April 29, 2025 • 22 mins
đź’¬ Are you leaving money on the table by not understanding your equity compensation?
Equity compensation is no longer reserved for top tech execs—it’s becoming a standard part of pay packages across industries. In this empowering and informative episode, Melissa Joy , CFP® breaks down the increasingly common but often misunderstood world of Restricted Stock Units (RSUs).
Whether you already receive RSUs or are considering a job offer that includes them, this episode is packed with essential knowledge to help you make confident, informed decisions.
💡 What You’ll Learn:
What RSUs Are - A quick breakdown of how they work and why they matter.
Vesting & Taxes - Why timing matters—and how to avoid surprise tax bills.
Women & Equity Pay - Why women often miss out—and how to change that.
Smart Strategies - How to handle vested shares and reduce risk.
Big Picture Planning -Ways to fold RSUs into your overall financial plan.
The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to the Women's Money Wisdom Podcast.
I'm Melissa Joy, a certifiedfinancial planner and the
founder of Pearl Planning.
My goal is to help youstreamline and organize your
finances, navigate big moneydecisions with confidence and be
strategic in order to grow yourwealth.
As a woman, you work hard foryour money, and I'm here to help
(00:21):
you make the most of it.
Now let's get into the show.
And I'm here to help you makethe most of it.
Now let's get into the show.
Just a quick note before wedive in.
The information that we shareis meant to educate and inspire,
not serve as personalizedfinancial advice.
Everyone's situation is unique,so be sure to consult with your
own financial professional forguidance that fits your life.
And just so you know, theopinions shared in this podcast
(00:44):
are my own and those of myguests, and they don't
necessarily represent those ofany organizations that I'm
affiliated with.
For more important disclosures,please go to our webpage at
pearlplancom.
Now let's get started.
Welcome back to the Women'sMoney Wisdom Podcast.
It's a solo episode today, butone I want you to stick around
(01:06):
for, because this is a topicthat many people are impacted by
.
If you aren't, you might be inthe future, and it's
underappreciated, misunderstood.
We're going to talk aboutequity compensation and
specifically restricted stockunits, today otherwise known as
RSUs.
(01:26):
Now, you may or may not knowthat you are compensated with
RSUs Not everyone is but if youwork for a publicly traded
company, it is likely that thecompany that you work for does
award some forms of theircompensation as restricted stock
units.
In fact, a research indicatedthat in 2021, according to
(01:50):
Barron's more than 86% ofcompanies use this type or form
of compensation.
That has grown from only 3% asof 2020.
So you can see why you may ormay not understand what these
are, and so we work with manypeople who happen to have this
(02:11):
form of compensation, and weknow that there are often areas
of opportunity to be educated,to understand planning
strategies and just understandwhat it means.
And when I said, stick around,even if you don't have this form
of compensation, remember ifyou change positions or careers,
this type of compensation maybe critical to your overall
(02:34):
employment package, and knowingwhat questions to ask or who to
ask can be really helpful alongthe way.
And if it's not impacted by you, it may be your spouse, your
kids or your friends.
So I hope you learned somethingin today's episode.
So let's start just at thebeginning.
What the heck is a restrictedstock unit?
(02:54):
A restricted stock unit is atype of equity compensation that
gives you a grant that saysthat at some point of time in
the future, if you remainemployed by the company and in
some cases you may even need tobe employed in hitting kind of
performance targets that youwill receive shares in the
future when you receive thatgrant.
(03:16):
Those are typically not vested.
That means that you don't haveownership of the shares yet, but
you would normally have aschedule, a vesting schedule,
that tells you when you're goingto be receiving the shares yet,
but you would normally have aschedule, a vesting schedule,
that tells you when you're goingto be receiving the shares.
This is most.
For the most part, this isissued through publicly traded
(03:36):
companies.
So the restricted stock unitsare a typical form of stock
compensation, aka equitycompensation, that is given to
you when you work for a publiclytraded company and it is a part
of your compensation package.
It's pay, just like you know,your regular paycheck that you
get in direct deposit into youraccount.
(03:58):
It goes on to your tax return,it goes on to your W-2 for your
employer, and so when youreceive and that's a lot of what
we're going to be going intotoday is.
Okay, I know I may be receivingthis.
Well, what does that mean, bothtax-wise and what should I do
with this stock that I'mreceiving?
It is much.
(04:19):
The percentage for privatecompanies and small companies
that are using restricted stockunits is much smaller, so it's
most probable that you havethese if you're working for a
publicly traded company, like Ialready said.
Plus, it's a bigger company, solarge cap companies and mid cap
companies are more typical ofwho is receiving restricted
(04:40):
stock units.
