RSUs-sell or keep (FAANG)

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narmada
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RSUs-sell or keep (FAANG)

Post by narmada »

Hello,

I have a question regarding RSUs. Hubby works for a company(FAANG-one of these) that is doing very well and has received RSUs since he joined it more than 4 years ago. We haven't sold any of the RSUs thinking that the company is doing well and we should keep them. However, a part of me thinks that this is too risky and as I am reading more and more about investing, I am realizing the risk we are taking. I want to sell at least 50% of the RSUs and invest them in Vanguard index fund. The RSUs are currently worth about $700K. This is a big chunk of money for us that is invested in a single company's stock.
Here are my questions:

1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?

State of residence: CA
Federal tax: 37% CA: 12%

Thank you for your time in reading and responding!
MindBogler
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Re: RSUs-sell or keep (FAANG)

Post by MindBogler »

narmada wrote: Fri Jun 18, 2021 3:27 pm Hello,

I have a question regarding RSUs. Hubby works for a company(FAANG-one of these) that is doing very well and has received RSUs since he joined it more than 4 years ago. We haven't sold any of the RSUs thinking that the company is doing well and we should keep them. However, a part of me thinks that this is too risky and as I am reading more and more about investing, I am realizing the risk we are taking. I want to sell at least 50% of the RSUs and invest them in Vanguard index fund. The RSUs are currently worth about $700K. This is a big chunk of money for us that is invested in a single company's stock.
Here are my questions:

1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?

State of residence: CA
Federal tax: 37% CA: 12%

Thank you for your time in reading and responding!
For the recently vested RSUs you would owe short-term capital gain or a loss, depending on what the stock has done. The gain calculated from the day the shares were released/vested. Remember the company sold a portion for taxes at vest. For the shares held longer than 1 year after vesting, you would owe long term capital gain at whatever rate your taxable income dictates.

Most people here will recommend you sell RSUs as soon as they vest and re-invest them in something like Vanguard Total Stock Market (VTI). This is exactly what I do when my RSUs vest.
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Wiggums
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Re: RSUs-sell or keep (FAANG)

Post by Wiggums »

Think of it this way. Your family’s paycheck and RSUs come from the same source. I always sold my stock. Some people had better investment returns, but I slept well during the 2000 crash. Diversity of your holdings is important.
Last edited by Wiggums on Fri Jun 18, 2021 3:48 pm, edited 2 times in total.
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Re: RSUs-sell or keep (FAANG)

Post by ivgrivchuck »

narmada wrote: Fri Jun 18, 2021 3:27 pm Hello,

I have a question regarding RSUs. Hubby works for a company(FAANG-one of these) that is doing very well and has received RSUs since he joined it more than 4 years ago. We haven't sold any of the RSUs thinking that the company is doing well and we should keep them. However, a part of me thinks that this is too risky and as I am reading more and more about investing, I am realizing the risk we are taking. I want to sell at least 50% of the RSUs and invest them in Vanguard index fund. The RSUs are currently worth about $700K. This is a big chunk of money for us that is invested in a single company's stock.
Here are my questions:

1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?

State of residence: CA
Federal tax: 37% CA: 12%

Thank you for your time in reading and responding!
I also have RSUs at FAANG. I recommend selling ASAP and investing in the 3-fund portfolio. Since the vesting happened a week ago the tax implications are small (small capital gain or loss).
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1789
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Re: RSUs-sell or keep (FAANG)

Post by 1789 »

Similar situation here. Wife works for one of them and she wants to keep her RSUs. I could not convince her otherwise yet. Will work on it more.

Generally if you sell the recent RSU's since tax is already withheld and if no major stock move happened in a week that's good time to sell. If you sell the ones vested more than a year ago, you will pay long term capital gains taxes. That will be around 15% but you need to be careful because the gains from that sale can increase your income tax bracket to one higher level.

Honestly speaking the chance that these companies will survive more than a decade or so is slim, imo. I would start selling them.
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Topic Author
narmada
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Re: RSUs-sell or keep (FAANG)

Post by narmada »

Thank you for your reply.

What happens if we sell the RSUs that have been vested for more than a year ago? Do we pay 37% federal tax and 12% CA tax on them?

Sorry for such a dumb question but I am new to this and having difficulty figuring out how to calculate long term capital gain tax.

