Your MoneyOnFIRE plan includes RSU income in your FI simulation and generated two action items: sell RSUs on each vest date and set calendar reminders for upcoming vests. The engine already handles the math — it deducts taxes at vesting, sells enough shares to fund higher-priority items in your waterfall, and retains the rest as company stock in your portfolio. This page covers the two decisions you need to make each time shares vest.
What to Do on Vest Day
Each vest date is a decision point. Follow this checklist every time shares land in your brokerage account.
Confirm shares have settled
Log into your equity compensation brokerage (typically E*Trade, Schwab, or Fidelity). Verify the correct number of shares appears and the vest has settled. Settlement usually takes one to two business days after the vest date.
Verify tax withholding
Most employers use “sell to cover” — they automatically sell a portion of your vesting shares to pay taxes. Check your brokerage statement or pay stub to confirm federal, state, and FICA withholding was applied. If your employer withholds at the flat supplemental rate (22% federal), you may owe additional tax at filing if your marginal rate is higher.
Sell and redirect proceeds
Place a market order during market hours for the shares you want to sell. Proceeds settle in two business days (T+2), after which you can transfer them to fund your next waterfall priority — IRA contribution, debt paydown, or taxable brokerage account. Check your action checklist to see which step is next in your plan.
Set a reminder for the next vest
Quarterly vests happen on a predictable schedule. Add the next vest date to your calendar now so you repeat this process promptly. This is the second action item in your plan.
What Taxes Are Withheld at Vest
When shares vest, their market value is taxed as ordinary income — the same as your salary. Your employer withholds taxes automatically, but the withholding rate may not match your actual marginal rate. Use the breakdown below to estimate what you should expect for a typical quarterly vest.
Where Your $15,000 Vest Goes
Check for Under-Withholding
If your total income (salary + RSU vests) pushes you into the 32% or 35% federal bracket, the default 22% supplemental withholding rate will leave you short. You can either request additional withholding through your employer's benefits portal (update your W-4) or set aside the difference in a savings account for tax time.
Sell or Hold: How to Decide
Your plan defaults to selling on the vest date because after-tax vested shares are no different from any stock you could buy on the open market. There is no built-in advantage to holding company stock over a diversified index fund. That said, here are the situations where each approach makes sense.
Sell on Vest Date When
- Company stock already exceeds 10% of your total portfolio
- You have higher-priority waterfall items to fund (IRA, debt, emergency fund)
- You want to reduce concentration risk — your salary already depends on this company
Consider Holding When
- You want long-term capital gains treatment (hold 12+ months for 15–20% rate vs 30%+ short-term)
- The stock has dropped below your vest-day price and you want to harvest the tax loss
- Company stock is below 10% of your portfolio and you are comfortable with the concentration
The comparison below shows how these strategies play out over 10 years on a $45,000 starting position. The expected return is similar, but the risk profiles are very different.
Priya's $45k in Company Stock After 10 Years
Key insight: The first two scenarios produce the same return—but only the diversified one eliminates single-stock risk. Holding is a bet that your company will outperform the entire market, while your salary already depends on that same company.
Watch for Concentration Risk
If you receive annual refresher grants, overlapping vests can cause company stock to accumulate faster than you realize. With four-year vesting and annual grants, your RSU income reaches steady state (4x one grant) by year four. If you hold rather than sell, your portfolio can quickly become dominated by a single stock.
Overlapping RSU Grants Over 5 Years
Each annual $60k grant vests $15k/year over 4 years. By year 4, all four grants overlap.
A Rule of Thumb
If company stock exceeds 10–15% of your total investable assets, the concentration risk starts to outweigh any potential upside. Your MoneyOnFIRE plan tracks what percentage of your FI number is held in RSU stock — check the RSU section of your results to see where you stand.
The Two Tax Events You Need to Track
RSUs trigger taxes at two moments. Confusing them is the most common mistake.
At Vest: Ordinary Income
The market value of your shares on the vest date is taxed as ordinary income. Your employer withholds automatically. This happens whether you sell or hold — vesting itself is the taxable event.
At Sale: Capital Gains
If you hold after vesting and sell later, any gain above the vest-day price is a capital gain. Under 12 months is short-term (taxed at your ordinary rate). Over 12 months is long-term (15–20% federal). If the stock dropped, you have a capital loss you can use to offset other gains or deduct up to $3,000 per year.
If you sell on the vest date — as your plan recommends — there is no second tax event because there is no gain or loss to report. The vest-day tax is your only tax obligation.
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