Women's Money Wisdom

Episode 269: RSU's Demystified: How Smart Women Manage Equity Compensation

• Melissa Joy, CFP® • Season 4 • Episode 269

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đź’¬ Are you leaving money on the table by not understanding your equity compensation?

Equity compensation is no longer reserved for top tech execs—it’s becoming a standard part of pay packages across industries. In this empowering and informative episode, Melissa Joy , CFP® breaks down the increasingly common but often misunderstood world of Restricted Stock Units (RSUs).

Whether you already receive RSUs or are considering a job offer that includes them, this episode is packed with essential knowledge to help you make confident, informed decisions.

💡 What You’ll Learn:

What RSUs Are - A quick breakdown of how they work and why they matter.

Vesting & Taxes - Why timing matters—and how to avoid surprise tax bills.

Women & Equity Pay - Why women often miss out—and how to change that.

Smart Strategies - How to handle vested shares and reduce risk.

Big Picture Planning -Ways to fold RSUs into your overall financial plan.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. And I'm here to help you make the most of it. Now let's get into the show. Just a quick note before we dive in. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are my own and those of my guests, and they don't necessarily represent those of any organizations that I'm affiliated with. For more important disclosures, please go to our webpage at pearlplancom. Now let's get started.

Speaker 1:

Welcome back to the Women's Money Wisdom Podcast. It's a solo episode today, but one I want you to stick around for, because this is a topic that many people are impacted by. If you aren't, you might be in the future, and it's underappreciated, misunderstood. We're going to talk about equity compensation and specifically restricted stock units, today otherwise known as RSUs. Now, you may or may not know that you are compensated with RSUs Not everyone is but if you work for a publicly traded company, it is likely that the company that you work for does award some forms of their compensation as restricted stock units. In fact, a research indicated that in 2021, according to Barron's more than 86% of companies use this type or form of compensation. That has grown from only 3% as of 2020. So you can see why you may or may not understand what these are, and so we work with many people who happen to have this form of compensation, and we know that there are often areas of opportunity to be educated, to understand planning strategies and just understand what it means. And when I said, stick around, even if you don't have this form of compensation, remember if you change positions or careers, this type of compensation may be critical to your overall employment package, and knowing what questions to ask or who to ask can be really helpful along the way. And if it's not impacted by you, it may be your spouse, your kids or your friends. So I hope you learned something in today's episode. So let's start just at the beginning.

Speaker 1:

What the heck is a restricted stock unit? A restricted stock unit is a type of equity compensation that gives you a grant that says that at some point of time in the future, if you remain employed by the company and in some cases you may even need to be employed in hitting kind of performance targets that you will receive shares in the future when you receive that grant. Those are typically not vested. That means that you don't have ownership of the shares yet, but you would normally have a schedule, a vesting schedule, that tells you when you're going to be receiving the shares yet, but you would normally have a schedule, a vesting schedule, that tells you when you're going to be receiving the shares. This is most. For the most part, this is issued through publicly traded companies. So the restricted stock units are a typical form of stock compensation, aka equity compensation, that is given to you when you work for a publicly traded company and it is a part of your compensation package. It's pay, just like you know, your regular paycheck that you get in direct deposit into your account. It goes on to your tax return, it goes on to your W-2 for your employer, and so when you receive and that's a lot of what we're going to be going into today is. Okay, I know I may be receiving this. Well, what does that mean, both tax-wise and what should I do with this stock that I'm receiving? It is much. The percentage for private companies and small companies that are using restricted stock units is much smaller, so it's most probable that you have these if you're working for a publicly traded company, like I already said. Plus, it's a bigger company, so large cap companies and mid cap companies are more typical of who is receiving restricted stock units. Like we said, though, if you do work for those types of companies, it is probable that at least some people in your company are receiving these shares, and here's a little bit about what we see in terms of different companies and how they treat restricted stock units.