Like we said, though, if you dowork for those types of
companies, it is probable thatat least some people in your
company are receiving theseshares, and here's a little bit
about what we see in terms ofdifferent companies and how they
treat restricted stock units.
In some cases, we have clientsof ours who are recruited to be
(05:04):
a top level executive at acompany, and they may, in their
employment package, get an RSUthat has a vest schedule.
That's when they actuallyreceive the stock, versus having
it unvested in a future offer.
They may receive the stock ifthey hit certain performance
requirements and or the companymay need to hit some overall
(05:26):
performance targets and this canbe a way to recruit the person
to the company.
It can also help to keep themat the company.
So that's one way thatcompanies may offer these and
those they may be just like fora small percentage of the
highest, most highly compensatedemployees of the company.
That means that in the offerpackage the company doesn't
(05:47):
necessarily have to come up withall of the money that they're
offering you all at once upfront.
So it would be different thanlike a signing bonus which is
maybe paid to you toward thebeginning of your employment,
versus you have these targets orgoals to stick around and hit
certain performance metrics inorder to get money later.
Another thing that we see is ifa company had been a private
(06:10):
company and it went public,usually if somebody was working
for a private company, they mayhave received either
incentivized stock options ornon-qualified stock options.
With company stock switchesover to being publicly traded
after their IPO, then employeesmay receive more restricted
(06:36):
stock units in the futureinstead of those ISOs or
non-qualified stock options.
So it's much more typical toreceive the RSUs after the
company is public and in some ofthese companies every employee
may be receiving some RSU grants, either annually, semi-annually
or at different refresh pointsalong the way.
So certain companies, almostevery employee, might receive
(06:59):
this form of compensation, andmaybe you can see why it's so
important to understand this,because if you don't know what
to ask in an interview processor look for, you may not
understand that you may be ableto receive more than just you
know kind of the base salaryoffer, and then, in other cases,
rsus could be issuedperiodically and much more
(07:20):
randomly.
Instead of being something thatyou're always receiving as a
way to keep you at the companyor as a standard format for
compensation, instead you may bereceiving standard format for
compensation.
Instead you may be receivingthe money like as a one-time
bonus, or you did a good job onthis project, or perhaps the
manager of a team may be able tooffer some RSUs to certain
(07:42):
employees.
They may have a certain numberof shares they can offer.
We see that too.
So there's no standard rulesfor how RSUs may work, but
knowing they're out there isimportant.
What studies have shown and onein particular from the
Socioeconomic Review in 2025,indicated that in the US, the
gap in terms of compensationbetween women and men and of
(08:04):
course we're talking on theWomen's Money Wisdom podcast
highlights, equity compensationcan be part of the reason that
women lag men in similarpositions.
Now, why does that happen?
One may be not justunderstanding what to ask for
and you may just, during aninterview process, need to look
into hey, is this form ofcompensation something you
(08:27):
typically have?
Make sure that you are cued inand dialed in in your
conversations to know what toask for.
This may be something yousearch on, something like
Glassdoor or something like that.
Also, women are less likelythan men.
It's about a third of women whonegotiate versus about a half
of men, and sometimes peoplereceive equity compensation
(08:51):
after negotiating.
When there's not enough in thebudget but the employer really
wants to retain an employee orkeep them there, then the RSUs
may be a possibility.
So understanding and knowingwhat is happening, kind of in
employment context withrestricted stock units can be
really important.
With restricted stock units canbe really important.
(09:14):
Now, when these RSUs are issuedfor someone, for you, then you
likely are also receiving somedocumentation of how you'll be
receiving those shares, and thisagain can be all over the map.
Like we said, sometimes there'swhat's called cliff vesting and
so in that case you wouldn'tget your shares until maybe
three or four years down theroad.
In other cases you might get aquarter of the shares right off
(09:36):
after a year and then receiveshares either monthly or
quarterly.
And so everybody has differentvest schedules, although they
tend to be a midterm, notimmediate, so you're not getting
those stocks three months laterall in, but perhaps over time,
or definitely typically not overa decade, more like over three
(09:57):
or four years.
And so then you know you havesome kind of X factors to
consider because you don't knowwhat the stock will be trading
at on that future date.
And we've certainly had clientswho won big by the stock going
up, getting issued maybe theequivalent of shares that were
equal to $50,000.
But when the stock vests overtime perhaps the aggregate value
(10:22):
of those shares is more like100.
It just depends.
Or they may have been issuedstock at a high and unbeknownst
to them, the stock ended upgoing down and so then the
shares would have had a lowervalue over time.
