Ask HN: What do you do with vested RSUs?
What do you do with your vested RSUs? I heard of a very strong school of thought here to sell straight away as to diversify. Is this what most of HN generally does? Or do you have other strategies? Thanks!
ignoring blackout volatility, since of course our grants didnt line up with windows, pretending it was cash and would you purchase stock on a cash bonus really is the best way to think about it
Generally I sell as soon as they vest and invest the proceeds into a diversified portfolio.
A way to think about it is if you had the equivalent in cash, would you spend that money to purchase that stock? If yes, then keep the RSU otherwise sell enough for your risk tolerance.
As I also recall, holding them complicated my taxes that year and put me into AMT threshold. This may have been from option exercise though, I can’t remember.
If you were allowed to sell on the vesting day (open trading window etc) there is generally no way to reduce any tax burden, you are taxed as regular income on the vesting day based on the vesting price, no amount of waiting will reduce your tax liability.
Nearly all the RSU cases I’ve always seen are super simple: on date X, a given amount of shares will be given to you via vesting. You take whatever those shares are worth on that day, and pay regular tax. If you decide to hold past the vesting day, you’ll be subject to additional tax liability if the share price increases, but this additional liability will be $0 if you sell on vest day. It’s completely equivalent to getting just a variable W2 income.
In this simple framework, I’m confused as to what “discounted share price” even means. Certainly for all FAANG and big public companies it works like this.
Sorry for the confusion.
I've also had ESPP shares that appreciated significantly and therefore held onto them to get long term capital gains, then sold them into a donor advised fund (DAF) to give to charities in a doubly tax advantaged way.