4 ms·

> $1 of stock isn't worth $1 of liquid assets Er, why not? Only difference is I have to pay a $5 trading fee on Schwab to turn stock into cash. So I guess $10,

> $1 of stock isn't worth $1 of liquid assets Er, why not? Only difference is I have to pay a $5 trading fee on Schwab to turn stock into cash. So I guess $10,000 in stock is worth $9,995 in liquid assets. > even then, you're putting a lot of eggs in one basket. Only if you hold the stock. Which nothing forces you to do. I can (and do) sell all of my tech company stock on the day it vests and buy other assets instead. I think you must have the wrong mental model of how RSUs work. Nothing forces you to hold the stock once it vests. It's yours, you can sell it and do whatever you want with the money. Usually when people at a public company say "I make X", X is the sum of base salary, cash bonus, and the value of RSUs that vest in a year.

sjg007 9y ago
You can hold it to reduce taxes right?
- umanwizard 9y ago
  Not that I'm aware -- how would holding it reduce taxes? I'm not sure I understand.
  - kspaans 9y ago
    Long Term Capital Gains Tax treatment when you sell (20%) after at least one year vs regular Income Tax treatment if you sell right away.
    - traek 9y ago
      Yes, but that's only on the capital gains. You still pay income tax on the value of the equity when it's granted.
    - umanwizard 9y ago
      If the stock is $100 when it vests, you pay income tax on $100 per share, whether you hold or sell. It's exactly the same as if you got paid that money in cash and then decided to buy shares (after paying tax). If you then hold and it goes above $100 while you held, you pay capital gains tax (short or long-term, depending on how long you hold) when you sell. Again, exactly the same as would happen if you bought those shares yourself with a cash bonus. Getting shares really is the same as cash, for tax purposes.
    - ohazi 9y ago
      No. RSUs are not stock options. They're taxed at their current value when they're given to you.
      - kspaans 9y ago
        Right, I was assuming sjg007 was talking about tax treatment of the capital gains if you hold onto the stock after the RSUs vest.
        umanwizard 9y ago
        I still don't get how there's any way holding it instead of selling it reduces taxes. If you sell on vest, you pay income tax and 0 capital gains. If you sell after vest, you pay the same amount of income tax, and possibly nonzero capital gains.
        kspaans 9y ago
        Yes, I think the clarification needed was that you can reduce capital gains tax rates but not income tax rates.
        klipt 9y ago
        But you don't have to hold $company stock to do that. You can sell on vest for 0 capital gains, then buy diversified index funds and hold those long term.
        kspaans 9y ago
        And that's indeed what I do! ;)
        skookum 9y ago
        There is no clarification to be made. There is no way to reduce taxes on RSUs by holding onto them longer. When $100 of RSUs vest, you get taxed on $100 of income. You can either keep the stock or immediately sell it with no further tax event related to that initial $100 whichever of the two options you choose. If you keep the stock, it is equivalent to having bought $100 of stock at that instant. Psychology aside, the hold versus sell-on-vest decision should be predicated entirely on whether you would have bought that amount of stock with your own cash at its vest price.

sjg007 9y ago

You can hold it to reduce taxes right?

umanwizard 9y ago
Not that I'm aware -- how would holding it reduce taxes? I'm not sure I understand.
- kspaans 9y ago
  Long Term Capital Gains Tax treatment when you sell (20%) after at least one year vs regular Income Tax treatment if you sell right away.
  - traek 9y ago
    Yes, but that's only on the capital gains. You still pay income tax on the value of the equity when it's granted.
  - umanwizard 9y ago
    If the stock is $100 when it vests, you pay income tax on $100 per share, whether you hold or sell. It's exactly the same as if you got paid that money in cash and then decided to buy shares (after paying tax). If you then hold and it goes above $100 while you held, you pay capital gains tax (short or long-term, depending on how long you hold) when you sell. Again, exactly the same as would happen if you bought those shares yourself with a cash bonus. Getting shares really is the same as cash, for tax purposes.
  - ohazi 9y ago
    No. RSUs are not stock options. They're taxed at their current value when they're given to you.
    - kspaans 9y ago
      Right, I was assuming sjg007 was talking about tax treatment of the capital gains if you hold onto the stock after the RSUs vest.
      - umanwizard 9y ago
        I still don't get how there's any way holding it instead of selling it reduces taxes. If you sell on vest, you pay income tax and 0 capital gains. If you sell after vest, you pay the same amount of income tax, and possibly nonzero capital gains.
        kspaans 9y ago
        Yes, I think the clarification needed was that you can reduce capital gains tax rates but not income tax rates.
        klipt 9y ago
        But you don't have to hold $company stock to do that. You can sell on vest for 0 capital gains, then buy diversified index funds and hold those long term.
        kspaans 9y ago
        And that's indeed what I do! ;)
        skookum 9y ago
        There is no clarification to be made. There is no way to reduce taxes on RSUs by holding onto them longer. When $100 of RSUs vest, you get taxed on $100 of income. You can either keep the stock or immediately sell it with no further tax event related to that initial $100 whichever of the two options you choose. If you keep the stock, it is equivalent to having bought $100 of stock at that instant. Psychology aside, the hold versus sell-on-vest decision should be predicated entirely on whether you would have bought that amount of stock with your own cash at its vest price.