But it's important tounderstand, kind of how the
vesting schedule works andasking for documentation of how
(10:42):
this will be.
And this is important over timebecause sometimes the vesting
schedules may change over timethey may be slightly different
depending, and it's important toreally consider all of the
factors and then in many casesyou can coordinate between your
financial planner and a CPA,which becomes a critical team if
(11:03):
you are getting more equitycompensation or have lower
understanding of how thesethings work.
So when you get to that bestdate, one of the things that
people may not understand is, onthat day, whatever the price of
the stock when you receive thestock is times, the number of
shares that you receive on thatday goes onto your tax return
(11:26):
and it's taxed like ordinaryincome and it's taxed on your
pay stub.
You can keep track of that, butthe default withholding rate is
often lower than what youraggregate tax bill may be.
And in some cases you have theopportunity if you just again
and again are getting hit withtaxes when it comes to your RSUs
(11:46):
, to set a higher withholdingrate on your pay stub so that
some shares are sold in order tobe withheld for your taxes, so
you don't always end up havingto owe later down the road and
or be underpaid in so that youhave penalties.
That's something that'simportant to keep in mind, and
(12:07):
what I tell people to do whenthe shares vest is to think,
like making a decision of wouldI choose to buy these shares if
I got the equity compensation inthe form of cash on that day?
Because many people think, oh,I can't sell them because there
would be a penalty, there wouldbe tax costs.
But the tax costs are the sameif you sell on the same day,
(12:30):
whether you sell the if afterthat first day and you extend
out, if you have shares more andmore piling up.
You may have to deal withcapital gains or capital losses,
depending on where the pricegoes from there, but on that day
in particular, it's as if youwere awarded cash that you went
(12:51):
to buy the stock, and sosometimes and this is just like
an asterisk if you're sittingthere with, oh, maybe even
having to borrow money for yourtax liability when it comes to
the RSUs, and then you havepiles and piles of the stock
building up.
Perhaps, I hope you work for acompany that has had great stock
returns.
So you know, as shares gotawarded over the years, you just
(13:13):
had more and more of your greatcompany stock.
Well then you potentially havesome concentration risk where
your net worth is bouncing allaround based on wherever your
stock trades on any given day oryear, and you may want to start
to incorporate a strategy whereyou consider selling the stock
on the day it vests and thengoing back and strategically
(13:34):
selling shares that you'veaccumulated over time and
certainly, if you're borrowingmoney, carrying credit card debt
, don't have the money to payfor taxes.
Look back to those shares thatare adding to your tax bill and
consider a strategy to getaccess to some of those funds to
both pay the tax bill, perhapsdiversify.
Maybe you're going to put moremoney into your 401k, because
(13:57):
this will fund your day-to-dayneeds, and so then you can both
lower taxes and boost yourretirement savings.
All of these are possibilities.
It's not there's not like asingular, two-dimensional
prescription for what you shoulddo when you receive equity
compensation.
What I'll tell you, though, isit's just a little more
complicated, it's not thatdifficult, but you but things
(14:19):
change over time, and this isone great place where I love
talking to clients about whatthey should consider when it
comes to their RSUs, and we canhelp map out.
Hey, here's the tax impact,here's places we can put money,
here's the use of the funds, andhere's how to diversify so that
you don't end up justscratching your head saying I
think I should do something.
(14:40):
It's nice that I have the stock, but how does it translate into
a better financial future forme now and over time?
Now an important thing toconsider is these forms of
compensation are often used tokeep people employed at the
places that they are alreadyworking.
And so if you say at the placesthat they are already working,
(15:02):
and so there, if you say youknow, I've loved my income but
I've made enough and now I'mgoing to retire, it depends on
your company whether yourunvested shares get to go over
into your hands.
And so it just depends on theway contracts are written as to
whether you can retire andmaintain your RSUs.
But typically, if you're laidoff or quit and aren't
(15:24):
retirement age, you wouldtypically walk away from those
unvested shares.
But again, keep an eye on theway things are granted to make
sure that you understand howthings would happen.
You may have been, you know,kind of earmarking that future
value of your invested shares,but if you're no longer working
at that place of employment,they may not be yours.
(15:45):
So I hope two things thatyou're hearing is when you leave
, you may not have your investedshares, you would have your
vested shares and also, asyou're negotiating to enter the
company, you may want to talkabout whether the company
typically offers RSUs and howthey work, and would that be a
part of your employment package?
So we've talked a little bitabout taxes, and taxes can
(16:08):
change over time, especially ifyou just had shares and shares
piling up.
Maybe you have $100,000 or evenmore in shares.
We've seen clients withmillions of dollars of their
company stock in conjunctionwith their employee stock
purchase plan, et cetera.
