RSU Rich, Portfolio Poor? Balance Your Wealth and Reduce Risk

By Nathan Lee, CFP®, BFA

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Restricted Stock Units (RSUs) can be both a blessing and a burden. They represent the hard work you've put into your career but also tie a significant portion of your wealth to a single company—which can feel risky. So, how do you strike the perfect balance between benefiting from your company's growth while securing your financial future?

Unlike your salary, which hits your bank account in predictable intervals, RSUs are subject to market swings, company performance, and even broader economic conditions. This can make them feel like both a golden ticket and a financial landmine.

When your RSUs are tied to the same company that provides your paycheck, you're doubling down on a single point of financial dependency. It's like having your entire investment portfolio riding on the same horse in a race—exciting, sure, but nerve-wracking if that horse stumbles.

On the flip side, RSUs can be a powerful wealth-building tool, especially if your company is on a growth trajectory. The key is finding the sweet spot where you’re still rooting for your company's success without betting your entire financial future on it.

So, how do you strike the perfect balance between benefiting from your company's growth while securing your financial future? I’ll share two real-life stories that demonstrate how strategic equity compensation planning can help.

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Equity Compensation Planning: The Foundation for Smart RSU Management

Consider Allison, a tech professional in her mid-30s working for one of the Mag 7 companies in NYC. This was her first high-paying job, pulling in over $250K annually, and she suddenly found herself sitting on more than $100K in vested RSUs, with another $200K scheduled to vest in the coming years. At first, she felt like she was riding the wave of her company's success. After all, who wouldn’t be optimistic when you're part of a tech giant?

But as her vested shares grew, so did her anxiety. What if the company hit a rough patch? What if the market took a nosedive? She and her partner considered buying a home in NYC, but the idea seemed financially out of reach.

When we started working together, we focused on one key question: What do you need to feel financially secure? For Allison, it was owning a home where she could start a family. So, we analyzed her cash flow, upcoming bonuses, and RSU vesting schedule. We discovered she could easily afford a down payment when her next bonus hit.

The plan? Begin liquidating some of her vested RSUs to secure the down payment. I reminded her that even if the company’s stock soared, she'd still benefit from her unvested shares. Plus, she'd continue to receive more as her career progressed. We shifted the proceeds into stable income-generating investments, yielding around 4% annually. This approach provided peace of mind, knowing that her down payment wasn’t at the mercy of market volatility.

Fast forward two years: Allison and her partner purchased a beautiful home—one even nicer than they had initially imagined. The best part? They still cheered for her company's stock without the fear of losing their financial foundation.

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Selling RSUs: When Holding On Feels Safe But Isn't

Let's shift gears to Mike, a Senior Vice President at a major bank in his late 50s. Mike had lived through the 2008 financial crisis and vowed never to be overexposed to bank stocks again. Fast forward 12 years, and guess what? He was sitting on a million dollars in vested bank RSUs.

When I asked him why, given his past experience, he admitted, "The banking system is different now—more conservative, more regulations." Fair point. But then I asked, "What if you're wrong? What if the stock tanks and doesn’t recover?" That hit a nerve. The thought of derailing his early retirement plans was unsettling.

We had a candid conversation about diversification. Mike realized he was heavily overweight in bank stocks and missing out on other sectors, like technology, which had significantly outperformed banks over the past decade.

I asked Mike if he would invest a million dollars in his bank's stock if he didn't work there. His response was telling: "Of course not!" That was the lightbulb moment for Mike. After our exercise, he realized he had forgotten one of the core principles he had sworn to himself after living through the financial crisis. He would not be over-concentrated on any one industry.

We developed a plan to gradually diversify his holdings over six months (Our conversation was mid-year), reducing concentration risk while moving his tax burden over two years. We also set a rule: if his bank stock ever exceeded a certain percentage of his net worth, he'd sell more. This strategy provided balance, allowing Mike to enjoy the potential upside of his company's stock while protecting his retirement goals.

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The Takeaway

Allison and Mike had one thing in common: emotional ties to their RSUs. Whether it’s optimism about your company’s future or fear of missing out, emotions can cloud judgment when it comes to equity compensation.

That’s where having a financial plan makes all the difference. Diversifying doesn’t mean giving up on your company; it means securing your financial future while still benefiting from its success.

In summary:

• Identify your financial goals: Whether buying a home, planning for retirement, or securing your lifestyle, knowing your objectives helps guide decisions regarding RSUs.

• Diversify strategically: Balance your RSUs with other investments to reduce risk while maintaining growth potential.

• Stay emotionally grounded: Recognize that emotional attachment to your company can lead to overexposure. Objectivity is key.

• Have a plan: Work with a financial advisor to create a tailored strategy that aligns with your goals and risk tolerance.

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Let’s Build Your Plan Together

Managing RSUs can be like navigating New York City—it helps to have a local expert who knows all the shortcuts and potential pitfalls. So, if you’re sitting on a pile of RSUs and feeling unsure about what to do next, let’s talk. At Servet Wealth Management, we specialize in helping professionals like you transform their equity compensation into lasting wealth.

Whether you're dreaming of that perfect Brooklyn brownstone or planning your exit strategy, we're here to help you make sense of your RSUs and build a financial plan that works as hard as you do.

If you’re ready to take control of your financial future, let’s connect. Schedule a consultation with our team, and let's discuss how we can help you make the most of your equity compensation. You can also find me on LinkedIn, where I regularly share strategies focused on helping you reach your financial goals.

Remember, your RSUs are more than just compensation—they're opportunities. The question is: are you making the most of yours?

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.

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