When to Sell RSUs: Complete Decision Guide for 2026

You just received a notification: 500 RSUs are vesting next month. Worth $75,000 at today's stock price. The question keeping you up at night: should you sell them immediately, or hold for long-term gains?

This decision could mean the difference between optimal tax efficiency and losing tens of thousands of dollars to concentration risk or poor timing. Let's break down exactly when to sell your RSUs using real numbers, tax analysis, and a practical decision framework.

Understanding RSU Taxation: Why Timing Matters

Before we discuss when to sell, you need to understand how RSUs are taxed—because this fundamentally changes the "hold vs sell" equation.

RSUs Are Taxed at Vesting (Not Sale)

This is the critical difference between RSUs and stock options. The moment your RSUs vest, you owe income tax on their full market value—whether you sell them or not.

Example:

• 500 RSUs vest
• Stock price: $150/share
• Fair market value: $75,000
• Your tax bill: ~$28,000 (assuming 37% effective rate)

You're taxed on $75,000 as ordinary income. This gets added to your W-2, just like your salary.

What Happens After Vesting

After vesting, any gain or loss is treated as a capital gain or loss:

• Hold < 1 year after vesting: Short-term capital gains (taxed as ordinary income, 10-37%)
• Hold ≥ 1 year after vesting: Long-term capital gains (taxed at 0%, 15%, or 20%)

Important: There's no "long-term treatment" that starts from your grant date. The holding period begins at vesting.

Use our RSU Tax Calculator to see exactly how much you'll owe based on your vesting schedule and income level.

The Case for Selling Immediately

For most people, selling RSUs immediately after vesting is the optimal strategy. Here's why.

1. You've Already Been Taxed

Since you paid full income tax at vesting, holding the shares provides no tax advantage for the first year. You're essentially holding a stock you already paid the highest possible tax rate on.

The only additional tax benefit comes from holding 12+ months for long-term capital gains—but that assumes the stock goes up.

2. Concentration Risk Is Real (and Expensive)

Having too much of your net worth in one stock—especially your employer's stock—is one of the biggest wealth-destroying mistakes employees make.

Real example from the 2022 tech downturn:

Sarah, a Meta employee:

• 2,000 RSUs vested in January 2022 at $338/share = $676,000
• She held them for "long-term gains"
• By November 2022: stock at $88/share = $176,000
• Loss: $500,000 (74% decline)

Her tax bill? Still based on the $676,000 vesting value. She owed ~$250,000 in taxes on stock now worth $176,000.

The harsh reality: Your compensation and career are already concentrated in your employer. Adding your investment portfolio to that concentration is putting all your eggs in one basket.

3. You Can Reinvest in Diversified Assets

Selling immediately lets you:

• Invest in broad index funds (VTI, VOO)
• Build your emergency fund
• Pay off high-interest debt
• Buy a home
• Achieve actual diversification

Example: Diversification advantage

Scenario A: Hold company stock

• $100,000 in company stock
• Stock drops 30% = $70,000
• Loss: $30,000

Scenario B: Sell and diversify

• $100,000 in S&P 500 index
• Market drops 15% = $85,000
• Loss: $15,000

Diversification doesn't eliminate risk, but it significantly reduces single-stock volatility.

4. The Math Rarely Favors Holding

Let's run the numbers on the "hold for long-term gains" strategy:

Assumptions:

• $100,000 RSU vesting value
• 37% ordinary income rate (paid at vesting)
• 20% long-term capital gains rate
• Stock gains 20% over next year

Scenario A: Sell immediately

• Tax paid at vesting: $37,000
• Invest $63,000 in diversified portfolio
• Portfolio gains 10% = $6,300
• Tax on gains: $1,260 (20% LTCG)
• Net after 1 year: $68,040

Scenario B: Hold for long-term gains

• Tax paid at vesting: $37,000
• Stock value after 1 year: $120,000
• Gain: $20,000
• Tax on gain: $4,000 (20% LTCG)
• Net after 1 year: $79,000

Holding wins if your company stock outperforms diversified investments. But:

• Most stocks don't beat the market long-term
• Single stocks carry 3-4x the volatility of index funds
• You're taking concentrated risk for a potential 15-20% tax savings on gains

The expected value often favors selling and diversifying.

The Case for Holding (When It Makes Sense)

There are legitimate scenarios where holding makes sense:

1. You Have High Conviction in Your Company

If you genuinely believe your company will outperform the market AND you have:

• Strong financials and competitive position
• Clear growth trajectory
• Insider knowledge of upcoming catalysts
• Already-diversified portfolio (RSUs < 10% of net worth)

Then holding a portion might be reasonable.