Then you really need, you knowkind of, to go through and
(16:28):
thread the needle in a surgicalmanner in terms of planning for
taxes.
But that can be something thatcan be managed over time.
It may be just importantbecause the stock is trading at
or near all-time highs, or youreally need the funds you don't
want to borrow for something, toknow, going in what tax bills
may be, but execute a salesstrategy so that you can reduce
your exposure to certain, youknow, to your company stock.
(16:54):
There are different ways to useRSUs, like I said.
So they can be a form of youknow, just you end up buying it
or not buying, but vesting andholding.
They may be something where youconvert to a more diversified
or less risky portfolio.
They may be used, like I said,to pay off debt, to pay your tax
liability, to fund a biggerretirement strategy.
(17:18):
If you find that you have toomuch concentration, then there
are certain strategies to helpyou kind of get out of the stock
.
Um, but it's really importantto know about diversification,
to know about this form of stockand to be tax aware as you're
investing in taxable accounts.
Not to say that taxes shouldn'tbe paid on when you make money
(17:38):
in investing, but knowing, goingin, what that liability may be,
so you can make informeddecisions when it comes to what
selling RSUs or any form ofconcentrated stock or any form
of stock in general.
A couple other ideas that I havethat integrate into a broader
financial plan might includecharitable donations of stock
(17:58):
that you've owned for more thana year.
So let's say that you had abunch of RSUs that you ended up
collecting just because youdidn't get around to selling.
You could turn around and usethat stock for a charitable gift
or maybe even give it to adonor advised fund, which we've
talked about in past episodes,and then those shares could
reduce your tax liability orfree up a tax budget for you to
(18:22):
sell a little bit more, but youmight be giving away a tax
liability if you did it theright way.
A few more things that you mayneed to consider.
One of them is that, for manyemployees who receive RSUs, they
also have trading windows andthey are only allowed to trade
during certain periods of time,and so that is something that
you need to integrate into thegame plan of you know.
(18:45):
You can't sell that stock everysingle day, and so making a you
know calendar where you have aplan to be selling something at
certain periods of time can besuper helpful.
And then also, just you know,making sure that you've aligned
this form of compensation withyour overall game plan can be
(19:10):
really critical and important.
There are ways to track, likeour financial planning software
has, ways for you to review yourRSUs and what the future tax
liability may be.
So do know that there arecertain technologies that allow
you to track and review things.
The other thing that I wouldmention when it comes to these
(19:33):
RSUs is sometimes because stocksindividual stocks can have
volatility and trade, you know,trade different in any given
year.
You may have either that bigwin because the stock has gone
way up or a disappointing timewhere perhaps every year you get
issued shares but you're beingissued shares in a time period
where the stock is trading lower.
(19:54):
But a lot of times that thecompanies regularly issue those
shares, they will end up saying,hey, we're kind of targeting
perhaps like $25,000 for thisemployee and then, if the stock
is trading down, they wouldactually issue you more shares.
So it in essence be like kindof like receiving a grant at a
low price and then hopefully theprice has gone up over time.
(20:18):
So there's a lot of interestingnuances that you might need to
consider as you're evaluating it.
I do think it's so importantover time that we get better
language and understanding andpersonal financial literacy when
it comes to equity compensation, because it is expanding so
much.
I would see it rarely forclients back in the day so much.
(20:41):
I would see it rarely forclients back in the day and
nowadays, both because we'reinterested in this area and we
know we can give great advice inthis area.
We're just talking about itmore and more.
But whereas it used to be kindof on the coast with technology
companies, now it's spreadingaround the country and to all
sectors and areas of corporateAmerica.
So it is much more relevant,and especially for us women,
(21:02):
being able to understand andtalk with each other, like
that's how people figure outlike, oh, managers are awarding
some of these shares.
Maybe I should ask about it.
Or I think I may be paid lowerthan kind of standard market
rate.
Is this something you'reoffering if I were to come to
the company new and now that Iam someone who's employed and
(21:23):
has been there a long time, isthis a way you can tell me I'm
doing a good job if my reviewsare good?
So increasing your literacy,keeping your ears open when you
hear about it, and getting greatprofessional advice, whether
it's with a financial planner oralso with your tax professional
, can be a winning combinationin order to maximize your
(21:43):
strategy and game plan when itcomes to your equity comp.
If you have additional questions, please don't hesitate to reach
out.
This type of planning is one ofthe things that we do day in,
day out, so don't hesitate toreach out or find us at
pearlplancom and go to thecontact page to schedule a
meeting to discuss your personalequity compensation situation.