Thanks.
Tingting1013
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Re: RSUs-sell or keep (FAANG)

Post by Tingting1013 »

1789 wrote: Fri Jun 18, 2021 3:48 pm Similar situation here. Wife works for one of them and she wants to keep her RSUs. I could not convince her otherwise yet. Will work on it more.
How much have they outperformed the S&P since vest?
gougou
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Re: RSUs-sell or keep (FAANG)

Post by gougou »

If you got paid a $700K bonus (after tax) would you buy your company's stock with it? If the answer is no, then you should sell the RSUs as soon as they vest.

There's little tax consequences for selling the RSUs immediately after vest. You could probably even elect to sell them automatically. If you are selling RSUs that have appreciated from time of vest, then you need to pay capital gains tax on the amount of appreciation from time of vest to now.
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shess
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Re: RSUs-sell or keep (FAANG)

Post by shess »

narmada wrote: Fri Jun 18, 2021 3:27 pm 1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?
RSU vesting in most cases is EXACTLY the same as:

A) Company gives you that amount in $$$.
B) Company withholds some statutory amount for taxes.
C) Company invests remainder in some integral number of shares.

The taxes withheld may or may not correspond to the amount of taxes you owe at vesting. Any taxes on gains only apply from the point of vesting. Some companies allow you to elect for same-day sale as RSUs vest, and even then you have a slight capital gain/loss because the vesting value differs from the sale value.

You do not hold RSUs, you hold shares resulting from vesting of RSUs, and their capital gains treatment is IDENTICAL to if you simply bought the shares on the open market. So if you've held them for a year, you get long-term capital gains rates (15% or 20% or 23.8% federal, depending on income, likely 9.3% CA), for shorter holdings short-term capital gains rates (37%/12% like marginal income). If you're paying 37% marginal rates, you'll probably be paying 20% or 23.8% on LTCG.

This is a contentious question with many threads on it. IMHO, nobody would ever decide to purchase exactly the number of shares their RSU grant delivered to them as an appropriate holding. Just because the company decided to grant you 23 shares per quarter doesn't mean anyone sat down and figured out how well that fits into your asset allocation! Instead, the calculation was how much they wanted to compensate you, and they're just using RSUs as a tool to that end.

When you come down to it, you like the company giving your RSUs (I know, it's your husband, I just don't want to get intricate in my writing). If you didn't believe in them, your solution wouldn't be to sell your shares, your solution would be to find another job. So your position on your employer is biased towards the positive. Of course you believe your employer will do well! Until you don't, and then your shares are falling in value AND your job feels less secure.

My personal position on this was to manage my portfolio without regard to my equity and equity grants, and to also set a target threshold for how much those positions could make up of my portfolio (I ended up at 20%). Initially, I couldn't make that change all at once, so I set long-term goals to try to get closer over time. It took a few years. As a result, sales of that employer equity ended up increasing the size of the rest of my portfolio until things came into line. What's neat is that that stock keeps rising faster than the rest of my portfolio, so I have to make more sales every year or two...

At this point, in your situation, I would probably set future RSUs to sell as soon as possible after vesting, same-day if you have the ability to indicate that. Your existing shares have some amount of gains baked in at this point, but if you want to reduce your exposure, there's no reason to reduce it while also increasing it! Then, I would consider what my long-term goal for my position is, say in the 10-year timeframe, and if I quit the company entirely. If quitting would entirely change your outlook on keeping the shares, then you really need to think about why you're keeping them now.

IMHO, I wouldn't want to have more than 25-30% or so of my entire portfolio be employer equity. So if you have like a $3M portfolio, I see no problems with $700k in employer stock. It's a risk, but whatever. But if your portfolio is like $1.2M, then I think $700k is a big risk. To justify holding the shares, you have to assume the company does very well, but if the company keeps doing well, they'll keep paying you well and giving you more stock, so it's not like selling leaves you destitute.

