RSUs and Company Stock: What to Do When It Vests
Vesting day feels like a windfall. It's also a tax event and a concentration risk decision — here's how to think about both.
What actually happens at vesting
Restricted stock units (RSUs) convert to actual shares you own on their vesting date, and the full market value of those shares on that date counts as ordinary income — the same category as your salary. This is true whether you sell immediately or hold onto the shares; vesting itself is what triggers the tax, not selling.
The tax withholding trap
Many employer stock plans default to withholding at a flat supplemental rate (commonly 22% federally), which can be lower than your actual marginal tax bracket if your income is high enough. That gap between what's withheld and what you'll actually owe is a common surprise at tax time — worth checking your specific plan's withholding rate against your bracket rather than assuming it's fully covered.
Sell immediately or hold? The concentration risk argument
Your income already depends on your employer. Holding a large amount of that same company's stock means your investments and your paycheck both depend on the same company's fortunes — if something goes wrong at the company, you could face a job loss and a portfolio decline at the same time. This is the core argument for selling at least a portion of vested shares promptly and reinvesting elsewhere, regardless of how confident you feel about the company's prospects.
A simple default: diversify unless you have a specific reason not to
A common approach is to sell vested shares soon after vesting and reinvest the proceeds into a diversified portfolio, treating the vesting event more like a cash bonus than a long-term investment decision. Holding a meaningful concentrated position is a choice that should be made deliberately — for tax reasons, conviction in the company, or other specific circumstances — not simply because selling requires an active decision and holding doesn't.
See how vested shares affect your grade
Company stock and other brokerage holdings count as assets in your report card — run your numbers to see how a vesting event shifted your overall picture.
Check My Grade →Frequently asked questions
Do I owe taxes even if I don't sell?
Yes. The vesting event itself is what creates the taxable income, based on the share price on that date — selling or holding afterward doesn't change what you owe from vesting, though selling later can trigger additional capital gains or losses on top of that.
What's a reasonable amount of company stock to hold?
There's no universal number, but a common rule of thumb is keeping any single stock position, including employer stock, to a modest share of your total portfolio — reflecting the added concentration risk of it being tied to your own paycheck.
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