6 ms·

big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Those are

by vmarsy 10y ago

big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Those are easier to understand, there's no exercising decision to be made, you just need to know your vesting dates. The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks.

mikestew 10y ago
big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Microsoft used stock options when I worked there, hence my use of it as an example.
taude 10y ago
MSFT was one of the big model companies for stock options and sharing the wealth around. I think they got rid of their stock option plan sometime under Blamer when the stock started paying a dividend.
- skookum 10y ago
  That's correct. It was shortly after Steve took over as CEO. At the time a lot of options were underwater and Microsoft offered a buy-back plan where one could get a lump-sum payment in place of those options. In retrospect taking the buyback was the right decision as the Microsoft options had a 10 year expiry and most of the underwater options didn't climb back within their 10 year window.
emeritus 10y ago
> The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks. The decision is more along the lines of sell now vs. sell later. The LTCG decision is not nearly as important. The conventional wisdom is just to treat the RSU as the same as salary by selling immediately upon vesting. Since you're already employed and paid by them, holding equity in the company you work for is unnecessary additional risk.
- btkramer9 10y ago
  When the RSUs vest you usually have the option to take all and pay the appropriate tax when tax season comes around OR take a reduced amount to cover the taxes. Do you recommend/have a preference? What are the pros and cons?
  - emeritus 10y ago
    I'm at a company that automatically sells enough RSUs at vest date to cover withholding (the remainder is deposited alongside the regular salary). So that decision is made for me. No matter which option I'd take, I'd use the one that allows me to move as much money into retirement accounts, 401(k) etc. as quickly as possible.
- teej 10y ago
  If you're working in the Bay Area and making average wage for a software developer, your marginal tax rate is going to be 28%+. If waiting 12 months means you can lower your tax burden to the long term capital gains rate of 15%, that's a no brainer.
  - skorgu 10y ago
    AIUI, RSUs are treated as normal W-2 income when they vest.
    - emeritus 10y ago
      Right. Your cost basis is the price at vesting, so it's the same as if you bought the stock at market with cash for the same price.
      - thesimpsons1022 10y ago
        so is the capital gains tax only on the profit from the stock? wouldnt it be better just to sell instantly and not have so much of your money tied up into one asset anyway? Sorry if these are basic questions

by vmarsy 10y ago

mikestew 10y ago

big companies like Microsoft/Google/etc don't even offer most of their employees stock options, but instead they offer RSU (Restricted Stocks Units). Microsoft used stock options when I worked there, hence my use of it as an example.

taude 10y ago

MSFT was one of the big model companies for stock options and sharing the wealth around. I think they got rid of their stock option plan sometime under Blamer when the stock started paying a dividend.

skookum 10y ago
That's correct. It was shortly after Steve took over as CEO. At the time a lot of options were underwater and Microsoft offered a buy-back plan where one could get a lump-sum payment in place of those options. In retrospect taking the buyback was the right decision as the Microsoft options had a 10 year expiry and most of the underwater options didn't climb back within their 10 year window.

emeritus 10y ago

> The biggest decision is : Do you want to sell your stocks before or after the 1 year Long term capital gain wait, but that decision is common to all stocks. The decision is more along the lines of sell now vs. sell later. The LTCG decision is not nearly as important. The conventional wisdom is just to treat the RSU as the same as salary by selling immediately upon vesting. Since you're already employed and paid by them, holding equity in the company you work for is unnecessary additional risk.

btkramer9 10y ago
When the RSUs vest you usually have the option to take all and pay the appropriate tax when tax season comes around OR take a reduced amount to cover the taxes. Do you recommend/have a preference? What are the pros and cons?
- emeritus 10y ago
  I'm at a company that automatically sells enough RSUs at vest date to cover withholding (the remainder is deposited alongside the regular salary). So that decision is made for me. No matter which option I'd take, I'd use the one that allows me to move as much money into retirement accounts, 401(k) etc. as quickly as possible.
teej 10y ago
If you're working in the Bay Area and making average wage for a software developer, your marginal tax rate is going to be 28%+. If waiting 12 months means you can lower your tax burden to the long term capital gains rate of 15%, that's a no brainer.
- skorgu 10y ago
  AIUI, RSUs are treated as normal W-2 income when they vest.
  - emeritus 10y ago
    Right. Your cost basis is the price at vesting, so it's the same as if you bought the stock at market with cash for the same price.
    - thesimpsons1022 10y ago
      so is the capital gains tax only on the profit from the stock? wouldnt it be better just to sell instantly and not have so much of your money tied up into one asset anyway? Sorry if these are basic questions