---

To give you the other side of the story ... if I had kept all of my employer stock, today my portfolio would be 10x as big as it is. Wouldn't that be neat! But as I once told my wife when we were discussing whether to sell shares to fund buying a home: You can't live in your portfolio. The shares we sold provided money to do things in our life, and many of those things were more enjoyable than admiring the number of digits in some electronic ledger.
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1789
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Re: RSUs-sell or keep (FAANG)

Post by 1789 »

Tingting1013 wrote: Fri Jun 18, 2021 3:54 pm
1789 wrote: Fri Jun 18, 2021 3:48 pm Similar situation here. Wife works for one of them and she wants to keep her RSUs. I could not convince her otherwise yet. Will work on it more.
How much have they outperformed the S&P since vest?
She has been working there for 2 years so not much stocks not much. So far as i know the stocks from FAANG companies are more or less flat since last September or so. But your question is not relevant because top 5 companies always changes at every decade. It doesn't make sense to keep your life savings in a FAANG stock.
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Re: RSUs-sell or keep (FAANG)

Post by sureshoe »

narmada wrote: Fri Jun 18, 2021 3:27 pm The RSUs are currently worth about $700K. This is a big chunk of money for us that is invested in a single company's stock.
Here are my questions:

1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?
There are 2 components to the taxation, one involves a decision, the other doesn't.

Part 1 - Assuming these are truly RSUs, and if it's a FAANG, it should be, you're going to owe regular income tax on the vested portion - period (and you would have already paid it). So let's say for example you had $50k vest. That's $50k of ordinary income, you can't avoid that. Most companies nudge you to selling X# of shares to cover tax withholding. So you don't actually get $50k of stock, you only get what appears to be $35k of "tax free" stock (which isn't true, it just washes on your 1040). Repeating > this has nothing to do with your sell/keep decision. Let's assume you had $35k - this is now your cost basis, you need to know this for Part 2.

Part 2 - Now you need to decide whether to keep or sell. Plain and simple, capital gains is the difference between your cost basis ($35k above) and what the stock is worth now. So in your case, we can't answer your question on the $150k without knowing the cost basis. In this example, if your original grant was for $50k minus $15k of stock sold at the time to cover taxes, your cost basis would be $35k. The capital gains would be $115k (150-35).

If you can figure out the cost basis of the lots you're selling, you can get to the answer pretty easy (or we can help you). There should be a shareholder site you have access to that tells you this. Good luck.
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Re: RSUs-sell or keep (FAANG)

Post by Watty »

Some things to also consider;

1) In addition to the stock from the RSU you you likely own mutual funds that also own that stock. You may have more exposure to that companies stock than you realize.

2) You likely have RSUs that have not vested yet. That adds even more exposure to the companies stock.

3) Even if the company does well if there is a bad bear market the companies stock will also be impacted.

4) Unless you can figure out some scenario where you could keep the stocks for a couple of years and then pay less taxes when you sell them then it may just be a question of when you will pay the taxes, not if you will pay them sooner or later. Delaying a tax bill is a lot different than reducing your tax bill. We can't discuss politics here but there is also a chance that your tax rates could be higher in a few years.
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Re: RSUs-sell or keep (FAANG)

Post by Strifey »

narmada wrote: Fri Jun 18, 2021 3:50 pm Thank you for your reply.

What happens if we sell the RSUs that have been vested for more than a year ago? Do we pay 37% federal tax and 12% CA tax on them?

Sorry for such a dumb question but I am new to this and having difficulty figuring out how to calculate long term capital gain tax.

Thanks.
There is a tax break for Federal LTCG ranging from 0-20%. Because you're in the 37% Federal tax bracket meaning you make over $518K you would automatically be in the 20% LTCG tax bracket for total income above $502K (better than 37% at least).

Unfortunately CA doesn't give a LTCG tax break so you would be paying the additional 12% as it's considered ordinary income for CA.
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Re: RSUs-sell or keep (FAANG)

Post by NancyABQ »

Basically you could have 3 categories of stock that originally came from RSUs (as others have pointed out, they are no longer RSUs -- they are shares of stock with a cost basis equal to the value on the date they originally vested). Here is what I would do:

1) Shares that vested very recently -- you should sell these ASAP. They will have a small short term gain or loss depending what the stock has done recently.

2) Shares that vested sometime in the last year, but less than a year ago. If these have a loss, sell them right away. If they have a (non-trivial) gain, wait until you have had them for a year so that the gain will be long term cap gain. Then they will be category 3.

3) Shares that vested more than one year ago. If any of these have a loss, sell them. If they have a gain, then you need to evaluate how much of a capital gain you would incur from selling them, the effect on your taxes, etc. Sell them if it makes sense from a tax POV, possibly spread out over more than one year.