(22:04):
For those of you who listenedin and learned something new,
we'd love if you gave us arating and review at the place
that you're finding your podcastand with that, I hope you have
a good week and we'll talk toyou next week.
Thank you for listening to theWomen's Money Wisdom Podcast.
(22:32):
If you found value in thisepisode, the best way you can
support the podcast is toforward an episode to a friend
or leave a review.
Go to pearlplancom and thepodcast link to get all the
resources and links mentioned.
Welcome to the Women's Money Wisdom Podcast.
I'm Melissa Joy, a certifiedfinancial planner and the
founder of Pearl Planning.
My goal is to help youstreamline and organize your
finances, navigate big moneydecisions with confidence and be
strategic in order to grow yourwealth.
As a woman, you work hard foryour money, and I'm here to help
(00:21):
you make the most of it.
Now let's get into the show.
And I'm here to help you makethe most of it.
Now let's get into the show.
Just a quick note before wedive in.
The information that we shareis meant to educate and inspire,
not serve as personalizedfinancial advice.
Everyone's situation is unique,so be sure to consult with your
own financial professional forguidance that fits your life.
And just so you know, theopinions shared in this podcast
(00:44):
are my own and those of myguests, and they don't
necessarily represent those ofany organizations that I'm
affiliated with.
For more important disclosures,please go to our webpage at
pearlplancom.
Now let's get started.
Welcome back to the Women'sMoney Wisdom Podcast.
It's a solo episode today, butone I want you to stick around
(01:06):
for, because this is a topicthat many people are impacted by
.
If you aren't, you might be inthe future, and it's
underappreciated, misunderstood.
We're going to talk aboutequity compensation and
specifically restricted stockunits, today otherwise known as
RSUs.
(01:26):
Now, you may or may not knowthat you are compensated with
RSUs Not everyone is but if youwork for a publicly traded
company, it is likely that thecompany that you work for does
award some forms of theircompensation as restricted stock
units.
In fact, a research indicatedthat in 2021, according to
(01:50):
Barron's more than 86% ofcompanies use this type or form
of compensation.
That has grown from only 3% asof 2020.
So you can see why you may ormay not understand what these
are, and so we work with manypeople who happen to have this
(02:11):
form of compensation, and weknow that there are often areas
of opportunity to be educated,to understand planning
strategies and just understandwhat it means.
And when I said, stick around,even if you don't have this form
of compensation, remember ifyou change positions or careers,
this type of compensation maybe critical to your overall
(02:34):
employment package, and knowingwhat questions to ask or who to
ask can be really helpful alongthe way.
And if it's not impacted by you, it may be your spouse, your
kids or your friends.
So I hope you learned somethingin today's episode.
So let's start just at thebeginning.
What the heck is a restrictedstock unit?
(02:54):
A restricted stock unit is atype of equity compensation that
gives you a grant that saysthat at some point of time in
the future, if you remainemployed by the company and in
some cases you may even need tobe employed in hitting kind of
performance targets that youwill receive shares in the
future when you receive thatgrant.
(03:16):
Those are typically not vested.
That means that you don't haveownership of the shares yet, but
you would normally have aschedule, a vesting schedule,
that tells you when you're goingto be receiving the shares yet,
but you would normally have aschedule, a vesting schedule,
that tells you when you're goingto be receiving the shares.
This is most.
For the most part, this isissued through publicly traded
(03:36):
companies.
So the restricted stock unitsare a typical form of stock
compensation, aka equitycompensation, that is given to
you when you work for a publiclytraded company and it is a part
of your compensation package.
It's pay, just like you know,your regular paycheck that you
get in direct deposit into youraccount.
(03:58):
It goes on to your tax return,it goes on to your W-2 for your
employer, and so when youreceive and that's a lot of what
we're going to be going intotoday is.
Okay, I know I may be receivingthis.
Well, what does that mean, bothtax-wise and what should I do
with this stock that I'mreceiving?
It is much.
(04:19):
The percentage for privatecompanies and small companies
that are using restricted stockunits is much smaller, so it's
most probable that you havethese if you're working for a
publicly traded company, like Ialready said.
Plus, it's a bigger company, solarge cap companies and mid cap
companies are more typical ofwho is receiving restricted
(04:40):
stock units.
Like we said, though, if you dowork for those types of
companies, it is probable thatat least some people in your
company are receiving theseshares, and here's a little bit
about what we see in terms ofdifferent companies and how they
treat restricted stock units.
In some cases, we have clientsof ours who are recruited to be
(05:04):
a top level executive at acompany, and they may, in their
employment package, get an RSUthat has a vest schedule.