Important: "I work here and like the company" is NOT the same as "I have objective evidence this stock will outperform." Avoid emotional attachment.

2. You're in a Blackout Period

Many companies prohibit employees from trading during "blackout periods" (typically around earnings). If you vest during a blackout:

• You can't sell immediately
• Set up a sale order for the first trading day after blackout ends
• Don't treat the forced hold as a reason to keep holding

3. Your Company Stock Has Performed Extremely Well

If your company stock has been a consistent outperformer and represents legitimate growth potential, holding a small portion (10-20% of vested shares) might be worth the risk.

But even then: Limit company stock to no more than 10% of your total investment portfolio.

4. You Have Other Liquidity

If RSUs are a small part of your compensation and you have:

• 6-12 months emergency fund (in a high-yield savings account)
• Diversified 401(k)/IRA
• Other liquid investments

Then holding RSUs is less risky. You're playing with "house money."

The Sell-to-Cover Decision: Minimum vs Full Sale

Most brokers offer these options at vesting:

Sell-to-Cover (Minimum Sale)

The broker sells just enough shares to cover your tax withholding.

Example:

• 500 RSUs vest at $100/share = $50,000
• Tax withholding: 22% = $11,000
• Shares sold: 110 shares
• You keep: 390 shares ($39,000 value)

Pros:

• Keep most of your RSUs
• Automatic tax payment
• Simple, no action required

Cons:

• 22% withholding often underestimates actual tax (if you're in 32-37% bracket)
• You're fully exposed to stock price changes
• Concentration risk remains

Sell-All (Full Sale)

Sell all vested shares immediately.

Example:

• 500 RSUs vest at $100/share = $50,000
• Sell all 500 shares = $50,000 cash
• Set aside $18,500 for taxes (37% rate)
• You keep: $31,500 cash to invest

Pros:

• Complete control over investments
• Immediate diversification
• Lock in vesting price
• Ensure you can pay full tax bill

Cons:

• No upside if stock rises
• Transaction requires active management
• May face blackout restrictions

Recommendation for most people: Sell all or sell most (80-90%). Keep a small portion if you have high conviction, but prioritize diversification.

Real-World Scenarios: When to Sell vs Hold

Let's walk through concrete examples:

Scenario 1: Early-Career Tech Employee

Profile:

• Age 28, software engineer
• Salary: $150,000
• RSU vesting: $80,000/year
• Total net worth: $120,000
• Emergency fund: $15,000

Recommendation: Sell 100% immediately

Why:

• RSUs represent 67% of net worth—massive concentration
• Emergency fund is bare minimum
• Long career ahead—plenty of time to rebuild equity positions
• Need to diversify and build financial foundation

Action plan:

1. Sell all vested RSUs immediately
2. Build emergency fund to $30,000
3. Max out 401(k) with broad index funds
4. Invest remaining in VTI/VXUS in taxable account

Scenario 2: Mid-Career Manager with Strong Conviction

Profile:

• Age 42, engineering manager
• Salary: $200,000
• RSU vesting: $150,000/year
• Total net worth: $1.2M (including home equity)
• 401(k): $600,000 in diversified funds
• Emergency fund: $60,000

Recommendation: Sell 80%, hold 20%

Why:

• Strong financial foundation already exists
• RSUs are 12.5% of net worth—manageable
• Has emergency fund and diversified retirement accounts
• Can afford to take concentrated position on 20%

Action plan:

1. Sell 80% of vested RSUs ($120,000)
2. Invest in tax-efficient index funds
3. Hold 20% ($30,000) as "conviction bet"
4. Set stop-loss at 25% decline on held shares

Scenario 3: Pre-IPO Startup Employee

Profile:

• Age 35, product manager
• Salary: $140,000
• RSU grant: $400,000 (unvested, pre-IPO)
• Total net worth: $180,000
• Company going public in 6 months

Recommendation: Plan to sell 90%+ at IPO

Why:

• Pre-IPO stock is already concentrated wealth
• Early startup employees often have paper gains that evaporate
• IPO lockup periods create additional risk
• Need to derisk after years of illiquid compensation

Action plan:

1. Model tax liability using RSU Tax Calculator
2. Plan to sell 90% at lockup expiration
3. Set aside estimated taxes immediately
4. Hold 10% only if financial foundation is solid

Scenario 4: Approaching Retirement

Profile:

• Age 58, senior director
• Salary: $220,000
• RSU vesting: $200,000/year
• Total net worth: $3.5M
• Planning to retire at 62

