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Comment by namelessoracle | Hacker News Reader

Using Amazon as an example. If you were given a 10k grant (bear with me here) in 2018 and held on to that until now (when it all vested in 4 years)....

2018 price. 1170$, say 10 shares so 11700$

Right now its worth once you get it lets say 3260$ a share.

So you got over 300 percent return. If you are saying "just give me the 11k in cash and let me buy my own stocks. Well they could, you'd get probably taxed more for that though. (depending on how you handled it, where you lived, et cetra)

That tax difference when you are talking 100ks of stock is entire lower class people salaries for a year.

You can also play some interesting financial games with that much stock. You can put up 100k as collateral for a loan that will have very compelling interesting rates if its a stock that is seen positively and low risk like Amazon stock. And the tax that money is handled tax wise is also interesting.

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But you are also concentrating your risk.

If you receive stock from your employer and it does not do well, that will probably harm your salary/job as well and you'll lose twice.

If instead you receive the cash value of the stock and invest elsewhere and your employer's stock tanks, taking your salary/job with it, your investiment elsewhere won't be affected.

Yep, RSUs are a gamble. I would say the vast majority of time its to the employee's benefit to get straight cash instead.

I wouldn't want to be getting RSU's at IBM for instance :)

Using one of the companies that did well over time as an example isn't really fair. There's lots of companies where those stock options would be worth a moderate amount, and even more where they would be worth nothing.

I agree. You "probably" want to get paid in straight fiat money 9 times out of 10. But if you are looking to move out to a different position and have already established your financial means, RSUs have some things about them that become attractive.

But you should be looking at RSUs as a funny money kind of thing.

I really don't get this. If you give me the money I can just buy the stock if I want to and then it is identical. But the option to do something else with that money has value. So it is always more valuable (to me) to just receive the money.

I think RSUs are more valuable to companies, which is why they do things this way. And that's fine. But it doesn't mean they are more valuable to me.

If you have other capital gains, then its less of a gamble because then you can use the loss if it goes sideways to offset your other gains. But for the vast vast majority who get RSU's yes its not preferred.

RSUs are taxed as income at the time they vest. If you were given the exact same amount as a cash and then used that cash to buy that exact same amount of stock, then the tax treatment would be identical.

Of course nobody would actually do that with the cash, because most other things (like buying an index fund or stock in one or more competitor companies) would be a smarter thing to do with it.

> stock in one or more competitor companies

Be careful with this... if we're talking about diversifying your risk, there's a good chance that the stock values of your employer and of its competition in the same industry are positively correlated modulo some market events. Better to buy stock that is likely to be independent of the industry that derives your primary salary.

Sure. I'm just speaking hypothetically. It might have been better to say "uncorrelated" rather than "competitors".

I think it'd be rare for RSU's in a public company to be worth nothing. These aren't options, but actual shares. The only way they'd be worth nothing is in the event of bankruptcy.

You wouldn't get taxed more. You have to pay the taxes either way.

You can play all those games with stock just by using cash given to you to buy stock.

You'd have the same tax burden if you were given cash vs. vested shares worth the same amount.

This isn't true because you need to pay income tax on both RSUs and salary, but if you were given more salary to invest yourself, then you'd also be subject to capital gains tax. There are no capital gains on RSUs prior to vesting.

Don't you pay income tax on the appreciation then? That's much worse than capital gains...

Or you could just buy Amazon stock when given the money instead.

Except no company is going to give you the equivalent of 4 years of salary upfront. That’s the part you’re missing; companies that give 4-year RSU grants are effectively giving you an (illiquid) advance on your pay that grows until you vest and cash out.

That _can_ grow. Everyone here is riding the tech stock wave, where anywhere else in the world you are essentially betting your future salary on the stock market. Whats the tried and true advice? Don't trade your own stock.

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