What to do with your Stripe RSUs in the 30 days before vesting

What actually happens when RSUs vest

Restricted stock units convert to actual shares of company stock on your vest date. At that moment, the full value of the vested shares is treated as ordinary income by the IRS, regardless of whether you sell the shares or hold them.

Your employer will withhold taxes at the supplemental rate, which is 22 percent federally for income up to $1 million. The problem: if you are earning $200,000 or more in base salary, your marginal federal rate is likely 32 to 37 percent. The withholding gap is real money you will owe at tax time.

The tax hit most employees do not see coming

Suppose 500 shares vest at $45 per share. That is $22,500 in ordinary income added to your W-2. At a 22 percent withholding rate, your employer withholds $4,950. But if your marginal rate is 35 percent, you actually owe $7,875. The $2,925 gap comes out of your pocket at tax time.

This gets worse if you have already had a high-income year, or if your vest comes in Q4 after other income events. A financial advisor who works with equity compensation can model this before your vest date and help you prepare for the shortfall.

Concentration risk: how much company equity is too much

A common rule of thumb among financial planners: no single stock should represent more than 10 to 15 percent of your overall investment portfolio. For employees at high-growth companies, this threshold is frequently exceeded by a wide margin at vest.

The risk is not just downside. Concentrated positions also create complexity around capital gains timing, AMT exposure for incentive stock options, and charitable giving strategy. There is rarely a simple answer, and the right approach depends on your full financial picture.

The three decisions you have to make before your vest date

First: sell-to-cover versus cash exercise. Most employees default to sell-to-cover, where the company automatically sells enough shares to cover the tax withholding. This is the simplest option but not always the optimal one if you have a view on the stock price.

Second: holding period strategy. Shares held for more than 12 months after vest qualify for long-term capital gains treatment when sold. If you believe in the company and can afford the concentration risk, holding is worth modeling against your full tax picture.

Third: diversification timing. The 90-day window after a vest date is the most common period for planned selling. If you are at a public company with a trading window, your options are constrained by policy. A financial advisor can help you build a 10b5-1 plan for systematic diversification.

Questions to ask any financial advisor before you work with them

How many clients do you currently work with who have RSU or equity compensation complexity? Ask for a specific number, not a general answer.

Do you have experience with the specific type of equity your company issues? The tax treatment varies significantly across RSUs, ISOs, NSOs, and QSBS.

What is your approach to concentration risk, and how do you balance diversification against potential upside? This tells you whether they think in terms of your full financial picture or just the equity event in isolation.

Common mistakes employees make at vest

Defaulting to sell-to-cover without modeling the alternatives. It is not always wrong, but it should be a deliberate choice, not the path of least resistance.

Treating the vest event as isolated from the rest of the tax year. Equity income stacks on top of salary, bonus, and other income, and the marginal impact at the top of the bracket matters significantly.

Waiting until after the vest date to talk to a financial advisor. Most of the planning leverage happens before the shares hit your account, not after.