When Should I Sell RSUs? Mariner Wealth Advisors on Vest-Day Sales

What holding vested RSUs out of loyalty can cost

Executives who keep every vested share "to show faith" or "for the long-term rate" are making a fresh buy decision at every vest, usually without noticing.

Take Kwame (hypothetical), 44, a divorced general counsel at a biotech company who shares custody of two children. He has never sold a vested share. About $600,000 of RSUs vest each year, and his vested holdings have reached $900,000. A 40% drop would cost him $360,000. Selling everything would cost about $35,700 in tax, assuming a 23.8% rate on his gains. The drop is roughly ten times the tax.

The ordinary income tax on each vest is owed whether he sells or holds. Holding doesn't avoid it. It only adds market risk.

And there's a bigger layer. Kwame's salary and his next $600,000 a year of vests already depend on the same company. The vested shares are a third bet on one employer.

Would you buy your company's stock with this cash today?

Picture each vest as cash that has already cleared payroll tax. Would you spend that cash today to buy that many shares of your employer at the current price? If not, sell at the next open trading window.

The value reported as wages at vest becomes your basis. A same-day sale therefore produces roughly zero gain. Only price movement after the vest is taxed.

There are honest exceptions. A stock ownership guideline, a closed trading window or a pending preclearance can delay a sale. Guidelines and 10b5-1 trading plans have their own pages, so one sentence each here: a guideline sets a floor you must keep, and a 10b5-1 plan sets trade instructions in advance so sales can run even when you later hold inside information.

Before Mariner Wealth Advisors recommends keeping any vested shares, it compares the position with a diversified portfolio of the same value. It doesn't lean on a forecast for the company's next quarter.

Sell at vest, sell over twelve months or hold: what each one costs

Look at two columns. The tax barely changes between selling now and selling over a year, but the exposure column changes a lot.

The table uses Kwame's $900,000 of vested shares, $750,000 basis, all lots held over a year. Selling everything taxes only the $150,000 of growth: $150,000 × 23.8% (an assumed 20% long-term rate with the 3.8% surtax on investment income added, for illustration) = $35,700, leaving $864,300 to diversify. Selling $225,000 a quarter leaves $450,000 held at month six, and the same 40% drop then costs $180,000.

Now the loss side. If Kwame's held shares fell 40%, his $150,000 gain would become a $210,000 loss ($540,000 value against $750,000 basis). Beyond any capital gains, he could deduct only $3,000 a year against salary. Investing involves risk, including loss of principal.

• Sell at vest, pro: no added tax, immediate diversification, one decision per vest. Con: no upside if the stock rallies, and sales must fit trading windows.
• Twelve-month staging, pro: less regret risk, and gains can split across two tax years if the schedule crosses January 1. Con: months of exposure remain.
• Hold, pro: keeps upside and long-term treatment on future growth. Con: a fall turns gains into losses, and beyond capital gains those offset only $3,000 of ordinary income a year.

Do you pay tax twice if you sell at vest? Myths that keep executives holding

No. The vest is taxed once as wages, and a same-day sale has a basis equal to that value, so there's little or nothing left to tax. The double tax only appears when a broker reports a zero basis and nobody corrects it.

Myth: you must hold a year to avoid tax. Holding more than one year after vest changes the rate only on growth after vest. On a $150,000 vest that gains 10% ($15,000), long-term treatment at an assumed 23.8% versus 40.8% saves $2,550, while the full $150,000 stays at risk. That is the most common mistake, and its price is far larger than the saving if the stock falls.

Myth: an insider who sells looks disloyal. Executives routinely sell through open windows and preclearance, and boards set ownership guidelines precisely so people can diversify the rest.

Myth: waiting until a fallen stock "gets back" to the vest price is safer. The loss can be harvested now. But a new RSU vest within 30 days before or after the sale counts as a purchase under the wash-sale rule and can disallow part of the loss.

Does the answer change at 44 versus 60, or at $50,000 versus $900,000?

The rule stays the same at any age or size; what changes is how urgently and how carefully you sell. Younger executives have more paychecks tied to one employer, older ones have less time to recover, and bigger backlogs need a lot-by-lot plan.

At 44, Kwame has two decades of paychecks ahead, all from the same employer. That already concentrates his future earnings, which argues for selling vested shares.

Someone at 60 who is three years from retiring has less time to recover from a 40% drop and needs the money sooner. Selling at vest matters more, not less.

A $50,000 position on a $2 million balance sheet is a small decision, and a standing sell-all-at-vest election costs nothing to run. A $900,000 backlog with older low-basis lots needs a plan. Gifts of long-held shares can move gains out of your return, and exchange funds can spread one stock across many.

Size changes how to sell the backlog, not the rule. New vests still get the "would I buy it?" test on the day they arrive. Our concentrated stock planning and equity compensation pages go deeper.

How to set up a vest-day sale, step by step

Setup takes an afternoon, once. After that each vest runs on its own, apart from the trading-window check.

• Step 1, you and legal/compliance: check the insider trading calendar and preclearance rules for each vest date. Kwame, as general counsel, may run that calendar himself and still has to follow it.
• Step 2, you in the stock plan portal: change the default from sell-to-cover to sell-all, or enter a standing sale instruction if the plan offers one.
• Step 3, Mariner Wealth Advisors: write down the target diversified allocation for the proceeds before the first sale, so cash doesn't sit idle. For the backlog, it ranks lots by gain and sells highest-basis lots first, using specific identification.
• Step 4, you and your CPA at tax time: compare the Form 1099-B with the plan's supplemental statement. Brokers often report RSU basis as zero or leave it blank, and the basis must be corrected on Form 8949 or the vest is taxed a second time.

Questions for your advisor and a checklist before your next vest

Bring the questions to an advisor and run the checklist before each vest. The withholding gap has its own article, so that last line is only a reminder.

This page covers vested shares only. It doesn't settle unvested RSUs, change-in-control terms or shares a guideline requires you to keep. If vested stock is a small slice of a large diversified portfolio, holding some is a reasonable choice.

Mariner Wealth Advisors meets with executives by video and phone, and you can use the request form to ask for a review of your vested lots and sale plan. Put your next vest date in the calendar with the sale decision already made.

• What share of my net worth, counting unvested RSUs, depends on my employer?
• Which lots would you sell first, and what is the tax on each?
• Where do the proceeds go on the day of the sale?
• How do the sales fit my trading windows and any ownership guideline?
• What happens to unvested RSUs if I leave?
• Checklist: next vest date and dollar amount.
• Checklist: is the window open that day?
• Checklist: sale election set in the portal.
• Checklist: destination fund for proceeds chosen.
• Checklist: lot list with vest-date basis saved.
• Checklist: cash set aside for any tax withholding doesn't cover.