Your RSUs are a bonus, not a lottery ticket

Restricted stock units (RSUs) are shares a company grants an employee that convert to actual stock over time, usually on a vesting schedule. When shares vest, their value on that date is taxed as ordinary income — the same category as salary — whether or not the shares are sold.

A few practical consequences follow from that:

• Default withholding often falls short. Many employers withhold a flat 22% federal rate on vested RSUs, which is lower than the marginal rate many employees actually owe once salary is added in. That gap shows up as a tax bill at filing time if it isn't planned for.
• Vesting is a paycheck, not a jackpot. Because RSU income is taxed the same way a cash bonus would be, a useful mental model is to treat vested shares as already-taxed compensation that happens to be sitting in stock — not as a separate windfall to speculate with.
• Concentration is a real, quantifiable risk. An employee holding a large position in their own employer's stock is exposed to that single company's fortunes twice over: through their paycheck and through their portfolio. Diversifying out of vested shares over time is a standard way advisors address this, distinct from any view on whether the stock itself is a good investment.

None of this is a reason to avoid equity compensation — it's real compensation, and often a meaningful part of total pay. It's a reason to plan for the tax bill in advance and decide deliberately what to do with vested shares, rather than by default. An advisor who works with equity compensation regularly can help model the actual tax exposure against a specific vesting schedule.