What Should You Do With RSUs? A Smart, Tax-Aware Strategy to Sell and Diversify

If you receive Restricted Stock Units (RSUs) as part of your compensation, you’re not alone. You’re also sitting on one of the most commonly mishandled parts of a financial plan.

RSUs can be an incredible wealth-building tool, but without a clear strategy, they can quietly create a large and risky concentration in your company’s stock. That’s something I regularly see when clients come to me for the first time.

The issue isn’t that company stock is “bad.” It’s that too much of any one stock introduces unnecessary risk. And when that stock is the company that employs you, the risk is even greater. In a worst-case scenario, which isn’t uncommon in the startup world, your company could go under. Not only would you be out of a job, but that valuable company stock position is now worth nothing! That’s a double hit you don’t want.

Because of that, the goal with RSUs isn’t just to hold them and hope for the best. It’s to be intentional about how they fit into your overall financial picture. So let’s break down how to be strategic with this lucrative benefit. 

The Simple Strategy for Newly Vested RSUs

For newly vesting RSUs, the strategy is actually very straightforward.

When RSUs vest, their value is taxed as ordinary income. That means the price on the day they vest becomes your cost basis. If you sell the shares right away, there is typically little to no capital gain, because you’re selling at (or very close to) that same price. 

In other words, from a tax perspective, it’s no different than receiving a cash bonus and investing it. (For more on the tax impact of RSUs, see our blog post on this: Basics of Restricted Stock Units: How RSUs Are Taxed and When You Pay Taxes). 

This is why, in most cases, the cleanest and most effective strategy is to sell RSUs as they vest and reinvest the proceeds into a diversified portfolio. It keeps your investments aligned with your overall plan and prevents your portfolio from becoming increasingly concentrated in a single stock over time.

A common pushback I hear is, “But I believe in my company.” That may very well be true, and it doesn’t mean you need to eliminate your exposure entirely. If you continue working there, you already have significant exposure through your income and future RSU grants. You don’t need to double down by holding large amounts of vested shares on top of that. 

In fact, I’ve worked with many senior executives at publicly traded companies, and the approach is nearly always the same: aside from any required ownership guidelines, they hold the shares they need to hold and systematically diversify the rest.

When You Already Have a Large RSU Position

Where things get more complex is when someone has already accumulated a significant position in company stock. 

This is incredibly common. By the time many people come to me, they’re sitting on hundreds of thousands of dollars (or even millions!) of vested RSUs, often with substantial unrealized gains. And as the number of vested RSUs increases, your next steps can feel even more precarious. 

If you’re in this spot now, the question isn’t simply “Should I sell?” It’s “How do I unwind this in a smart, tax-efficient way?”

Now you’re balancing two competing priorities. On one hand, you want to diversify and reduce risk as quickly as possible. On the other hand, selling everything at once could create a large tax bill. The right approach is usually somewhere in the middle.

A Practical, Tax-Aware Selling Strategy

The first step is to look at your shares by individual tax lots. Not all RSUs are the same. Some may have large gains, some small gains, and some may even be at a loss. Breaking them out this way gives you flexibility.

If any shares are currently at a loss, those are typically the easiest decision. Selling them allows you to realize tax losses, which can be used to offset gains from other RSUs you want to sell off or realized capital gains elsewhere in your portfolio. Those losses can also be used to reduce your taxable income. That’s a clear win.

One important caveat here is to be mindful of wash sale rules. If you’re continuing to buy shares through an ESPP or planning to exercise stock options, you could inadvertently trigger a wash sale and lose the ability to claim those losses for tax purposes. This is an area where a little coordination can go a long way.

From there, I generally recommend prioritizing shares with the highest cost basis when selling positions that have gains (while avoiding short-term gains when possible). This approach gives you the greatest reduction in concentration risk for the least tax impact. It’s what I often describe as getting the biggest “diversification bang for your tax buck.”

Rather than trying to sell everything at once, it’s helpful to set a clear, intentional target for each year. For example, you might decide to realize $50,000 in long-term capital gains this year, then repeat that process over the next several years until the position is fully diversified. In some cases, especially when the position is very large, it may make sense to move more aggressively.

As you do this, it’s important to plan ahead for the tax impact. That means estimating your federal and state taxes on the realized gains, setting aside funds to cover those taxes, and coordinating with your CPA to make sure everything is aligned with your broader tax picture.

Thinking About Timing and Flexibility

If you expect your income to fluctuate over the next few years, that can create additional planning opportunities. Lower-income years are often ideal for realizing larger gains, while higher-income years may call for a more measured approach.

That said, many people either don’t have visibility into future income or expect it to remain consistently high. That’s perfectly fine. The key is not to overcomplicate the strategy. Start with a plan, stay flexible, and adjust as your situation evolves.

The Behavioral Side: What Gets in the Way

Even when the strategy is clear, emotions can make execution difficult. There are a few common mental traps that come up over and over again.

Some people hesitate to sell newly vested shares because they want to wait a year for long-term capital gains treatment. In reality, this often means taking on additional risk for a relatively small tax benefit. If you sell shortly after vesting, there is typically little to no gain on those shares, sometimes even a slight loss. Even better, if you’re able to set up a 10b5-1 plan, you can sell shares immediately upon vesting at the vest price, resulting in no capital gains or losses.

Others don’t want to sell shares at a loss because it feels like “locking in” that loss. But from a tax perspective, those losses are actually valuable.

On the flip side, it can also be hard to sell shares that have gone up significantly. It feels good to hold winners, but that’s often where concentration risk builds.

And one of the most common tendencies is wanting to “wait for the stock to come back” after a decline. Unfortunately, markets don’t work that way. A stock doesn’t owe you a recovery.

One of the most helpful ways to reframe all of this is to ask a simple question:

If you had cash today, would you choose to invest it in your company’s stock, or would you invest it in a diversified portfolio?

Your answer to that question usually makes the right decision much clearer.

Final Thoughts

RSUs are a powerful form of compensation, but they require intentional planning. Left unmanaged, they can create unnecessary risk. Managed well, they can be a key driver of long-term wealth.

The goal isn’t to eliminate taxes entirely or perfectly time the market. It’s to reduce concentration risk, manage taxes thoughtfully, and align your investments with your broader financial goals.

If you’d like help building out a thoughtful strategy for your RSUs, or simply want to better understand the next steps for your specific situation, you can schedule a short introduction call with me here. There’s no cost or obligation to the call, and sometimes talking about complex situations like this out loud can give you the clarity you’ve been searching for.

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About the author
Carla Adams is a CERTIFIED FINANCIAL PLANNER® practitioner who specializes in helping women build strong financial plans around their equity compensation, including Restricted Stock Units (RSUs) and company stock options. With over 15 years of experience in financial services, Carla has in-depth knowledge and expertise geared toward helping clients with complex financial situations. She enjoys boiling down complicated scenarios through practical examples and down-to-earth conversations.