Speaker 1:

In some cases, we have clients of ours who are recruited to be a top level executive at a company, and they may, in their employment package, get an RSU that has a vest schedule. That's when they actually receive the stock, versus having it unvested in a future offer. They may receive the stock if they hit certain performance requirements and or the company may need to hit some overall performance targets and this can be a way to recruit the person to the company. It can also help to keep them at the company. So that's one way that companies may offer these and those they may be just like for a small percentage of the highest, most highly compensated employees of the company. That means that in the offer package the company doesn't necessarily have to come up with all of the money that they're offering you all at once up front. So it would be different than like a signing bonus which is maybe paid to you toward the beginning of your employment, versus you have these targets or goals to stick around and hit certain performance metrics in order to get money later.

Speaker 1:

Another thing that we see is if a company had been a private company and it went public, usually if somebody was working for a private company, they may have received either incentivized stock options or non-qualified stock options. With company stock switches over to being publicly traded after their IPO, then employees may receive more restricted stock units in the future instead of those ISOs or non-qualified stock options. So it's much more typical to receive the RSUs after the company is public and in some of these companies every employee may be receiving some RSU grants, either annually, semi-annually or at different refresh points along the way. So certain companies, almost every employee, might receive this form of compensation, and maybe you can see why it's so important to understand this, because if you don't know what to ask in an interview process or look for, you may not understand that you may be able to receive more than just you know kind of the base salary offer, and then, in other cases, rsus could be issued periodically and much more randomly. Instead of being something that you're always receiving as a way to keep you at the company or as a standard format for compensation, instead you may be receiving standard format for compensation. Instead you may be receiving the money like as a one-time bonus, or you did a good job on this project, or perhaps the manager of a team may be able to offer some RSUs to certain employees. They may have a certain number of shares they can offer. We see that too. So there's no standard rules for how RSUs may work, but knowing they're out there is important.

Speaker 1:

What studies have shown and one in particular from the Socioeconomic Review in 2025, indicated that in the US, the gap in terms of compensation between women and men and of course we're talking on the Women's Money Wisdom podcast highlights, equity compensation can be part of the reason that women lag men in similar positions. Now, why does that happen? One may be not just understanding what to ask for and you may just, during an interview process, need to look into hey, is this form of compensation something you typically have? Make sure that you are cued in and dialed in in your conversations to know what to ask for. This may be something you search on, something like Glassdoor or something like that. Also, women are less likely than men. It's about a third of women who negotiate versus about a half of men, and sometimes people receive equity compensation after negotiating.

Speaker 1:

When there's not enough in the budget but the employer really wants to retain an employee or keep them there, then the RSUs may be a possibility. So understanding and knowing what is happening, kind of in employment context with restricted stock units can be really important. With restricted stock units can be really important. Now, when these RSUs are issued for someone, for you, then you likely are also receiving some documentation of how you'll be receiving those shares, and this again can be all over the map. Like we said, sometimes there's what's called cliff vesting and so in that case you wouldn't get your shares until maybe three or four years down the road. In other cases you might get a quarter of the shares right off after a year and then receive shares either monthly or quarterly. And so everybody has different vest schedules, although they tend to be a midterm, not immediate, so you're not getting those stocks three months later all in, but perhaps over time, or definitely typically not over a decade, more like over three or four years. And so then you know you have some kind of X factors to consider because you don't know what the stock will be trading at on that future date.

Speaker 1:

And we've certainly had clients who won big by the stock going up, getting issued maybe the equivalent of shares that were equal to $50,000. But when the stock vests over time perhaps the aggregate value of those shares is more like 100. It just depends. Or they may have been issued stock at a high and unbeknownst to them, the stock ended up going down and so then the shares would have had a lower value over time. But it's important to understand, kind of how the vesting schedule works and asking for documentation of how this will be. And this is important over time because sometimes the vesting schedules may change over time they may be slightly different depending, and it's important to really consider all of the factors and then in many cases you can coordinate between your financial planner and a CPA, which becomes a critical team if you are getting more equity compensation or have lower understanding of how these things work.