Recommendation: Sell 100% immediately

Why:

• Limited time horizon—can't recover from downturn
• Should be in capital preservation mode
• Concentration risk is unacceptable near retirement
• Need stable, predictable portfolio

Action plan:

1. Sell all RSUs at vesting
2. Rebalance portfolio to 60/40 or 50/50 stocks/bonds
3. Consider tax-loss harvesting opportunities
4. Ensure no single stock > 5% of portfolio

Decision Framework: Your Personal RSU Strategy

Use this checklist to determine your strategy:

Step 1: Calculate Your Concentration Risk

Company stock as % of net worth = (Vested RSUs ÷ Total Net Worth) × 100

• < 5%: Low risk—can consider holding
• 5-10%: Moderate risk—sell most, hold small portion
• 10-20%: High risk—sell 90%+
• > 20%: Extreme risk—sell 100% immediately

Step 2: Assess Your Financial Foundation

Do you have:

• 6-12 months emergency fund in cash/savings
• Maxed out 401(k) contributions
• Diversified investment portfolio
• No high-interest debt (>6% APR)

If you answered "no" to any of these: Sell 100% and build foundation first.

Step 3: Evaluate Company-Specific Factors

• Company has strong competitive moat
• Clear path to revenue/profit growth
• You have objective evidence of outperformance potential
• Stock is not overvalued (high P/E, negative earnings)
• You would buy this stock with your own money today

If you answered "no" to most: Sell 100%.

Step 4: Check Your Tax Situation

Run the numbers:

• Use RSU Tax Calculator to estimate total tax
• Ensure you have cash to pay taxes (don't rely on stock sale)
• Consider state tax implications
• Factor in AMT if you have ISOs

If withholding won't cover taxes: Sell enough to cover full tax bill minimum.

Step 5: Make Your Decision

Based on your answers:

Sell 100% if:

• Concentration risk > 20%
• Missing financial foundation elements
• Don't have strong conviction in company
• Approaching retirement (< 10 years)

Sell 80-90% if:

• Concentration risk 10-20%
• Have solid financial foundation
• Moderate conviction in company
• Long time horizon (> 15 years)

Sell 50-80% if:

• Concentration risk < 10%
• Excellent financial foundation
• High conviction + objective evidence
• Sophisticated investor comfortable with volatility

Never hold more than 50% of vested RSUs—even with high conviction.

Common Mistakes to Avoid

Mistake 1: Holding Because "It Keeps Going Up"

The trap: Your company stock has doubled since you started. You think "why sell a winner?"

The reality: Past performance doesn't predict future returns. Most high-flying stocks eventually revert to market returns or worse.

Remember Enron employees: Many had 90%+ of retirement in company stock. Stock went from $90 to $0.26.

Mistake 2: Emotional Attachment to Company Stock

The trap: "I built this product, I believe in this company, I should hold the stock."

The reality: Your labor already built the company. Your compensation is your reward. You don't owe the company additional investment risk.

Better approach: Separate your emotional connection from your investment decisions.

Mistake 3: Not Planning for Taxes

The trap: Selling to cover (22% withholding) but actually owing 35%+.

The reality: You get a surprise $15,000 tax bill in April.

Solution: Use the Tax Calculator to estimate your real rate. Set aside cash immediately.

Mistake 4: Triggering Wash Sales

If you sell RSUs at a loss and then receive new RSU vesting within 30 days, you might trigger wash sale rules.

Example:

• Sell 100 vested RSU shares at $50 loss
• 200 new RSUs vest 2 weeks later
• Wash sale rule disallows the $50 loss

This is particularly problematic with RSUs because vesting is automatic. Learn more in our guide: RSU vesting can trigger wash sales.

Use the Wash Sale Calculator to check if your trades trigger this rule.

Mistake 5: Ignoring Blackout Periods

Trading during blackout periods can result in:

• Immediate termination
• SEC investigation
• Clawback of profits
• Criminal insider trading charges

Solution: Set up a 10b5-1 trading plan to automate sales during allowed windows.

Mistake 6: Selling in Panic During Downturns

The trap: Stock drops 20%, you panic sell, then it recovers.

Better approach: Have a predetermined strategy. If you planned to sell immediately at vesting, do that regardless of price movement.

If you're holding intentionally: Set a stop-loss (e.g., sell if drops 25%) and stick to it.