That's when they actuallyreceive the stock, versus having
it unvested in a future offer.
They may receive the stock ifthey hit certain performance
requirements and or the companymay need to hit some overall
(05:26):
performance targets and this canbe a way to recruit the person
to the company.
It can also help to keep themat the company.
So that's one way thatcompanies may offer these and
those they may be just like fora small percentage of the
highest, most highly compensatedemployees of the company.
That means that in the offerpackage the company doesn't
(05:47):
necessarily have to come up withall of the money that they're
offering you all at once upfront.
So it would be different thanlike a signing bonus which is
maybe paid to you toward thebeginning of your employment,
versus you have these targets orgoals to stick around and hit
certain performance metrics inorder to get money later.
Another thing that we see is ifa company had been a private
(06:10):
company and it went public,usually if somebody was working
for a private company, they mayhave received either
incentivized stock options ornon-qualified stock options.
With company stock switchesover to being publicly traded
after their IPO, then employeesmay receive more restricted
(06:36):
stock units in the futureinstead of those ISOs or
non-qualified stock options.
So it's much more typical toreceive the RSUs after the
company is public and in some ofthese companies every employee
may be receiving some RSU grants, either annually, semi-annually
or at different refresh pointsalong the way.
So certain companies, almostevery employee, might receive
(06:59):
this form of compensation, andmaybe you can see why it's so
important to understand this,because if you don't know what
to ask in an interview processor look for, you may not
understand that you may be ableto receive more than just you
know kind of the base salaryoffer, and then, in other cases,
rsus could be issuedperiodically and much more
(07:20):
randomly.
Instead of being something thatyou're always receiving as a
way to keep you at the companyor as a standard format for
compensation, instead you may bereceiving standard format for
compensation.
Instead you may be receivingthe money like as a one-time
bonus, or you did a good job onthis project, or perhaps the
manager of a team may be able tooffer some RSUs to certain
(07:42):
employees.
They may have a certain numberof shares they can offer.
We see that too.
So there's no standard rulesfor how RSUs may work, but
knowing they're out there isimportant.
What studies have shown and onein particular from the
Socioeconomic Review in 2025,indicated that in the US, the
gap in terms of compensationbetween women and men and of
(08:04):
course we're talking on theWomen's Money Wisdom podcast
highlights, equity compensationcan be part of the reason that
women lag men in similarpositions.
Now, why does that happen?
One may be not justunderstanding what to ask for
and you may just, during aninterview process, need to look
into hey, is this form ofcompensation something you
(08:27):
typically have?
Make sure that you are cued inand dialed in in your
conversations to know what toask for.
This may be something yousearch on, something like
Glassdoor or something like that.
Also, women are less likelythan men.
It's about a third of women whonegotiate versus about a half
of men, and sometimes peoplereceive equity compensation
(08:51):
after negotiating.
When there's not enough in thebudget but the employer really
wants to retain an employee orkeep them there, then the RSUs
may be a possibility.
So understanding and knowingwhat is happening, kind of in
employment context withrestricted stock units can be
really important.
With restricted stock units canbe really important.
(09:14):
Now, when these RSUs are issuedfor someone, for you, then you
likely are also receiving somedocumentation of how you'll be
receiving those shares, and thisagain can be all over the map.
Like we said, sometimes there'swhat's called cliff vesting and
so in that case you wouldn'tget your shares until maybe
three or four years down theroad.
In other cases you might get aquarter of the shares right off
(09:36):
after a year and then receiveshares either monthly or
quarterly.
And so everybody has differentvest schedules, although they
tend to be a midterm, notimmediate, so you're not getting
those stocks three months laterall in, but perhaps over time,
or definitely typically not overa decade, more like over three
(09:57):
or four years.
And so then you know you havesome kind of X factors to
consider because you don't knowwhat the stock will be trading
at on that future date.
And we've certainly had clientswho won big by the stock going
up, getting issued maybe theequivalent of shares that were
equal to $50,000.
But when the stock vests overtime perhaps the aggregate value
(10:22):
of those shares is more like100.
It just depends.
Or they may have been issuedstock at a high and unbeknownst
to them, the stock ended upgoing down and so then the
shares would have had a lowervalue over time.
But it's important tounderstand, kind of how the
vesting schedule works andasking for documentation of how
(10:42):
this will be.
And this is important over timebecause sometimes the vesting
schedules may change over timethey may be slightly different
depending, and it's important toreally consider all of the
factors and then in many casesyou can coordinate between your
financial planner and a CPA,which becomes a critical team if
(11:03):
you are getting more equitycompensation or have lower
understanding of how thesethings work.