Speaker 1:

So when you get to that best date, one of the things that people may not understand is, on that day, whatever the price of the stock when you receive the stock is times, the number of shares that you receive on that day goes onto your tax return and it's taxed like ordinary income and it's taxed on your pay stub. You can keep track of that, but the default withholding rate is often lower than what your aggregate tax bill may be. And in some cases you have the opportunity if you just again and again are getting hit with taxes when it comes to your RSUs, to set a higher withholding rate on your pay stub so that some shares are sold in order to be withheld for your taxes, so you don't always end up having to owe later down the road and or be underpaid in so that you have penalties. That's something that's important to keep in mind, and what I tell people to do when the shares vest is to think, like making a decision of would I choose to buy these shares if I got the equity compensation in the form of cash on that day? Because many people think, oh, I can't sell them because there would be a penalty, there would be tax costs. But the tax costs are the same if you sell on the same day, whether you sell the if after that first day and you extend out, if you have shares more and more piling up.

Speaker 1:

You may have to deal with capital gains or capital losses, depending on where the price goes from there, but on that day in particular, it's as if you were awarded cash that you went to buy the stock, and so sometimes and this is just like an asterisk if you're sitting there with, oh, maybe even having to borrow money for your tax liability when it comes to the RSUs, and then you have piles and piles of the stock building up. Perhaps, I hope you work for a company that has had great stock returns. So you know, as shares got awarded over the years, you just had more and more of your great company stock. Well then you potentially have some concentration risk where your net worth is bouncing all around based on wherever your stock trades on any given day or year, and you may want to start to incorporate a strategy where you consider selling the stock on the day it vests and then going back and strategically selling shares that you've accumulated over time and certainly, if you're borrowing money, carrying credit card debt, don't have the money to pay for taxes. Look back to those shares that are adding to your tax bill and consider a strategy to get access to some of those funds to both pay the tax bill, perhaps diversify. Maybe you're going to put more money into your 401k, because this will fund your day-to-day needs, and so then you can both lower taxes and boost your retirement savings. All of these are possibilities.

Speaker 1:

It's not there's not like a singular, two-dimensional prescription for what you should do when you receive equity compensation. What I'll tell you, though, is it's just a little more complicated, it's not that difficult, but you but things change over time, and this is one great place where I love talking to clients about what they should consider when it comes to their RSUs, and we can help map out. Hey, here's the tax impact, here's places we can put money, here's the use of the funds, and here's how to diversify so that you don't end up just scratching your head saying I think I should do something. It's nice that I have the stock, but how does it translate into a better financial future for me now and over time? Now an important thing to consider is these forms of compensation are often used to keep people employed at the places that they are already working.

Speaker 1:

And so if you say at the places that they are already working, and so there, if you say you know, I've loved my income but I've made enough and now I'm going to retire, it depends on your company whether your unvested shares get to go over into your hands. And so it just depends on the way contracts are written as to whether you can retire and maintain your RSUs. But typically, if you're laid off or quit and aren't retirement age, you would typically walk away from those unvested shares. But again, keep an eye on the way things are granted to make sure that you understand how things would happen. You may have been, you know, kind of earmarking that future value of your invested shares, but if you're no longer working at that place of employment, they may not be yours. So I hope two things that you're hearing is when you leave, you may not have your invested shares, you would have your vested shares and also, as you're negotiating to enter the company, you may want to talk about whether the company typically offers RSUs and how they work, and would that be a part of your employment package?

Speaker 1:

So we've talked a little bit about taxes, and taxes can change over time, especially if you just had shares and shares piling up. Maybe you have $100,000 or even more in shares. We've seen clients with millions of dollars of their company stock in conjunction with their employee stock purchase plan, et cetera. Then you really need, you know kind of, to go through and thread the needle in a surgical manner in terms of planning for taxes. But that can be something that can be managed over time. It may be just important because the stock is trading at or near all-time highs, or you really need the funds you don't want to borrow for something, to know, going in what tax bills may be, but execute a sales strategy so that you can reduce your exposure to certain, you know, to your company stock.

