Top 15 Questions Tech Professionals Ask About RSUs
Key Takeaways
Restricted Stock Units (RSUs) are taxed as ordinary income when they vest
Many companies withhold about 22 percent for federal taxes, which may be lower than your actual tax bracket
Holding too much company stock can create concentration risk over time
RSUs often become one of the largest sources of wealth for tech professionals during peak earning years
Thoughtful planning around taxes and diversification can help turn equity compensation into long-term wealth
Why RSUs Create So Many Questions
Restricted Stock Units are one of the most common forms of equity compensation in the technology industry.
Many professionals receive RSUs as part of their compensation package but are unsure how the taxes work or how company stock fits into their long-term financial plan.
Over time RSUs can grow quickly and represent a significant portion of someone's net worth. This is exactly the kind of complexity we work through with tech professionals.
Below are some of the most common questions tech professionals ask about RSUs and equity compensation.
1. How are RSUs taxed?
Restricted Stock Units are taxed as ordinary income when they vest.
The value of the shares on the vesting date is included in your W-2 income and taxed at your marginal tax rate.
If you continue holding the shares after vesting, any future price changes are taxed as capital gains or losses when the shares are sold.
2. Should you sell RSUs when they vest?
Many employees choose to sell RSUs when they vest because the shares have already been taxed as income.
From a financial planning perspective, RSUs can often be thought of similarly to a cash bonus that happened to be paid in stock.
Some employees choose to hold shares if they believe strongly in their company's future.
Others diversify so their career, income, and investments are not all tied to the same company. We built a full framework for thinking through this decision here.
3. What is the RSU tax trap?
The RSU tax trap occurs when employees accumulate large amounts of company stock without realizing how concentrated their wealth has become.
Because RSUs are taxed when they vest, holding shares longer does not change that original tax.
Instead, it increases exposure to a single stock, which can create significant concentration risk over time. We cover this in more depth here.
4. How much company stock is too much?
There is no universal number that applies to everyone.
However many financial planners suggest that a single stock representing more than 10 to 20 percent of an investment portfolio may create meaningful concentration risk.
Employees receiving RSUs can cross this threshold faster than they expect because grants accumulate gradually over time.
5. What happens to RSUs when you leave a company?
Unvested RSUs are typically forfeited if you leave the company before they vest.
Shares that have already vested belong to you and can usually be held or sold like any other stock.
This is why vesting schedules often play an important role in career decisions.
6. Should you hold company stock after RSUs vest?
Some employees continue holding their company stock because they believe in the business and want to participate in future growth.
Others choose to gradually diversify because their salary, career, and equity are already connected to the same company.
Diversification can help reduce financial risk if the company stock declines.
7. What is the difference between RSUs and stock options?
RSUs are shares granted to employees that vest over time. When the shares vest they are delivered to the employee and taxed as income.
Stock options are different. They give employees the right to purchase shares at a predetermined price.
Taxes for stock options are typically triggered when the options are exercised or when the shares are sold.
8. How do tech employees diversify company stock?
Many professionals diversify by selling shares gradually and reinvesting the proceeds into a diversified portfolio of investments.
This allows them to reduce exposure to a single company while still benefiting from the value their equity compensation created.
The strategy often depends on tax considerations, career outlook, and personal goals.
9. What should you review when RSUs vest?
When RSUs vest employees often review three things.
First, the tax withholding on the shares.
Second, whether they want to hold or sell the stock.
Third, how the shares fit into their overall financial plan.
Vesting events can become natural checkpoints for portfolio rebalancing.
10. How do RSU vesting schedules work?
RSUs usually vest according to a schedule established by the employer.
Some plans include a one-year cliff followed by quarterly vesting.
Others vest gradually over several years.
Each time shares vest they are delivered to the employee and taxed as income.
11. How much should tech professionals save?
Savings rates vary depending on lifestyle and goals.
Many professionals aim to save between 20 and 30 percent of their income across retirement accounts, investments, and other long-term savings.
Equity compensation can also play a role in this savings strategy.
12. When should tech professionals hire a financial planner?
Many professionals begin working with a financial planner once their finances become more complex.
This often happens when equity compensation grows, income increases significantly, or family responsibilities expand.
Financial planning can help coordinate taxes, investments, and long-term goals.
13. What financial mistakes do tech professionals often make?
High income alone does not automatically create long-term wealth.
Common mistakes include holding too much company stock, delaying tax planning, and allowing accounts to grow without a coordinated strategy. We break these down in more detail here.
These issues often develop gradually and go unnoticed during busy career years.
14. What is financial planning for tech professionals?
Financial planning for tech professionals often focuses on managing equity compensation, coordinating taxes, diversifying company stock, and building long-term wealth.
Because income and equity can fluctuate, having a structured strategy can help simplify financial decisions.
15. How can equity compensation build wealth?
Equity compensation has created significant wealth for many professionals in the technology industry.
When managed thoughtfully it can accelerate savings and create opportunities that would be difficult to achieve through salary alone.
The key is integrating equity decisions with tax planning, diversification, and long-term financial goals. See how this played out for one client in our RSU case study.
About the Author
Anthony Syracuse, CFP® is the founder of Dynamic Financial Planning, a fee-only fiduciary financial planning firm based in Scottsdale, Arizona. Learn more about his background here.
He works with tech professionals and growing families building meaningful wealth who want to turn equity compensation into long-term financial security.
Take the Next Step
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Dynamic Financial Planning works with tech professionals and growing families in Scottsdale, Phoenix, and clients nationwide.
Disclosure: This content is for educational and informational purposes only and should not be construed as personalized investment, tax, or legal advice. All strategies discussed are general in nature and may not be suitable for all individuals. Past performance does not guarantee future results. Before making any financial decisions, consult a qualified financial advisor, CPA, or attorney who can assess your specific situation, risk tolerance, and financial objectives. Dynamic Financial Planning does not provide tax or legal advice.
