RSUs: Your Paycheck That Happens to Be in Stock
June 2026 · 10 min read
Restricted Stock Units are the standard equity grant at public tech companies now. If you work at Amazon, Google, Meta, Apple, or Microsoft, a big chunk of your total comp is RSUs — often $50K-150K+ per year at senior levels.
They're simpler than stock options. There's no strike price, no exercise decision, no AMT. You get shares, they vest, they're yours. But the simplicity hides two things that trip people up: the tax withholding trap, and the concentration risk that builds up silently over years of holding.
How vesting actually works (and why it's designed that way)
Your grant letter says "80,000 RSUs vesting over 4 years." That almost never means 20,000 shares per year. Here's how the most common schedules work in practice:
| Schedule | What happens | Who uses it |
|---|---|---|
| 1-year cliff, then quarterly | Nothing for 12 months. Then 25% vests at once. Then 1/16th every 3 months for years 2-4. | Startups, some public companies |
| Monthly, no cliff | 1/48th vests each month from day 1. Much smoother. No giant cliff. | Amazon (after year 1), some late-stage companies |
| Back-loaded | 5% year 1, 15% year 2, 40% year 3, 40% year 4. Amazon's infamous schedule. | Amazon initial grant |
The back-loaded schedule is a retention tool disguised as an equity grant. You burn 2 years at the company before the real money starts — and by then you've probably accumulated refresher grants that keep you on the treadmill. It's not evil, but you should understand what you're signing up for. At Amazon, year 3 and 4 comp is often 2-3x what it was in year 1. The people who understand this negotiate their signing bonus accordingly.
The 22% withholding problem
When RSUs vest, your employer sells some shares to cover taxes. The federal withholding rate for supplemental income is 22%. Here's the issue: if you make $300K+ total comp, you're in the 32-37% bracket. The 22% withholding isn't enough.
Real example:
You make $180K salary + $120K of RSUs vesting = $300K total.
Your marginal tax rate: 32% federal.
RSU withholding: 22% = $26,400 withheld.
Actual tax owed: 32% + state (~9% for CA) = ~$49,200.
April surprise: You owe $22,800. Not fun.
Two ways to fix this: increase your W-4 withholding to cover the gap, or make estimated quarterly payments. My recommendation: use the safe harbor rule. If you pay 110% of last year's tax liability through withholding (100% if AGI under $150K), you won't get penalized even if you owe more at filing time. For tech workers whose RSU income grows year over year, this is the cleanest approach — you just budget for the April check.
Double-trigger RSUs at startups
Private company RSUs are different. They have two conditions ("double trigger"):
- Time-based: You stay for the vesting period (same as public companies).
- Liquidity event: The company goes public or gets acquired.
Until both triggers fire, your RSUs are an IOU. If you leave before the IPO — even if you've already "vested" the time requirement — you get nothing. The shares never become real.
This matters for offer negotiations. If you're joining a pre-IPO company, the equity number on your offer letter is a guess at best. You need to think about it in expected value terms — not "400,000 RSUs at the current 409A," but "400,000 RSUs × probability of IPO × expected exit valuation ÷ dilution factor." Which is a lot of math, and most of the inputs are unknowable. Don't count pre-IPO equity in your net worth until it's liquid. Just don't.
Sell at vest or hold? (The argument I keep having)
I am going to give you the argument for selling at vest. I think it applies to 80%+ of people. Then I'll give you the counter-argument for the 20% where holding makes sense.
The case for selling: Your human capital (salary) is already levered to one company. Adding stock on top doubles the bet. If your employer goes through a rough patch, you could lose income and watch your portfolio crater simultaneously. Selling RSUs and buying a diversified index fund decouples these risks. Also, there's no tax penalty for selling immediately — your cost basis equals the vest price, so the gain is zero (or negligible).
The case for holding: If you work at a dominant company with strong moats, holding some percentage of RSUs has historically paid off enormously. Someone who held Amazon RSUs from 2015-2020 made more from stock appreciation than from salary. The counter to this is survivorship bias — you don't hear from the people who held Meta RSUs through the 2022 75% drawdown and panic-sold at the bottom.
My genuine advice: sell 70-80% at vest, hold 20-30% if you're bullish. This gives you upside exposure without making your financial life depend on one stock.
What happens to RSUs when you quit
Vested shares are yours. Period. Unvested shares disappear. There is no negotiation — they're gone the day you leave.
This is why timing your departure matters. If you have 15,000 RSUs vesting on June 15, don't give notice on June 10. Give notice on June 16. Those two weeks are worth real money.
Also: if you're leaving unvested equity behind, ask your new employer for a sign-on grant to compensate. This is standard practice. They expect the ask. "I'm leaving $X of unvested RSUs — can you match that as a sign-on?" The answer is usually yes.