My employer will be giving us RSU, I’m trying to figure out how exactly it works and if it’s something that I can just cash out?
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An RSU is just you being given some number of stocks, likely as a result of performance, being at the company for some duration, etc. They differ from stock options in that with an option, you need to purchase them before you actually own the stock, whereas with an RSU, you just have the stock.
Now, whether or not you can just “cash out” the stocks depends on the company. If it’s publicly traded, I would assume you can. If not, then you would need to wait for some sort of secondary transaction, I would assume. Or maybe your company offers an alternate way to sell them, idk.
Your employer gives you stock, but it’s restricted. You might have to wait for it to vest before you can actually sell it.
When it vests, it’s a taxable event. You may have the option to ‘sell to cover’ where some of the stock is immediately sold to cover the necessary witholding (note – this might be more or less than you owe come tax season).
Once the stock is vested, it’s yours and you can do as you please. You can hold onto it and hope it increases in value or you can sell it immediately.
If it increases in value, you will owe additional capital gains tax (short or long term depending on how long you hold it from the vesting date).
RSUs don’t become shares until the vesting date, and you can’t sell or transfer them until they do vest. Once they do, then you can sell them as long as you’re in the trading window the company establishes to avoid insider trading
Basically it is a promise you will get N stocks of the company by date X.
When date X arrives, and you are still working for the company, your brokerage account will be up by N stocks, minus whatever was sold to pay for taxes and transaction fees. These stocks are considered ordinary income, so the value of the N stocks that day adds up to your W2 income.
You then hold your stocks in your brokerage account as if you bought it in the market. You can hold it or sell it, and any appreciation is considered capital gains/losses
You can cash them out after they fully vest. In my experience that’s usually 1-3 year but that number depends on what that company decides to do at that time
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