So when you get to that bestdate, one of the things that
people may not understand is, onthat day, whatever the price of
the stock when you receive thestock is times, the number of
shares that you receive on thatday goes onto your tax return
(11:26):
and it's taxed like ordinaryincome and it's taxed on your
pay stub.
You can keep track of that, butthe default withholding rate is
often lower than what youraggregate tax bill may be.
And in some cases you have theopportunity if you just again
and again are getting hit withtaxes when it comes to your RSUs
(11:46):
, to set a higher withholdingrate on your pay stub so that
some shares are sold in order tobe withheld for your taxes, so
you don't always end up havingto owe later down the road and
or be underpaid in so that youhave penalties.
That's something that'simportant to keep in mind, and
(12:07):
what I tell people to do whenthe shares vest is to think,
like making a decision of wouldI choose to buy these shares if
I got the equity compensation inthe form of cash on that day?
Because many people think, oh,I can't sell them because there
would be a penalty, there wouldbe tax costs.
But the tax costs are the sameif you sell on the same day,
(12:30):
whether you sell the if afterthat first day and you extend
out, if you have shares more andmore piling up.
You may have to deal withcapital gains or capital losses,
depending on where the pricegoes from there, but on that day
in particular, it's as if youwere awarded cash that you went
(12:51):
to buy the stock, and sosometimes and this is just like
an asterisk if you're sittingthere with, oh, maybe even
having to borrow money for yourtax liability when it comes to
the RSUs, and then you havepiles and piles of the stock
building up.
Perhaps, I hope you work for acompany that has had great stock
returns.
So you know, as shares gotawarded over the years, you just
(13:13):
had more and more of your greatcompany stock.
Well then you potentially havesome concentration risk where
your net worth is bouncing allaround based on wherever your
stock trades on any given day oryear, and you may want to start
to incorporate a strategy whereyou consider selling the stock
on the day it vests and thengoing back and strategically
(13:34):
selling shares that you'veaccumulated over time and
certainly, if you're borrowingmoney, carrying credit card debt
, don't have the money to payfor taxes.
Look back to those shares thatare adding to your tax bill and
consider a strategy to getaccess to some of those funds to
both pay the tax bill, perhapsdiversify.
Maybe you're going to put moremoney into your 401k, because
(13:57):
this will fund your day-to-dayneeds, and so then you can both
lower taxes and boost yourretirement savings.
All of these are possibilities.
It's not there's not like asingular, two-dimensional
prescription for what you shoulddo when you receive equity
compensation.
What I'll tell you, though, isit's just a little more
complicated, it's not thatdifficult, but you but things
(14:19):
change over time, and this isone great place where I love
talking to clients about whatthey should consider when it
comes to their RSUs, and we canhelp map out.
Hey, here's the tax impact,here's places we can put money,
here's the use of the funds, andhere's how to diversify so that
you don't end up justscratching your head saying I
think I should do something.
(14:40):
It's nice that I have the stock, but how does it translate into
a better financial future forme now and over time?
Now an important thing toconsider is these forms of
compensation are often used tokeep people employed at the
places that they are alreadyworking.
And so if you say at the placesthat they are already working,
(15:02):
and so there, if you say youknow, I've loved my income but
I've made enough and now I'mgoing to retire, it depends on
your company whether yourunvested shares get to go over
into your hands.
And so it just depends on theway contracts are written as to
whether you can retire andmaintain your RSUs.
But typically, if you're laidoff or quit and aren't
(15:24):
retirement age, you wouldtypically walk away from those
unvested shares.
But again, keep an eye on theway things are granted to make
sure that you understand howthings would happen.
You may have been, you know,kind of earmarking that future
value of your invested shares,but if you're no longer working
at that place of employment,they may not be yours.
(15:45):
So I hope two things thatyou're hearing is when you leave
, you may not have your investedshares, you would have your
vested shares and also, asyou're negotiating to enter the
company, you may want to talkabout whether the company
typically offers RSUs and howthey work, and would that be a
part of your employment package?
So we've talked a little bitabout taxes, and taxes can
(16:08):
change over time, especially ifyou just had shares and shares
piling up.
Maybe you have $100,000 or evenmore in shares.
We've seen clients withmillions of dollars of their
company stock in conjunctionwith their employee stock
purchase plan, et cetera.
Then you really need, you knowkind of, to go through and
(16:28):
thread the needle in a surgicalmanner in terms of planning for
taxes.
But that can be something thatcan be managed over time.
It may be just importantbecause the stock is trading at
or near all-time highs, or youreally need the funds you don't
want to borrow for something, toknow, going in what tax bills
may be, but execute a salesstrategy so that you can reduce
your exposure to certain, youknow, to your company stock.
