Equity Compensation
RSU Hold vs. Sell
Should you sell the company stock as it vests, or keep it and bet more of your savings on your employer?
Vesting already taxed the shares as income. The only question left is whether keeping them beats selling and diversifying, after tax and after the concentration.
What this calculator answers, what you need, and what to do with the result
Have this in front of you
- Your equity portal: the next vest date and how many shares land.
- Last year’s tax return, for the bracket the shares are taxed in.
- The grant price and today’s price, both shown on the same statement.
Words on this page, in plain English
- RSU
- Restricted stock unit. Shares your employer gives you as part of pay, taxed as income the day they vest.
- Concentration risk
- How much of your savings depends on one company. Your paycheck already depends on it too.
- Mega Backdoor Roth
- Extra after-tax 401(k) money that can be converted to Roth, if your plan allows it.
What to do with the answer
- 01Ask payroll whether your 401(k) allows after-tax contributions and in-plan conversion. Most people assume it does not.
- 02Pick the share of your savings one company may hold, then sell down to it on a schedule instead of on a hunch.
- 03If you would not buy the stock with new cash today, selling on vest is the same decision.
RSU Hold vs. Sell & Mega Backdoor Roth Simulator
2026 IRS statutory model quantifying employer concentration risk, double-jeopardy exposure, and $72,000 Section 415(c) shelter.
Mega Backdoor Roth Waterfall vs. Holding
Of household liquid net worth in 1 stock
Income + equity correlation penalty
Min growth needed to justify concentration
1. RSU Vesting & Horizon
2. Concentration & Double Jeopardy
3. 2026 Tax & Mega Backdoor Roth
| Metric (5 Yrs) | Auto-Sell & Index | Hold Company RSU | Mega Backdoor Roth |
|---|---|---|---|
| Vested Gross Inflow | $600,000 | $600,000 | $600,000 |
| Vest Ordinary Income Tax | -$222,000 | -$222,000 | -$222,000 |
| Net Invested Principal | $378,000 | $378,000 | $378,000 |
| Exit Capital Gains Tax | -$24,705 | -$34,418 | -$14,597 |
| Net Take-Home Wealth | $457,096 | $488,194 | $469,416 |
| Double-Jeopardy Risk Level | Zero Risk | Critical | Zero Risk + Sheltered |
The RSU Vesting Fallacy
Because RSUs are taxed as ordinary earned income on vest date, holding company stock after vesting is mathematically identical to receiving a cash bonus and buying company shares on the open market at today's peak price. If you wouldn't take cash out of your checking account to buy your company's stock today, auto-selling and routing the proceeds into a broad index or Mega Backdoor Roth is mathematically dominant.
Method
How this number is calculated
- 01
Tax at vest
The vest value is ordinary income. What is left is the cash a sell-and-diversify strategy can actually deploy, and the vest price becomes the cost basis.
- 02
Two strategies, same starting cash
Sell and diversify invests the after-tax proceeds in the index at the index return. Hold keeps the shares at the company return. Both are then taxed at exit on their gains.
- 03
The break-even growth rate
Solve for the company return at which the two after-tax outcomes are equal. It is usually a few points above the index, because holding pays capital gains later on a larger gain while selling pays tax sooner on a smaller one.
- 04
Concentration against the balance sheet
The held position is measured as a share of liquid net worth. Above roughly half, a single bad year in one stock moves the household number more than any decision the household makes.
Assumes a flat holding period and a single exit tax event. It does not model a falling share price, a cliff that removes future vests, or trading windows that stop you selling when you decide to.
Worked numbers
Pre-computed scenarios
A 120,000 annual vest, 150 current price and 100 vest price, 400,000 liquid net worth on a 180,000 salary, 35% ordinary rate, 23.8% long-term rate, against an 8.5% index. Only the company return changes.
| Scenario | Inputs | Outcome |
|---|---|---|
| Company tracks the index | 8.5% company vs 8.5% index, 5 years | Sell and diversify $471,607 | hold $474,936 | concentration 56% of liquid net worth, break-even growth 8.2% |
| Company beats the index | 13% company vs 8.5% index, 5 years | Sell and diversify $471,607 | hold $528,052 | concentration 59% of liquid net worth, break-even growth 8.2% |
| Company lags the index | 4% company vs 8.5% index, 5 years | Sell and diversify $471,607 | hold $427,622 | concentration 52% of liquid net worth, break-even growth 8.2% |
Questions
What people ask before trusting this number
Why is the break-even growth rate the number that matters?
Because holding a single stock instead of a diversified portfolio only pays if that stock beats the portfolio by more than the extra tax and risk. The break-even growth rate is the company return at which holding and selling end level. Above it holding wins on arithmetic; below it the concentration buys nothing.
What is double jeopardy in this context?
Your salary and your concentrated stock come from the same employer. A bad year cuts the bonus, freezes the vest and marks the shares down together, which is the risk the concentration ratio measures against your liquid net worth.
How is the vest taxed, and what becomes the cost basis?
The value at vest is ordinary income, taxed at your income rate, and the vest price becomes the cost basis for whatever happens next. That is why selling immediately after vest usually produces almost no capital gain, and why holding creates a second tax decision later.
What does the Roth waterfall do here?
It routes part of the liquidated proceeds through after-tax 401(k) contributions if your plan allows them, up to the annual additions limit. It changes where the money compounds, not whether selling was right, so it is modelled as a separate strategy rather than a correction.
Why compare against an index return at all?
Because the alternative to holding company stock is not cash, it is a diversified portfolio. Comparing a stock position to zero makes every holding decision look correct. The index return is what you give up to stay concentrated.
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