RSUs: How They Work & How They Matter in Your Job Offer

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Welcome to Radhika’s Newsletter “Intent”. This is your 3x/month guide to purposeful living, wealth-building, and personal growth.

Happy Tuesday! I’m so excited to share this edition of Intent. Today’s topic is all about RSUs!

If you’ve ever been offered RSUs (Restricted Stock Units) or are hoping to negotiate for them in your next job, this one’s for you.

RSUs can be a huge part of your total compensation, especially in startups and tech companies. But a lot of us don’t learn how they actually work until we’re already in the job, signing offer letters we don’t fully understand.

So here’s your beginner’s guide: what RSUs are, how they vest, how they’re taxed, and how to negotiate for more.

What I’m Sipping On This Month

I’ve been reaching for Blue People Oolong this month. It has that deep, earthy flavor at the start, but as it cools just slightly, it smooths out into something softer and sweeter. I really love the sweet aftertaste, too! It’s gentle, not overpowering, and lingers just long enough to make you pause and want another sip.

There’s a comfort to it. It feels cozy without being heavy. Like the kind of tea you’d drink while journaling on a quiet afternoon or during a slow morning when you’re not in a rush to be anywhere. It’s easy to drink, but still layered with enough complexity to keep you curious.

One of my friends gifted me this tea and I just got to catch up with her recently making my heart so full! Just makes me happy to still sip on this tea from time to time

So… what are RSUs?

Restricted Stock Units or RSUs company shares your employer promises to give you but you don’t get them all at once. They’re “restricted” because you don’t fully own them until they vest. Once they do vest, you own the shares, and you can either hold them or sell them.

They’re usually part of your total compensation. For example, your total compensation might be $120k which includes $100k of base salary and $20k of RSUs that vest over a certain number of years. Typically the number of years the vesting cycle takes depends company to company. I’ve heard of RSUs vesting over 5 years, 4 years, and 3 years.

How does vesting work?

You earn your RSUs over time and most RSUs follow something called a “vesting schedule”, which is just a fancy way of saying: you earn the shares over time.

A common setup looks like this:

• 4-year vesting with a 1-year cliff

  • This means that you get 25% of the total amount after your first year, then the rest monthly or quarterly over the next 3 years. (which depends on your employer)

So if you leave before year one, you get nothing. If you stay all four years, you get it all.

But when do you actually get the shares? Usually when they vest, they get delivered to you. At that moment, they’re counted as income. This is important for tax reasons!!

How are RSUs taxed?

Now, this is where things get tricky.

When your RSUs vest, they’re counted as taxable income. That means on the day those shares are officially yours, the IRS treats it like you just got paid, except instead of cash, it’s in company stock.

So let’s say 100 shares vest today, and the stock price is $50. That’s $5,000 of income.

Even if you don’t sell a single share, that $5,000 gets added to your W-2 and you’ll owe ordinary income tax on that amount, just like your regular paycheck.

Most companies will help with this by selling a portion of your RSUs to cover taxes automatically (called “sell to cover”), but it’s still your job to keep track and make sure you’re withholding enough.

And here’s the tough part: If the stock price drops after the shares vest, you still pay taxes based on the original value at vesting time.

That’s why many people choose to sell their RSUs as soon as they vest. It’s called a same-day sale, and it helps avoid the risk of holding onto a stock that might go down in value. (But this depends on your strategy and risk tolerance!)

Before you go and sell, let’s talk about: Capital gains tax.

Here’s how that works:

• If you sell within one year of vesting, you’ll pay short-term capital gains tax (taxed like income).

• If you sell after one year, you’ll pay long-term capital gains tax, which is usually a lower rate.

So yes, you’re taxed twice: Once when the shares vest (as income) and again when you sell them (as capital gains).

The trick here is to plan ahead! Know your vesting schedule, track your tax impact, and decide whether to hold or sell based on your financial goals. If you have a CPA, this is a great conversation to have with them!

How do you negotiate your RSUs?

Companies don’t always budge on salary and more often than not, that base range is fixed.

But RSUs? There’s more room to play.

Here’s a tip: If they say they “can’t go higher on salary,” ask if there’s flexibility on equity compensation. 

You can ask for things like:

• A larger RSU grant (more shares upfront)

• A refresh grant in year 2 or 3 (especially common at startups or growth-stage companies)

And even if they say no, you’ve shown that you know how to negotiate your full package and not just the paycheck.

Something to think about: RSUs are often reviewed less frequently than base salary, so getting a better equity setup now can make a big difference down the line. Feel free to email me back if you want to talk through negotiation strategies!!

RSUs vs Stock Option: Same same, but very different

On the surface, RSUs and stock options might look similar and people mix them up a lot.

• They’re both forms of equity.

• They both tie part of your compensation to your company’s success.

• And they both show up in offer letters.

But the way they work is completely different. Here’s a quick breakdown:

Quick note for everyone reading:

RSUs are more common at large, publicly traded companies where the stock already has real value and can be sold quickly after vesting.

Stock options are more common at early-stage startups. The upside? You could buy shares at a low strike price and make a big return if the company grows. But there’s also more risk: they could end up being worth nothing.

The key is knowing what you’re getting into and how to make the most of it. Factor in how much risk you’re comfortable taking, what stage the company is in, and how much you believe in where it’s headed.

Downsides of RSUs

Let’s be real, RSUs aren’t perfect. They can be a powerful wealth-building tool, but there are a few catches to keep in mind:

1. They’re tied to your company’s stock.

If your company’s stock goes up, great, you win! But if it drops? So does the value of your RSUs.

2. You’re taxed before you sell.

When RSUs vest, they count as income. Even if you don’t sell them, you still owe taxes on the full value at vesting.

3. They can feel like golden handcuffs.

It’s common to feel locked in to your company because of the money you’d be leaving behind. And that can cloud your decisions when it comes to switching roles or taking a leap.

4. They’re not the same as a diversified portfolio.

RSUs might look like a big number in your offer letter, but remember: it’s still just one company’s stock. If most of your net worth is tied up in your employer, you may want to think about diversifying your portfolio!

Final Thoughts

If you’re new to RSUs, don’t worry. Most people learn this stuff on the job, often the hard way. But if you take the time now to learn the basics, you’re already ahead of the game.

The key to RSUs is about being prepared. Know when your shares vest. Set reminders. And start thinking about what you’d do with that money when the time comes.

The truth is, RSUs can feel confusing at first but they’re a great way to build wealth and something to keep in mind while negotiating your offer. They’re part of your paycheck. And one day, they might be the reason you’re able to take a break, buy your next home, or start that dream project.

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Thank you so much for being a part of the Intent community. I rely on word-of-mouth for growth. If you enjoyed this newsletter, I’d love for you to share it with a friend.
Your commitment to living with purpose is exactly why this space exists. Can’t wait to share more in the next edition!

Until next time,
Radhika
Creating a life of purpose, wealth, and growth

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