(16:54):
There are different ways to useRSUs, like I said.
So they can be a form of youknow, just you end up buying it
or not buying, but vesting andholding.
They may be something where youconvert to a more diversified
or less risky portfolio.
They may be used, like I said,to pay off debt, to pay your tax
liability, to fund a biggerretirement strategy.
(17:18):
If you find that you have toomuch concentration, then there
are certain strategies to helpyou kind of get out of the stock
.
Um, but it's really importantto know about diversification,
to know about this form of stockand to be tax aware as you're
investing in taxable accounts.
Not to say that taxes shouldn'tbe paid on when you make money
(17:38):
in investing, but knowing, goingin, what that liability may be,
so you can make informeddecisions when it comes to what
selling RSUs or any form ofconcentrated stock or any form
of stock in general.
A couple other ideas that I havethat integrate into a broader
financial plan might includecharitable donations of stock
(17:58):
that you've owned for more thana year.
So let's say that you had abunch of RSUs that you ended up
collecting just because youdidn't get around to selling.
You could turn around and usethat stock for a charitable gift
or maybe even give it to adonor advised fund, which we've
talked about in past episodes,and then those shares could
reduce your tax liability orfree up a tax budget for you to
(18:22):
sell a little bit more, but youmight be giving away a tax
liability if you did it theright way.
A few more things that you mayneed to consider.
One of them is that, for manyemployees who receive RSUs, they
also have trading windows andthey are only allowed to trade
during certain periods of time,and so that is something that
you need to integrate into thegame plan of you know.
(18:45):
You can't sell that stock everysingle day, and so making a you
know calendar where you have aplan to be selling something at
certain periods of time can besuper helpful.
And then also, just you know,making sure that you've aligned
this form of compensation withyour overall game plan can be
(19:10):
really critical and important.
There are ways to track, likeour financial planning software
has, ways for you to review yourRSUs and what the future tax
liability may be.
So do know that there arecertain technologies that allow
you to track and review things.
The other thing that I wouldmention when it comes to these
(19:33):
RSUs is sometimes because stocksindividual stocks can have
volatility and trade, you know,trade different in any given
year.
You may have either that bigwin because the stock has gone
way up or a disappointing timewhere perhaps every year you get
issued shares but you're beingissued shares in a time period
where the stock is trading lower.
(19:54):
But a lot of times that thecompanies regularly issue those
shares, they will end up saying,hey, we're kind of targeting
perhaps like $25,000 for thisemployee and then, if the stock
is trading down, they wouldactually issue you more shares.
So it in essence be like kindof like receiving a grant at a
low price and then hopefully theprice has gone up over time.
(20:18):
So there's a lot of interestingnuances that you might need to
consider as you're evaluating it.
I do think it's so importantover time that we get better
language and understanding andpersonal financial literacy when
it comes to equity compensation, because it is expanding so
much.
I would see it rarely forclients back in the day so much.
(20:41):
I would see it rarely forclients back in the day and
nowadays, both because we'reinterested in this area and we
know we can give great advice inthis area.
We're just talking about itmore and more.
But whereas it used to be kindof on the coast with technology
companies, now it's spreadingaround the country and to all
sectors and areas of corporateAmerica.
So it is much more relevant,and especially for us women,
(21:02):
being able to understand andtalk with each other, like
that's how people figure outlike, oh, managers are awarding
some of these shares.
Maybe I should ask about it.
Or I think I may be paid lowerthan kind of standard market
rate.
Is this something you'reoffering if I were to come to
the company new and now that Iam someone who's employed and
(21:23):
has been there a long time, isthis a way you can tell me I'm
doing a good job if my reviewsare good?
So increasing your literacy,keeping your ears open when you
hear about it, and getting greatprofessional advice, whether
it's with a financial planner oralso with your tax professional
, can be a winning combinationin order to maximize your
(21:43):
strategy and game plan when itcomes to your equity comp.
If you have additional questions, please don't hesitate to reach
out.
This type of planning is one ofthe things that we do day in,
day out, so don't hesitate toreach out or find us at
pearlplancom and go to thecontact page to schedule a
meeting to discuss your personalequity compensation situation.
(22:04):
For those of you who listenedin and learned something new,
we'd love if you gave us arating and review at the place
that you're finding your podcastand with that, I hope you have
a good week and we'll talk toyou next week.
Thank you for listening to theWomen's Money Wisdom Podcast.
(22:32):
If you found value in thisepisode, the best way you can
support the podcast is toforward an episode to a friend
or leave a review.
Go to pearlplancom and thepodcast link to get all the
resources and links mentioned.
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