For the proceeds from any of the above sales, after making sure you have set aside money for any taxes due, invest them in an equity index fund (total stock market, S&P 500 etc) of your choice.

In future, always sell RSUs as soon as they vest . There might be a small delay, so they would have a small short term gain or loss, which should be inconsequential.
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Re: RSUs-sell or keep (FAANG)

Post by Marseille07 »

Personally I recommend keeping them, but come up with a profit-taking price so you can get out if things go south. I have some shares vested and I'm keeping them myself.
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Re: RSUs-sell or keep (FAANG)

Post by ModifiedDuration »

Strifey wrote: Fri Jun 18, 2021 4:38 pm
narmada wrote: Fri Jun 18, 2021 3:50 pm Thank you for your reply.

What happens if we sell the RSUs that have been vested for more than a year ago? Do we pay 37% federal tax and 12% CA tax on them?

Sorry for such a dumb question but I am new to this and having difficulty figuring out how to calculate long term capital gain tax.

Thanks.
There is a tax break for Federal LTCG ranging from 0-20%. Because you're in the 37% Federal tax bracket meaning you make over $518K you would automatically be in the 20% LTCG tax bracket for total income above $502K (better than 37% at least).

Unfortunately CA doesn't give a LTCG tax break so you would be paying the additional 12% as it's considered ordinary income for CA.
Plus 3.8% Net Investment Income Tax to the Feds
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Re: RSUs-sell or keep (FAANG)

Post by lazynovice »

If any of them are in a loss position, sell those. The losses can offset capital gains and up to 3,000 of ordinary income and anything remaining can carry into future years. You could also sell shares that have a net gain and loss of zero which will net against each other if you want to keep it simple.
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Re: RSUs-sell or keep (FAANG)

Post by zrail »

I work at a pre-IPO Silicon Valley decacorn and a very large chunk of my net worth is tied up in double trigger RSUs. I think I've settled on a strategy (that I read about here in Bogleheads) of selling half of the post-tax shares immediately, investing the proceeds in index funds, and set a ~15% trailing stop loss on the remainder. If I choose to stay at the company post IPO I'll continue that strategy for each vest.

I feel like this strategy will both help me with FOMO while also helping secure my family's future.

Not saying that it's what you should do, just what I plan to do.
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Re: RSUs-sell or keep (FAANG)

Post by tomsense76 »

Typically I treat RSUs as cash that happens to be paid in units of stock. This is how the Feds and (I would suspect) most (all?) states treat RSUs. Meaning RSUs are effectively taxed as ordinary income on vest date. So sell them on vest date (or as soon as the plan allows). Another way to think about this is if you were given the same amount of cash would you buy the company's stock at today's market price? That said, some people may just say yes to this question (because they have high hopes for the company for example), so another way to look at it is how much of your portfolio is in your employers' stock? Following that, would it be worthwhile to diversify your holdings to avoid concentrated risk?

That said, I understand the desire to hold some company stock (even if that is an unpopular opinion or others may argue it is irrational, which they are probably right about). Though do understand this may be taking on uncompensated risk (IOW it's a gamble). If you still want to hold company stock, would suggest doing that with ESPP instead of RSUs (assuming that is an option). There are a few reasons for this: 1 the purchase limits are quite small so it naturally remains a small portion of your portfolio, 2 even if the stock goes up a lot in value selling RSUs and reinvesting in index funds can keep the ESPP portion to a small part of your portfolio, 3 the basis is typically lower (up to 15% discount) than the stock price at day of purchase, 4 some plans allow buying at the lowest price in a window (effectively locking in an older lower price for later purchases), and 5 ESPP stock can be eligible for long-term gains (reducing the tax) if held long enough.

To be clear I'm not saying you should invest in your company's stock or not. Am just saying if you choose to (in spite of concentration risk), ESPP is more attractive compared to RSUs.
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Re: RSUs-sell or keep (FAANG)

Post by MrBeaver »

It sounds like you are in a high long term capital gains tax bracket (20% + 12% state +3.8% net investment income).

If you have any current or future desire for charitable giving, I highly suggest donating the shares, or opening a DAF with share value up to 30% of your AGI for the next few years.

