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What to Do I Need to Know About My Company's RSUs?

Restricted stock units could be a great option to diversify your financial plan and life. What should you know about them? There are four key questions to ask.

Full Transcript:

Hello, welcome to Arista Advice. Hope you're well. 

Question of the week is: "Paul, what do I need to know about my company's RSUs?" 

For many of you, you don't know what an RSU is. It's a restricted stock unit. It is a form of stock-based compensation used to reward employees.

RSUs will vest at some point in the future, and unlike stock options will have some value upon investing, unless the underlying company stock becomes worthless. There's no value to the employee when they are issued, instead the RSUs gain value during time, and revenue, and other hurdles are achieved for that company.

Here's four key points about RSUs that recipients should be clear on:

Number one: What causes the RSU to become vested in a certain period of time or an employee's achievement of a goal or milestone?
Number two: What happens to the RSU if specific events, such as termination, retirement, or death of the employee, occurs?
Number three: What happens to the RSUs in the event of a change in control of the company?
And number four: How are taxes withheld when the RSU's vest?

The takeaway - RSUs are an important component of your overall financial life and your financial plan and package. Your financial advisor can provide much-needed advice as to how to best handle this form of compensation that you'll receive on top of your normally scheduled salary and, potentially, bonuses. 

Hope this is helpful. Please go to AristaWealth.com and look at the tools, and tips, and videos to help you with your financial lives.