How Women in Tech Should Manage RSUs and ESPP

DEFINITION

RSU (Restricted Stock Unit)

A grant of company stock that vests over a schedule, typically 4 years with a 1-year cliff. On each vest date, shares are delivered (and taxed as ordinary income at the stock's fair market value). After vesting, you own the shares and can hold or sell at any time. Unvested RSUs are forfeited if you leave before they vest.

DEFINITION

ESPP (Employee Stock Purchase Plan)

A program allowing employees to purchase company stock at a discount — typically 15% below the lower of the price at the beginning or end of the offering period (some plans use just the purchase date price). The IRS calls plans with look-back provisions 'qualified ESPPs' — the 15% discount plus look-back can result in gains well above 15% in rising stock environments.

DEFINITION

Concentration Risk

The risk of having too much wealth tied to a single stock or asset. RSUs that vest in employer stock automatically create concentration — you're both employed by and invested in the same company. A company downturn can simultaneously reduce your income (layoffs) and your investment portfolio (stock decline), compounding the negative impact.

Why Equity Comp Requires Its Own Financial Framework

For many tech professionals, RSUs and ESPP aren’t bonuses — they’re a substantial and planned portion of total compensation. At many mid-to-large tech companies, the equity component of total comp for senior individual contributors and managers runs 30-60% of annual compensation, sometimes more.

This changes the math of wealth building significantly. A senior engineer earning $180,000 base with $200,000 per year in RSU vests has $380,000 in total comp. Managing that $200,000 well — when to sell, how to handle concentration risk, how ESPP layering interacts with it — is a more significant financial decision than optimizing the investment allocation of a $5,000/month retirement contribution.

Yet equity comp is systematically undermanaged. Most employees default to the plan’s automatic behavior (RSUs held in the equity platform until sold, ESPP purchases held until default disposition), without evaluating whether these defaults match their financial situation.

The RSU Decision Framework

Each RSU vest creates a discrete financial decision. On vest date, you receive shares worth some dollar amount — already taxed as ordinary income. From that moment, you own the shares at the vested price as your cost basis.

The question is: does it make financial sense to hold those shares?

The case for selling promptly:

• You already have employment income concentrated in this company (salary, future vests)
• Holding creates additional concentration in a single stock
• If the stock falls, you lose both investment value and potentially your job simultaneously
• There is no tax advantage to holding vs. selling immediately (the ordinary income tax is already incurred at vest)

The case for holding:

• You have genuine conviction that the stock will outperform (valid, but honestly evaluate whether you can objectively assess your own employer)
• You are approaching a qualifying disposition period and the long-term capital gain treatment on the appreciation above your cost basis matters
• Your total portfolio concentration in employer stock is already below 10% (holding becomes less problematic at lower concentration)

For most employees, most of the time, selling RSUs promptly and reinvesting in a diversified portfolio is the financially superior decision.

ESPP: Almost Always Worth Maximizing

The math on a standard qualified ESPP with a 15% discount and 6-month look-back period:

In the worst case (stock flat over the period): you buy at a 15% discount and immediately sell for a 15% gain over 6 months. Annualized, that’s roughly 30% return, at minimal risk.

In a good case (stock rises 20% during the period): you use the look-back to buy at the lower price with the 15% discount applied, your gain is well above 15%.

In a bad case (stock falls 30%): the look-back means you still buy at the period-end price, which is already down. The 15% discount partially offsets the decline. You still benefit from the discount even in declining stock scenarios, as long as you sell promptly after purchase.

The main financial discipline: sell ESPP shares immediately after purchase. Holding ESPP shares is treated as a separate investment decision from ESPP participation — and holding concentrated employer stock has the same problems whether it came from RSU vests or ESPP purchases.

Tracking It All

Equity comp creates multiple brokerage accounts: Fidelity for ESPP, Schwab Equity Awards for RSUs, your personal brokerage for diversified investments, plus retirement accounts. Thalvi aggregates all of these so you can see your total equity compensation exposure in context of your complete net worth — not just the slice visible in any one platform.