Speaker 1:

There are different ways to use RSUs, like I said. So they can be a form of you know, just you end up buying it or not buying, but vesting and holding. They may be something where you convert to a more diversified or less risky portfolio. They may be used, like I said, to pay off debt, to pay your tax liability, to fund a bigger retirement strategy. If you find that you have too much concentration, then there are certain strategies to help you kind of get out of the stock. Um, but it's really important to know about diversification, to know about this form of stock and to be tax aware as you're investing in taxable accounts. Not to say that taxes shouldn't be paid on when you make money in investing, but knowing, going in, what that liability may be, so you can make informed decisions when it comes to what selling RSUs or any form of concentrated stock or any form of stock in general.

Speaker 1:

A couple other ideas that I have that integrate into a broader financial plan might include charitable donations of stock that you've owned for more than a year. So let's say that you had a bunch of RSUs that you ended up collecting just because you didn't get around to selling. You could turn around and use that stock for a charitable gift or maybe even give it to a donor advised fund, which we've talked about in past episodes, and then those shares could reduce your tax liability or free up a tax budget for you to sell a little bit more, but you might be giving away a tax liability if you did it the right way. A few more things that you may need to consider. One of them is that, for many employees who receive RSUs, they also have trading windows and they are only allowed to trade during certain periods of time, and so that is something that you need to integrate into the game plan of you know. You can't sell that stock every single day, and so making a you know calendar where you have a plan to be selling something at certain periods of time can be super helpful. And then also, just you know, making sure that you've aligned this form of compensation with your overall game plan can be really critical and important. There are ways to track, like our financial planning software has, ways for you to review your RSUs and what the future tax liability may be. So do know that there are certain technologies that allow you to track and review things.

Speaker 1:

The other thing that I would mention when it comes to these RSUs is sometimes because stocks individual stocks can have volatility and trade, you know, trade different in any given year. You may have either that big win because the stock has gone way up or a disappointing time where perhaps every year you get issued shares but you're being issued shares in a time period where the stock is trading lower. But a lot of times that the companies regularly issue those shares, they will end up saying, hey, we're kind of targeting perhaps like $25,000 for this employee and then, if the stock is trading down, they would actually issue you more shares. So it in essence be like kind of like receiving a grant at a low price and then hopefully the price has gone up over time. So there's a lot of interesting nuances that you might need to consider as you're evaluating it.

Speaker 1:

I do think it's so important over time that we get better language and understanding and personal financial literacy when it comes to equity compensation, because it is expanding so much. I would see it rarely for clients back in the day so much. I would see it rarely for clients back in the day and nowadays, both because we're interested in this area and we know we can give great advice in this area. We're just talking about it more and more. But whereas it used to be kind of on the coast with technology companies, now it's spreading around the country and to all sectors and areas of corporate America. So it is much more relevant, and especially for us women, being able to understand and talk with each other, like that's how people figure out like, oh, managers are awarding some of these shares.

Speaker 1:

Maybe I should ask about it. Or I think I may be paid lower than kind of standard market rate. Is this something you're offering if I were to come to the company new and now that I am someone who's employed and has been there a long time, is this a way you can tell me I'm doing a good job if my reviews are good? So increasing your literacy, keeping your ears open when you hear about it, and getting great professional advice, whether it's with a financial planner or also with your tax professional, can be a winning combination in order to maximize your strategy and game plan when it comes to your equity comp.

Speaker 1:

If you have additional questions, please don't hesitate to reach out. This type of planning is one of the things that we do day in, day out, so don't hesitate to reach out or find us at pearlplancom and go to the contact page to schedule a meeting to discuss your personal equity compensation situation. For those of you who listened in and learned something new, we'd love if you gave us a rating and review at the place that you're finding your podcast and with that, I hope you have a good week and we'll talk to you next week. Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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Melissa Joy, CFP

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