This will still give you the charitable deduction like you would if you donated cash, while allowing you to donate 35.8% more than you could donate in cash with the same impact to your net worth, since you would not owe any of the capital gains tax. Or take that 35.8% tax savings of the 30% AGI tranche each year (about $70k per year if AGI is 600k) and invest it in your index portfolio.
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Re: RSUs-sell or keep (FAANG)

Post by etfan »

When someone says, "I have $100,000 worth of RSU's in company X," the question to ask is: "If you had $100,000 sitting in your Checking account right now, should you use all of it to buy company X stock?

The reasonable answer to that is no. But for some reason, even though that's essentially what RSU's do, more people let it happen simply because it happened through no action on their part.
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Re: RSUs-sell or keep (FAANG)

Post by NewMoneyMustBeSmart »

narmada wrote: Fri Jun 18, 2021 3:27 pm 1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?

State of residence: CA
Federal tax: 37% CA: 12%

Thank you for your time in reading and responding!
1/ Almost certainly the vesting is A/ ordinary income and B/ the company sells ~40% to pay taxes on the whole lot vesting.
2/ Tax on RSUs held over 1 year as I understand it would be the initial tax from 1/B/ resetting your basis to the price on that day, and you'd pay long term capital gains ("LTCG") on the difference between vesting and sale date.

Conventional wisdom is to sell RSUs immediately as A/ there is no tax benefit in holding (versus buying new) and B/ you should diversify away from the income of your employer.

Some people think if the company they work for will continue to grow, they should cap the current RSUs at a percentage of their net worth/wealth and sell whenever the owned RSUs exceed that percentage.
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Re: RSUs-sell or keep (FAANG)

Post by ruud »

etfan wrote: Sat Jun 19, 2021 9:36 am When someone says, "I have $100,000 worth of RSU's in company X," the question to ask is: "If you had $100,000 sitting in your Checking account right now, should you use all of it to buy company X stock?

The reasonable answer to that is no. But for some reason, even though that's essentially what RSU's do, more people let it happen simply because it happened through no action on their part.
I've had this discussion with people at my company a few times:
  • me: if you got a $20k bonus, would you buy company stock with it?
  • them: no
  • me: so why are you not selling your RSUs right away?
  • them: because I think they will go up
For some reason, many people don't seem to realize that "$20k bonus we used to buy company stock for you" and "$20k bonus in cash" are the exact same thing (at least on the day of vesting before any capital gains/losses).
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Re: RSUs-sell or keep (FAANG)

Post by aj76er »

My personal plan is to keep my RSU+ESPP to within 5% of my total portfolio value. And I prefer to hold ESPP for 2yrs for the most favorable tax treatment.

I’m bullish on my company’s future; it has historically outperformed the market, and I am a veteran of the field and have some insight into future product direction. I have also learned how to read 10Q and 10K statements in order to monitor the company finances.

It is the only individual stock I hold (rest in index funds), and given the above, I feel like 5% gives me enough exposure without too much concentration risk.

When I first started at the company, I set a 10% limit, but that made me too jittery; so I dialed it back to 5% and it feels right. Ultimately it is a personal decision, but I would recommend something < 20% of your total portfolio value.
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Re: RSUs-sell or keep (FAANG)

Post by shess »

ruud wrote: Sat Jun 19, 2021 10:35 am
etfan wrote: Sat Jun 19, 2021 9:36 am When someone says, "I have $100,000 worth of RSU's in company X," the question to ask is: "If you had $100,000 sitting in your Checking account right now, should you use all of it to buy company X stock?

The reasonable answer to that is no. But for some reason, even though that's essentially what RSU's do, more people let it happen simply because it happened through no action on their part.
I've had this discussion with people at my company a few times:
  • me: if you got a $20k bonus, would you buy company stock with it?
  • them: no
  • me: so why are you not selling your RSUs right away?
  • them: because I think they will go up
For some reason, many people don't seem to realize that "$20k bonus we used to buy company stock for you" and "$20k bonus in cash" are the exact same thing (at least on the day of vesting before any capital gains/losses).
It's an anchoring issue of some sort. Because, if you think about it, if a company is worth holding like that, then WHY IN THE WORLD would you want to wait months or years to receive shares to hold? Wouldn't it be smarter to get in and buy those shares as early as possible to maximize your gain? And why would anyone every imagine they'd want exactly the 7 or 23 or 36 shares the employer's system computed was an appropriate grant? It's kinda mind-boggling. If your company really is such a good bet, they're going to keep throwing money in your direction. When a tree in your yard is providing you a bumper crop of fruit, HARVEST SOME OF THAT FRUIT, don't hold off in hopes that the bounty will get even bigger!

