RSUs Are Not Bonuses: How Tech Employees Should Think About Restricted Stock Units and Concentration Risk

A household earns $600,000 per year.

Half of it ($300,000) comes in Restricted Stock Units (RSUs).

The market drops 30%.

Overnight, their effective compensation drops by $90,000.

Nothing about their role changed. Nothing about their performance changed. Nothing about their company’s long-term vision changed.

But their income did.

This is the core misunderstanding around RSUs:

They feel like bonuses. 

But they function like concentrated compensation.

And how you treat them has a significant impact on your long-term financial stability.

Why RSUs Feel Like Bonuses

RSUs don’t behave like salary.

They vest quarterly or annually. 

They appear in large chunks. 

They hit your brokerage account instead of your checking account.

Psychologically, they feel separate from your “real” income.

They feel like:

• Extra money

• Upside participation

• A reward

• Found wealth

  
  

But that framing can quietly create risk.

RSUs are not extra.

They are part of your total compensation package.

If your offer letter says:

• $300,000 base salary

• $300,000 in annual RSUs

  
  

Your compensation is $600,000....not $300,000 plus a bonus.

Half of your pay is simply delivered in stock instead of cash.

That distinction matters.

What Restricted Stock Units Actually Are

Restricted Stock Units are a promise to deliver company shares once certain conditions (usually time-based vesting) are met.

When RSUs vest:

• The shares are delivered to you.

• The value of those shares is taxed as ordinary income.

• A portion of shares is typically withheld to cover taxes.

  
  

At that moment, you have received income — just like salary.

The difference is that instead of being paid entirely in cash, you are paid in equity.

And equity fluctuates.

This means a portion of your income is exposed to market volatility and company-specific risk.

If you would not accept 50% of your paycheck in a single publicly traded stock, it’s worth examining why you are comfortable holding that level of exposure after vesting.

The Concentration Risk Most Tech Employees Ignore

Most tech professionals don’t have an investment selection problem.

They have a concentration problem.

Consider how many aspects of your financial life may depend on one company:

• Your salary

• Your annual bonus

• Your RSUs

• Your unvested equity

• Your health insurance

• Your professional network

  
  

If the company struggles, your income and your net worth can decline simultaneously.

That is called correlated risk.

When markets are rising, this dynamic feels powerful.

When markets decline, it can feel destabilizing.

A 30–40% drop in a single stock is not unusual. It does not require fraud, scandal, or bankruptcy.

It can happen due to:

• Earnings disappointments

• Regulatory changes

• Market rotations

• AI disruption narratives

• Broader macroeconomic shifts

  
  

When a large percentage of your net worth is tied to your employer’s stock, volatility becomes personal.

Concentration risk builds quietly during bull markets. It becomes obvious during downturns.

The RSU Tax Illusion

Another reason RSUs feel like bonuses is the way taxes are handled.

When RSUs vest:

• Shares are automatically withheld.

• Taxes are paid.

• You receive the net shares.

  
  

It feels clean and automatic.

But RSU withholding is not the same as proper tax planning.

There are two common issues.

1. Under-Withholding

RSUs are typically withheld at a flat federal supplemental wage rate (often 22% up to certain thresholds).

For high-income earners — especially in California — your actual marginal rate may be much higher when combining:

• Federal income tax

• State income tax

• Medicare surtaxes

  
  

This can create a shortfall when April arrives.

The withholding system was not designed specifically for $500K–$1M tech households with layered equity compensation.

2. Income Stacking

RSU income stacks on top of:

• Salary

• Bonuses

• Spousal income

• ISO exercises

• Capital gains

  
  

Large vesting events can:

• Push you into higher brackets

• Reduce deductions or credits

• Trigger estimated tax penalties

• Increase Medicare surtaxes

  
  

Without multi-year projections, it’s easy to make equity decisions in isolation — without understanding their broader tax impact.

