RSUs Vesting Soon? A Guide to Sell, Hold, and Reinvest

If you have RSUs vesting soon and live in Maryland, you are not alone in asking: What is the right strategy — sell, hold, or something in between? Should I reinvest the proceeds? What else should I think through before I click anything?

At Allset Wealth, we help tech professionals turn equity compensation into a clear plan. This guide walks through the decisions in the order that usually matters most.

Meet James: four questions before vest day

Names and details changed to protect privacy. For education only — not personal tax or investment advice.

James is 42, lives in Rockville, and works at a Maryland biotech company.

· Salary: $250,000

· RSUs vesting next month: $200,000

He came to us with four questions:

· What is a good strategy to deal with RSUs?

· Should I sell or hold?

· If I sell, what should I buy?

· What else should I consider before doing anything?

1. Hold or sell? Separate how you feel from how you invest

The one honest question

"If my company paid me $200,000 in cash today, would I use it all to buy my employer's stock?"

If the answer is no, selling most or all at vest is a reasonable default — not a vote against your company.

"But I feel connected to the company"

Many people don't want to sell because they feel loyal. They helped build the product. They trust leadership. Selling can feel like betraying the team.

That feeling is human. But investing is different.

Think of it as risk management, not disloyalty:

· You can believe in your company and cap how much of your wealth rides on one stock.

· Your paycheck already ties you to the company. Your entire nest egg doesn't need to as well.

What if the stock drops hard?

James's friend worked at a company whose stock trades under ticker CRM. Say 50% of her portfolio was employer stock. In one bad year, the stock dropped roughly 40%.

She didn't lose 40% of her job — she still had her salary. But her investment wealth shrank by about 20% overall.

Now imagine that same drop when you're 15 years from retirement, counting on that money for college, or planning to scale back work. A 20% hit on investable assets isn't a line item on a spreadsheet — it's years of savings undone.

Would you choose that outcome if the same $200,000 were cash in your hand?

Probably not. That's the point: separate personal feelings from the investment decision.

Simple guideline many fiduciaries use: keep employer stock at 10–20% or less of investable assets.

You can stay proud of where you work. You just don't have to concentrate there.

2. Tax implications when RSUs vest and when you sell — plus withholding

Once James settled the sell-vs.-hold question, we mapped the tax side. RSUs are like a bonus paid in stock — and the tax rules are straightforward, but easy to underestimate.

When tax is due

RSU and Tax implications.

James's vest: $200,000 of shares hit his W-2 as income. That $200,000 is also his cost basis. If he sells later at $250,000, only the $50,000 gain gets capital gains treatment.

Maryland note: RSU income is taxed as wages — state plus county (Rockville sits in Montgomery County).

Is default withholding enough?

Companies often withhold 22% federal plus some state tax. That's a payroll default, not a personalized estimate.

At $250k salary + $200k RSU, James is solidly in higher tax brackets than 22%.

What to do instead:

· Add salary + all RSUs + bonus → estimate full-year income

· Compare total tax to total withholding

· Close the gap with a higher supplemental withholding rate or a quarterly estimated tax payment

Safe harbor (simple version): pay enough during the year (often 100%–110% of last year's tax) and you usually avoid penalties — even if you still owe at filing.

For James, fixing withholding was part of the strategy — not the starting point. But skipping it would have meant a large surprise at tax time.

3. You sold the RSUs. Now what?

Selling is step one. What you buy next is step two — this is where the long-term plan actually begins.

Once you get rid of a concentrated stock position, the goal is not just "being out of one stock." It is building a diversified portfolio with a tax-efficient strategy that fits your timeline, cash flow, and future vests.

Build a diversified core

Global index portfolio

Low-cost funds covering US stocks, international stocks, and bonds. Simple, efficient, and a strong default for most RSU recipients.

Actively managed strategies (a slice)

Professional managers picking stocks or sectors. Higher fees. Reasonable as a portion of the portfolio — not the whole thing.

Direct indexing

Hold individual stocks in a basket that tracks an index, enabling tax-loss harvesting in taxable accounts. Especially useful when you have repeated large vests.

Private equity and alternatives (optional)

Long lock-ups and higher complexity. Only a small allocation if your cash flow and net worth can handle illiquid money for years.

Pair diversification with tax efficiency

After RSU sales, many clients benefit from coordinating three layers:

· Asset location — placing tax-efficient assets in taxable accounts and tax-deferred assets where they belong

· Tax-loss harvesting — especially via direct indexing when ordinary income from vests pushes you into higher brackets

· Ongoing vest calendar — aligning each future vest with withholding, concentration limits, and reinvestment

James's plan: a globally diversified index core, with direct indexing on the side to help offset taxes from future vests. No private equity yet — his priority was clarity and liquidity.

4. RSUs plus ISOs: the trade-off nobody talks about enough

James's colleague Priya also has ISOs (Incentive Stock Options). Her picture is harder — and the usual advice ("exercise early and wait for long-term capital gains") comes with real risks.

The standard ISO playbook

Many advisors suggest:

· Exercise ISOs earlier — when the spread (stock price minus strike price) is still small

· Hold the shares until you meet qualifying periods: more than 1 year after exercise, and more than 2 years after grant

· Sell as a qualifying disposition → lower long-term capital gains rates on the appreciation

On paper, that can save a lot of tax versus a disqualifying sale.

The catch: you pay now, and the stock can fall later

When Priya exercises, she often must:

· Pay cash to buy the shares (exercise price × number of options)

· Possibly owe AMT on the spread — even if she hasn't sold anything

· Wait through the holding window before selling for LTCG treatment

During that wait, the stock price can drop — a lot.

So the ISO decision isn't "early exercise = good." It's a trade-off:

Upside and downside of early exercise + hold.

Bottom line: ISO planning only works in the whole picture — RSU vests, salary, AMT, cash on hand, concentration limits, and when you actually need the money.

5. Tax strategies worth asking about

Not every strategy fits every client. These are worth a conversation when RSU income is a recurring part of your financial life.

Direct indexing — Helpful when you have large taxable accounts.

Safe harbor timing — If last year's tax was lower, you may legally delay some payments while staying penalty-free — keeping cash invested until next year due dates. Needs accurate math.

Gifting and charity — Donor-advised funds or gifting appreciated stock can make sense at higher wealth levels.

Estate planning and advanced tools — At the highest tax brackets — repeated large vests, growing net worth — conversations about estate planning, insurance-based strategies, and wealth transfer become relevant. Get full fee disclosure and compare alternatives first.

FAQ

Should I sell RSUs when they vest? If you would not buy your employer's stock with cash today, selling most or all at vest is usually the prudent default.

Do I pay tax when RSUs vest? Yes — the full vest value hits your W-2 as ordinary income.

Is 22% withholding enough on a large vest? Often not for high earners. Plan for your real federal, state, and county bracket.

What should I buy after selling RSUs? Most clients start with a globally diversified core and add tax-efficient tools like direct indexing when vests repeat.

Should I exercise ISOs early and wait for long-term capital gains? Sometimes — but you pay cash and possibly AMT at exercise, and the stock can fall before you sell. Model the full picture first.

Disclaimer: This article is for educational purposes only and is not tax, legal, or investment advice for your specific situation. RSU and ISO rules vary by employer plan and personal circumstances. Consult your CPA and a licensed fiduciary before acting.