I mean, don't get me wrong: I _still_ have a large portion of my portfolio in employer stock from an employer I left 4 years ago after long employment. I'm actually surprised at my loyalty! But it's only like 5% of my original grant and I flipped ALL of the refreshers as fast as I could.
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Re: RSUs-sell or keep (FAANG)

Post by Afty »

ruud wrote: Sat Jun 19, 2021 10:35 am
etfan wrote: Sat Jun 19, 2021 9:36 am When someone says, "I have $100,000 worth of RSU's in company X," the question to ask is: "If you had $100,000 sitting in your Checking account right now, should you use all of it to buy company X stock?

The reasonable answer to that is no. But for some reason, even though that's essentially what RSU's do, more people let it happen simply because it happened through no action on their part.
I've had this discussion with people at my company a few times:
  • me: if you got a $20k bonus, would you buy company stock with it?
  • them: no
  • me: so why are you not selling your RSUs right away?
  • them: because I think they will go up
For some reason, many people don't seem to realize that "$20k bonus we used to buy company stock for you" and "$20k bonus in cash" are the exact same thing (at least on the day of vesting before any capital gains/losses).
In behavioral economics, it's called the endowment effect (https://en.wikipedia.org/wiki/Endowment_effect). Maybe putting a name to it will help convince people?
babystep
Posts: 775
Joined: Tue Apr 09, 2019 9:44 am

Re: RSUs-sell or keep (FAANG)

Post by babystep »

narmada wrote: Fri Jun 18, 2021 3:27 pm Hello,

Here are my questions:

1) The most recent RSUs were vested about a week ago. What would be my tax implications if we sell them now? Short-term capital gain tax? The amount I want to sell would be around $150K.
2) What would be the tax implications for those RSUs that we have had for more than a year if I want to sell more and invest them in Vanguard Index funds?

State of residence: CA
Federal tax: 37% CA: 12%

Thank you for your time in reading and responding!
RSUs have two components 1) W2 regular income as soon as they are vested 2) Capital gains.

Let me take a simple example . Let us say you got RSUs worth 100k today. You will be paying the income tax at the rate of 37% + 12% on this 100k. This is the first component.

If you hold it for a week or any amount less than 1 year and then sell, it will be short-term gain/loss.
Say It goes from 100k to 110k in 1 week and then you sell. In your tax bracket the tax will be 37% +3.8% + 12%.

If you hold it for more than 1 year and gain is 10k then tax will be 20% + 3.8% + 12%.

What should one do?
A reasonable approach will be to select the "auto-sell" option for all the future RSU vesting and buy total stock market index e.g. VTI.

If the VTI goes down by say 5% then you sell VTI and say buy VOO (S&P 500). Sell the equivalent RSUs from more than 1 year ago so that you don't have any capital gain or loss. Wait for 1 month and sell VOO and buy the VTI again.
If VTI doesn't go down and keeps going up then you are slowly diversifying away from a single stock risk without tax implications.

You keep doing that and in few years it will be more diversified in a tax efficient way.
JustGotScammed
Posts: 104
Joined: Fri Jun 09, 2017 10:16 pm

Re: RSUs-sell or keep (FAANG)

Post by JustGotScammed »

Keep the stock. Avoid the taxes. When they pay dividends in 5-10 years, you can diversify that way by reallocating dividends and investing labor savings elsewhere.
etfan
Posts: 526
Joined: Sun May 16, 2021 4:22 pm

Re: RSUs-sell or keep (FAANG)

Post by etfan »

Afty wrote: Sat Jun 19, 2021 10:59 am In behavioral economics, it's called the endowment effect (https://en.wikipedia.org/wiki/Endowment_effect). Maybe putting a name to it will help convince people?
Thanks for sharing!

It's a strange effect because in my view, the "behavioral" bias should be that you're *already* heavily invested in the company by working for it. RSU's are just increasing that dependency, which further heightens the risk. RSU's should therefore be sold the day they are received and the funds diverted towards more diversification.
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