Special Considerations

Blackout Periods

Most public companies enforce blackout periods:

• Typically 2-4 weeks before earnings
• Start when quarter ends, end 24-48 hours after earnings release
• Applies to all employees with potential material information

Strategy:

• Know your company's blackout calendar
• Plan to sell immediately when window opens
• Don't let blackout become an excuse to hold long-term

10b5-1 Trading Plans

A 10b5-1 plan is a preset trading schedule that allows you to sell during blackouts.

How it works:

1. Set up plan during open trading window
2. Define automatic sell triggers (e.g., "sell all RSUs within 3 days of vesting")
3. Wait 90-day cooling off period
4. Sales execute automatically, even during blackouts

Benefits:

• Trade during blackouts legally
• Remove emotional decision-making
• Demonstrate sales aren't based on inside information

Setup: Work with your broker (E*TRADE, Fidelity, Schwab all offer this).

Cost: Usually $0-200 setup fee.

Executive Officers and 10% Owners

If you're an executive officer or own 10%+ of company stock:

• Subject to Section 16(b) short-swing profit rules
• Must hold stock 6+ months to avoid profit disgorgement
• All trades reported publicly on Form 4

Implication: You may be forced to hold longer than you want.

Acquisition or IPO Scenarios

If your company is acquired:

• Vested RSUs typically convert to acquirer stock or cash
• Unvested RSUs may accelerate (vest immediately)
• Strategy: Sell immediately unless acquirer is more stable than your company

If your company IPOs:

• Expect 90-180 day lockup period
• Stock often declines 10-30% at lockup expiration (supply flood)
• Strategy: Sell 90%+ at lockup expiration

State Tax Considerations

Some states have special RSU tax treatment:

• California: Taxes RSUs based on where you worked during vesting period (even if you move)
• New York: Similar sourcing rules for RSUs earned while resident
• Texas, Florida, Nevada, etc.: No state income tax (big advantage)

Implication: If you move from high-tax to no-tax state, timing of vesting matters. Learn more at our State Tax Calculators.

Your Action Plan: What to Do Now

For Your Next Vesting

1. Check vesting calendar: Know exactly when shares vest
2. Calculate tax impact: Use RSU Tax Calculator
3. Determine sell %: Use decision framework above
4. Set up automatic sale: Configure with broker or set calendar reminder
5. Plan reinvestment: Choose index funds before you sell (avoid "cash sitting" trap)

For Existing Holdings

If you're already holding vested RSUs:

1. Calculate concentration risk: Vested RSUs ÷ Net Worth
2. If > 10%: Sell down to 10% immediately
3. If 5-10%: Create 6-month plan to reduce to 5%
4. If < 5%: Evaluate conviction—sell if uncertain

Documentation

Create a simple spreadsheet tracking:

• Vesting dates and quantities
• Vesting price (your cost basis)
• Sale date and price
• Tax withholding vs actual tax owed
• Wash sale tracking

This prevents surprises at tax time.

The Bottom Line: What Most People Should Do

For 80% of employees receiving RSUs, the optimal strategy is simple:

1. Sell 90-100% immediately at vesting
2. Set aside cash for full tax bill (don't rely on withholding)
3. Invest proceeds in diversified index funds
4. Build emergency fund if needed
5. Don't look back

You already bet your career on your company. Don't bet your financial future on it too.

The only exception: If you have an excellent financial foundation, low concentration risk (< 10%), and genuine objective evidence your company will outperform—then holding 10-20% is reasonable.

But even then, recognize it's a concentrated bet, not an investment strategy.

What You've Learned

• RSUs are taxed at vesting as ordinary income—holding provides no tax advantage for 12 months
• Concentration risk is the biggest wealth destroyer for employees with equity comp
• For most people, selling 90-100% at vesting is optimal
• The decision framework: concentration risk → financial foundation → conviction → tax planning
• Common mistakes: emotional attachment, ignoring taxes, wash sales, panic selling
• Special tools: 10b5-1 plans, blackout calendars, stop-losses

Your RSUs are compensation, not a retirement plan. Treat them accordingly.

Use our calculators to make informed decisions:

• RSU Tax Calculator - Estimate your tax bill
• Wash Sale Calculator - Avoid $3,000 mistakes
• Tax Calculators - Federal and state tax planning

Want to understand more about RSU taxation? Read our guide: Your $100K RSU grant might only be worth $60K - here's why.

Need help comparing RSUs to other equity compensation? Check out: RSU vs Stock Options vs ESPP: Complete Guide.

Disclaimer: This article is for educational purposes only and does not constitute financial, tax, or legal advice. RSU taxation and optimal strategies vary based on individual circumstances. Consult with a qualified financial advisor and tax professional before making decisions about your equity compensation.