What to Know About Restricted Stock Units (RSUs) for Your Retirement
September 5th, 2025 | 2 min. read

Your company gave you stock. Now what?
If you’ve been awarded restricted stock units (RSUs), you might be wondering what they really mean and what you’re supposed to do with them.
I’ve worked with plenty of professionals who don’t realize that RSUs are more than just a bonus. They’re compensation. And if you don’t plan around them carefully, they could create surprise taxes, unnecessary risk and missed opportunities in your retirement plan.
So, let’s walk through what RSUs are, how they work and how to make the most of them.
What are RSUs?
Restricted stock units are a form of equity compensation. They’re essentially a promise from your employer to give you shares of company stock in the future, subject to certain conditions.
There are two important dates you should know:
- Grant Date – This is the date you're awarded the RSUs. Think of this as the “arrival” date.
- Vesting (or Distribution) Date – This is when the shares officially become yours. I like to call this the “yours” date.
Until the shares vest, you don’t actually own them. And if you leave your company before that date, you may forfeit some or all of the shares, depending on your vesting schedule.
What are the tax implications?
Tax planning is a big part of RSU strategy.
Here’s what typically happens:
- At the vesting date, the value of the shares is treated as ordinary income. It’s reported on your W-2, and you’ll owe income tax on it even if you don’t sell the shares.
- If you hold the shares beyond the vesting date and they increase in value, the gain is subject to capital gains tax when you sell. The rate depends on how long you’ve held them: short-term gains are taxed at ordinary income rates; long-term gains (on shares held more than a year) are taxed at lower capital gains rates.
That means RSUs can create a two-tiered tax event: once when they vest, and again when you sell.
Should you sell or hold after vesting?
In many cases, I recommend selling the shares soon after they vest. Here's why:
- Single-stock risk
Holding too much of your company’s stock can expose you to unnecessary risk. If your income and your investments are both tied to the same company, a downturn could double the impact on your finances. - RSUs are compensation
Remember, RSUs are part of your paycheck, just paid in stock rather than cash. Would you take your entire salary in your company’s stock and hope it goes up? Probably not. Once the stock is yours, it often makes sense to diversify.
Selling the shares gives you more control over your financial plan. You can reinvest the proceeds in a diversified portfolio, put it toward retirement savings, or use it for other financial goals.
How do RSUs fit into retirement planning?
RSUs can be a valuable part of your retirement strategy, but only if you plan wisely.
Here are a few ways I help clients incorporate RSUs into their retirement picture:
- Forecast future vesting schedules so you can anticipate income and tax impact.
- Use RSU proceeds to max out retirement contributions, like your 401(k) or an IRA.
- Strategically time withdrawals or sales to minimize taxes and avoid unnecessary exposure.
- Align investment strategy so that your overall portfolio isn’t overweight in company stock.
When handled properly, RSUs can accelerate your progress toward retirement. But they need to be part of a bigger strategy.
The Bottom Line
RSUs are a great benefit, but they are often misunderstood. If you’re not sure how to handle them, it’s easy to make costly mistakes, whether it’s holding too long, getting hit with unexpected taxes, or missing opportunities to take full advantage of them.
If you’d like to take a closer look at how your RSUs fit into your broader financial picture, we’d be happy to help.
Patrick is a financial adviser whose priority is to help people achieve their financial and retirement goals. Working closely with clients, he incorporates all elements of their lives into personalized financial plans, including investment portfolio advice, tax strategies and saving for college. He is a CERTIFIED FINANCIAL PLANNER™ professional.