RSU is worth a lot more than base
This applies for people working in established companies. If you have to choose between 40k RSU with 10k vest a year vs 10k increase in base, you should pick RSU every time. The reason being that if you were to get laid off, it is likely that you get the vest RSU up front. With the higher base pay you can get a slightly higher severance but it will be rather insignificant. RSU also gives you free leverage. If the company stock goes up 10%, now your RSU is worth 44k without you putting any of your own money. Of course there is a risk of company’s stock dropping, but you can simply wait until the value comes up again before selling. If you are a believer of long term investing it is always a no brainer to go for RSU. Thoughts? Edit: I’m seeing most of the pushback is around the skepticism that the company stock may drop and never recover. If that is your genuine fear why bother investing in stocks at all? If you invest wisely RSU should only be a small portion of your total portfolio. I’m not saying put all of your money in RSUs. Also like I mentioned in the beginning, this applies for established companies. Edit 2: wow I’m rather shocked by number of people pushing back on the idea here. Look, it’s simple math. 10k raise after tax is 5k cash vs 40k in margin free leverage in the form of RSU. Which do you think is likely to generate more returns? Even if your company was to grossly under perform sp500 you are still likely to come out ahead with RSU.
So glad I didn't choose the RSU heavy salary when joining my current company
Wait you get paid all in yuan?
If I gave you 10k cash would you invest it all in the company that you work for?
I actually agree with what you’re getting at here but also here’s another way to think of it that helps OPs argument If I let you invest your future salary today, would you take it?
It's actually would you invest 40k or take a 10k raise.
“You can simply wait until the value comes up again” That’s the fun part sometimes it doesn’t
You don’t get your rsus if you’re laid off
If i get $10k cash I can choose to invest that in the same company I work for or wherever I choose to. For eg I could have bought $100k nvidia instead of $100k Apple
Yeah, also you don't get RSU up front. If you get laid off most likely you will miss a vest which is worse than guaranteed salary. Also companies hold RSUs against you. They go up and no raise or grant, they go down and "that's part of ownership". Also what a previous commenter mentioned, you are better off with cash and DCA into an index fund unless you work for NVDA lol
In established tech firms it is norm to let laid off employees to vest their RSU up front. If you invest wisely RSU should only be a small portion of your portfolio anyway.
Having friends/colleagues in recent MS, AWS and Google layoffs, they definitely did not get to vest up front. If your severance period includes a vest you get it, if it doesn't you don't. Take Google layoffs for example, they "accelerated" vests for up to 16 weeks, but also paid 16 weeks severance. So either way you get paid. If your vest occurs at week 17 you are SOL. I rather have 10k a month for 3 months than 30k after 3 months any day of the week
Spoken like someone who has been working less than 16 years (last time the market really took a dive). It'll happen again.
With that logic why bother with investing in stocks at all?
I’m sure if you never sold they were all back up in a year :/
I wouldn’t necessarily count on the value always recovering, exactly, but I think you’re right to think of unvested shares as options. If the stock goes up, you keep working there and get that upside. Also, it’s not likely you’ll have equivalent stock or cash options. Your expected TC is probably higher with stock because your employer is offloading some financial risk to you, and so you should expect to get paid for it. If the cash was guaranteed they’d probably offer you less of it since you’re not assuming the risk.
And this whole idea goes out of the picture when you join or try to join a startup. Take the rsu /options and sit on it forever I guess the better comparison should be rsu vs cash bonus. Either get 50k cash bonus at end of fiscal year or get a vest of 50k worth of rsu. That is a better comparison that many people face.
“Wait until value comes up again before selling” 😂
Concepts like opportunity cost and time value of money are difficult to comprehend. Even harder when you have to consider real vs. nominal gains more like we do in this inflationary era. Don’t make fun of him, he’s trying 😉
So you are saying that you can generate more return on 10k raise, which is 5k cash after tax, than 40k leverage in your company’s stock?