Top Reasons To Sell Restricted Stock Units On The Vesting Date

Jonathan Satovsky
Jonathan Satovsky, CFP®, ChFC®, CIMA®, CPWA®

Good afternoon, this is Jonathan Satovsky of Satovsky Asset Management.

On today’s episode of wisdom, wealth and wellness, I want to talk about restricted stock units.

Many corporations give restricted stock awards or units to employees as an incentive for long-term ownership stake in the success of the business.

And these normally vest over three years; a third, a third, a third.

And on the vesting date, which often happens in February or March or August, whatever date they’re granted, it is our typical suggestion that employees take the action to sell those shares on the vesting date.

And the reason why includes several factors:

Number one, the employer generally reloads or gives additional grants each year so you already have a stake in the business that’s growing.

Number two, it’s taxed as if it you got a bonus.

And to highlight [an example], if someone got a bonus of $100,000 and $40,000 came out on taxes, would you take the $60,000 cash and go out and buy that stock on that particular day?

The vesting is in effect that action, so your cost basis becomes the date of vesting. Not the date the grant was made but the date of vesting.

Very important consideration.

So remember, you concentrate to get rich and diversify to stay rich. It is prudent financial planning policy to take some chips off the table; and on the vesting date.

Remember, trim back your issues; you’ll get reloaded. You can reinvest and look forward to continue to build your wealth for many generations to come.

On that, have a happy healthy day and good luck on your own journey for wisdom, wealth and wellness.

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Video Recorded February 23rd, 2021
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