And importantly:

Once RSUs vest, the tax is owed whether you sell the shares or not.

Holding after vesting is an investment decision.

It is not a neutral default.

The Question That Clarifies Everything

When deciding whether to hold or sell RSUs after vesting, there is one powerful framing question:

If these shares vested as cash today instead of stock, would I use that cash to buy this company’s shares?

If the answer is no, that’s useful information.

Holding vested RSUs is economically equivalent to purchasing more shares at the current price.

This doesn’t mean you must sell immediately.

But it does mean holding should be intentional rather than automatic.

How Much Company Stock Is Too Much?

There is no universal number.

But concentration should be measured relative to your full financial picture.

Consider evaluating:

• What percentage of your net worth is in one stock?

• What percentage of your future income depends on that company?

• How secure is your role?

• How diversified is the rest of your portfolio?

• What would a 40% drop mean for your long-term plans?

  
  

For some families, 15–25% of net worth in a single stock may feel acceptable.

For others, especially when employment risk is high, lower thresholds may make more sense.

The key is having a defined policy before volatility forces a decision.

A Practical 3-Step RSU Selling Framework

You do not need to time the market.

You need structure.

Here is a simple approach many tech families adopt.

Step 1: Set a Target Concentration Range

Example:

“We are comfortable with 20–25% of net worth in company stock.”

This transforms selling from an emotional decision into a rebalancing decision.

When concentration exceeds the upper bound, you trim.

When it falls below the lower bound, you reassess.

Step 2: Align Sales With Vesting

Rather than guessing market tops and bottoms, many professionals:

• Evaluate concentration at each vest

• Sell enough shares to maintain target allocation

• Reinvest proceeds into diversified assets

  
  

This reduces regret and decision fatigue.

It also reinforces discipline.

Step 3: Coordinate With Tax Planning

RSU sales should not be evaluated in isolation.

They should be integrated with:

• Capital gains exposure

• Other equity events (ISO exercises, tender offers)

• Estimated tax payments

• Charitable giving strategies

• Multi-year income smoothing

  
  

This is where equity compensation planning becomes strategic instead of reactive.

The Psychological Trap of “Just a Little Longer”

One of the most common patterns among tech employees is incremental concentration.

It often sounds like:

“I’ll just hold a little longer.” 

“It’s a great company.” 

“I know the roadmap.” 

“I don’t want to miss the upside.”

Over time, this leads to:

• 40% of net worth

• 60% of net worth

• Occasionally 80%+ of net worth

  
  

And because it happened gradually, it doesn’t feel risky...until volatility exposes it.

Wealth built through equity can disappear faster than it accumulated.

Managing that risk does not mean abandoning belief in your company.

It means separating career conviction from portfolio construction.

Equity Should Support Your Life — Not Define It

Equity compensation can be a powerful wealth-building tool.

Many tech professionals achieve financial independence faster than they expected because of RSUs.

But equity should be integrated into a broader plan that includes:

• Tax forecasting

• Diversification strategy

• Cash flow clarity

• Career optionality

• Long-term independence modeling

  
  

The goal is not to eliminate upside.

The goal is to reduce the chance that one stock determines your family’s financial trajectory.

Equity Clarity Before Optimization

Most conversations around RSUs focus on maximizing returns.

A better starting point is clarity:

• How much exposure do you already have?

• How much risk are you implicitly taking?

• How would a major drawdown affect your timeline?

  
  

When RSUs are treated as guaranteed upside, risk compounds quietly.

When they’re treated as concentrated compensation, decisions become deliberate.

Final Thought

RSUs are not bonuses.

They are part of your paycheck, but delivered in stock instead of cash.

And paychecks shouldn’t swing 30% overnight without a plan.

If you work in tech and are navigating RSUs, concentrated stock, or broader equity compensation decisions, having a structured framework can make those choices far less stressful.

Equity can build real wealth.

But only if it’s managed intentionally.