and bonds. Majority of that (17%) in 11 months CDs that have around 2% return rate and have no penalty for cashing earlier than maturity. This includes our emergency funds. Our monthly expenses are around $10K so one year emergency funds can be around $100K. Is there better investment option compare to CDs for emergency fund ($100K) and the remaining ($79K)?

3. We can save around $2-3K from after tax base income (excluding annual RSU vest). We max our pre tax 401Ks. Where should we invest the $2-3K monthly savings? Our 401K total is just 19% of our total portfolio. Should we invest in after tax Roth 401K? We are not eligible for Roth IRA contributions.

4. Any other comments on our portfolio and AA?

Thanks for your valuable!
Last edited by investor2018 on Sat Nov 16, 2019 2:49 am, edited 1 time in total.

MotoTrojan
Posts: 6944
Joined: Wed Feb 01, 2017 8:39 pm

Re: [Need Advice on RSUs and AA]

Post by MotoTrojan » Sat Nov 16, 2019 1:43 am

At high income I don’t see why you’d want to use a Roth 401K. Do you have pretax IRAs? If not then you can both contribute to Roth IRAs using the backdoor Roth (white coat investor blog has great info on how to implement that).

Any extra savings I’d put into Total Market (US and/or Int) index funds.

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1789
Posts: 342
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Location: OR

Re: [Need Advice on RSUs and AA]

Post by 1789 » Sat Nov 16, 2019 1:56 am

Hello,

As a starting point, you can sell all future RSUs once they are vested so you don’t run into this problem.

1) I am in the camp that does not favour RSUs. I would get rid all of them before substantial gains.

2) MM accounts, HYSA rates are around 2% regime. If you are easily tracking this bucket, it is fine to continue what you are doing.

3) Your company should allow after tax 401k contribution. Make use of that along with Roth in plan conversion. Put all extra money there. This is called mega back door Roth.

4) I assume you are contributing a Roth IRA thru back door Roth. No?

Congrats on your savings.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

Topic Author
investor2018
Posts: 6
Joined: Thu Nov 29, 2018 6:23 pm

Re: Need Advice on RSUs and AA

Post by investor2018 » Wed Nov 20, 2019 2:53 pm

Thanks.

I have just sold 3 RSU lots that had LT gain. I will be occurring about 18K in long term gain taxes.

We have not been taking advantage of after tax contribution to Tradition IRA (that can be converted into Roth). Going to use it for both of us right away.

For Mega backdoor Roth, I still have to do research whether company allows in-serve rollover to Roth.

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