I’m going to rebound on that and explain why it doesn’t make sense to hold on to RSUs.
Disclaimer: I’m an IC myself.
I worked for my 1st company for 15 years. Held to their RSUs most of the time. Then moved to another (public) company and stayed there for a year before leaving. Now in a startup with a lower salary and no immediate liquidity on my stock options.
When you work at a public company, you have multiple exposures to the company’s growth: the RSUs that have already vested, the RSUs that haven’t vested yet and through your own career growth and salary increase that goes with a successful company. If you were early enough, you also get market cred for having made the company successful. If the companies goes under (or shrinks, or lays people off), all those assets are at risk.
Usually, one has more in granted stocks than in vested stocks. If your company just went public, you might have a lote more sellable than in your pipeline, but even that is unusual. Usually, you’ll still have more in the pipeline than you’ve already vested.
If your company has been public for a while, you should get frequent refreshes, which means you still have a significant numbers of unvested shares.
Regardless, you should sell as soon as you can, because of the remaining exposure through unvested equity. Use the proceeds to place in an ETF, or in a high-yield savings account, or some more aggressive investment strategy. Or use it for the downpayment on your house, or fund your kid’s college funds, whatever floats your boat.
Anyways, keep in mind that you still have a significant exposure to the growth of the company through your unvested equities. If you’re worried about short-term cap gain, don’t be. If you sell immediately, there’s no growth between cost basis and selling price, so no cap gain. Another upside to selling is that you’re not bound by the blackout periods, so your assets are much more liquid. And remember you still have exposure
That's the incorrect belief that causes so many people to hold their RSUs. The day you vest the RSU is the day someone decided to:
(1) give you the amount in cash (as regular income)
(2) take that cash and buy that stock on your behalf
(3) turn around and give you the stock
and somehow you decide to let (2) and (3) happen without returning to the cash position in (1) and buying whatever else you would prefer to hold. The LTCG clock starts on that day, and all you're doing by holding your vested RSU is let someone else decide to buy stuff on your behalf and make the decision for you.
(that's assuming that there's an ability to liquidate the RSU on the vest date)
At vesting time you are taxed (immediately) at ordinary income rates on the fair market value the day that it vests, and that's what the cost basis is set to. If you sell on that day, your capital gains from the sale will be (near) $0.
The only reason to wait for LTCG on RSUs is if you decided to hold it for some non-zero amount of time after vesting and then the stock price shot up. But then you're also taking on the risk that the stock price will drop again before the year has passed, and end up with less post-tax money than if you'd sold at short-term tax rates.
Some companies might make you hold for a few months until the next earnings report and trading window. After that it depends on your tolerance for risk and your attitude about the IRS.
Earnings reports happen once a quarter between the company and the public. A couple of business days after that, employees (without material nonpublic info) may trade company shares for the next month or so. Maybe you can't sell April shares until mid-July, and then you have to decide whether to wait until next July to minimize tax on gain.
Sometimes you can elect to sell every released share in a quarter, or file a 10b5-1 plan with a schedule, but you have to do that during a trading window.
Most (all?) public tech companies have policies that prohibit employees from trading the company's stock outside designated windows following a quarterly earnings release.
Disclaimer: I’m an IC myself.
I worked for my 1st company for 15 years. Held to their RSUs most of the time. Then moved to another (public) company and stayed there for a year before leaving. Now in a startup with a lower salary and no immediate liquidity on my stock options.
When you work at a public company, you have multiple exposures to the company’s growth: the RSUs that have already vested, the RSUs that haven’t vested yet and through your own career growth and salary increase that goes with a successful company. If you were early enough, you also get market cred for having made the company successful. If the companies goes under (or shrinks, or lays people off), all those assets are at risk.
Usually, one has more in granted stocks than in vested stocks. If your company just went public, you might have a lote more sellable than in your pipeline, but even that is unusual. Usually, you’ll still have more in the pipeline than you’ve already vested.
If your company has been public for a while, you should get frequent refreshes, which means you still have a significant numbers of unvested shares.
Regardless, you should sell as soon as you can, because of the remaining exposure through unvested equity. Use the proceeds to place in an ETF, or in a high-yield savings account, or some more aggressive investment strategy. Or use it for the downpayment on your house, or fund your kid’s college funds, whatever floats your boat.
Anyways, keep in mind that you still have a significant exposure to the growth of the company through your unvested equities. If you’re worried about short-term cap gain, don’t be. If you sell immediately, there’s no growth between cost basis and selling price, so no cap gain. Another upside to selling is that you’re not bound by the blackout periods, so your assets are much more liquid. And remember you still have exposure