Leaving a Job With Unvested RSUs: What Kestrel Bay Retirement Advisors Tells Clients

What happens to unvested RSUs when you leave?

Most grant agreements cancel unvested shares on your last day of employment. You get no payment for them, and you owe no tax on shares you never received. Shares that already vested are yours. Their basis is the market price when each tranche landed in your account, so only the unvested tranche is at risk. Our related article on how RSUs are taxed at vest and at sale walks through that basis in detail.

Exceptions exist. Some plans accelerate vesting at a retirement age, some tie acceleration to layoffs with severance terms, and some change when the company is acquired. Those rules sit in your grant agreement and the company's equity plan, and neither the offer letter nor a call with HR overrides them. We can't read your documents from here, so check the termination language before you treat forfeiture as certain.

How do you compare a sign-on package with the vests you would give up?

Put both sides on one after-tax basis for the same 12 months. Use an assumed combined tax rate for illustration (35% in the example below) and swap in your own. Count sign-on cash as wages, taxed like a paycheck, and ask whether you must repay it if you leave within a year. Count only the first-year slice of the new RSU grant, usually a quarter of a four-year grant, because the rest is still unvested at the new employer.

Use the same share price for the old grant in every row. Here the table assumes a flat $40 and no change in price, which is never true in real life but keeps the comparison honest. Notice the last row: staying is worth $100,750 more after tax, and the gap is what you'd be paying for the move.

Hypothetical: Gwen, 52, is a VP of sales at a software company that just went public. Her husband Sam, 53, teaches high school and will have a state pension. Gwen has a vest three months away, and 3,000 shares vest each quarter at an assumed flat $40. Four vests are 4 × 3,000 × $40 = $480,000, or $312,000 after an assumed 35% tax. A new employer offers $250,000 sign-on cash plus $300,000 in RSUs vesting 25% a year. Her first 12 months there: $250,000 + $75,000 = $325,000, or $211,250 after tax. Staying is worth $312,000 − $211,250 = $100,750 more. She asks for a start date after the next vest and a larger sign-on instead of resigning now.

When is walking away from a vest the right call?

Sometimes it is right. If the new role raises base pay by more than what the forfeited shares would leave you after tax over the same period, the gap closes on its own. The same goes for a vest date more than about a year out, because waiting then costs more in time than the move saves.

The other case is concentration. If one company's stock already makes up too much of what you own and the next vest would pile on more, those shares are worth less to you than the table suggests. Even so, we wouldn't treat forfeiture as a diversification strategy. Selling vested shares on a planned schedule lowers concentration and keeps the money. Our concentrated stock positions work starts from that same question: how much of one company you should hold.

Say it plainly to yourself. Forfeiting $100,750 after tax for a role you want is a choice, not a mistake, as long as you made it knowingly. The rule we use: if the shares you'd forfeit in the next 12 months are worth more after tax than the new package pays in its first 12 months, ask for a later start date or a bigger sign-on before you accept. Leave early only when you're willing to pay that gap to make the move. All investing carries risk, principal can be lost, and the share price in any row can move before the vest.

Step by step: from offer to last day

The order matters more than any single step. Most of the money in this article is lost by doing step 5 first.

• Step 1: pull the grant agreement and vest schedule from the equity portal and list each vest date and share count for the next 12 months.
• Step 2: get the offer in writing, including sign-on cash, repayment terms and the new RSU vest schedule.
• Step 3: build the after-tax 12-month comparison for both paths with one assumed tax rate and one share price.
• Step 4: ask the new employer to move the start date to the day after the next vest, or to raise the sign-on by the gap.
• Step 5: only then give notice, and confirm your exact last day in writing.

Myths about unvested RSUs, and what is true

Myth: you keep what you've earned so far. Truth: time worked counts only for shares that have vested on or before your last day. Two and a half years of a four-year schedule still leaves the next tranche at zero if you walk out the day before it vests.

Myth: the company must pay out the forfeited shares in cash. Truth: no such rule exists for RSUs, so any exception comes only from your agreement or a negotiated deal.

Myth: forfeited RSUs create a tax loss you can deduct. Truth: you were never taxed on them, so there is nothing to deduct. Tax-loss harvesting applies to investments you actually own, and unvested RSUs aren't that yet.

Mistakes to avoid when you give notice

The costliest one is accepting an offer and setting a start date before checking the next vest date. In Gwen's case, resigning a few weeks early gives up a $120,000 vest, or $78,000 after an assumed 35% tax, which is three months of work, for a start date the new employer would often move.

Three others come up in reviews. First, comparing the sign-on cash against only the next vest and ignoring the three vests after it. Second, selling the shares that did vest in a rush, which lands in the same tax year as the new sign-on bonus; decide the sale pace first. Third, forgetting that the new grant restarts the clock, so the next 12 months of new RSUs are smaller than the old ones.

What should you do this week?

Log in to the equity portal, write down the next four vest dates with the number of shares in each, and read the termination section of the agreement. Most people finish this in less than an hour. If the gap in your own table is larger than the sign-on cash, take it to the new employer before accepting.

• Your last day is after the vest date.
• The new start date is confirmed in writing.
• Sign-on repayment terms are known.
• Vested shares are not locked by a blackout period.
• You've decided whether to sell the vested shares, and in which tax year.
• You've asked whether the start date can move without risking the offer.

Questions to ask an advisor before you resign

Bring these to a planner before you give notice. At Kestrel Bay Retirement Advisors, we put a tax number on staying, leaving now and leaving after the next vest, then talk about the job. If you have $400K or more in investable assets, you can ask for a conversation using the contact form here; meetings happen by phone or video, wherever you live. Our equity compensation planning, Roth conversion planning and 401(k) rollover help can come into the picture once the new job starts.

• What is my total tax this year if the next vest lands and I also receive sign-on cash?
• How much of the vested stock should I sell, and in which tax year, so one December vest doesn't push me into a higher bracket?
• If the gap is $100,000 after tax, is the new job worth that, given my savings rate and how much of my net worth is this one stock?
• Does my plan have any acceleration rule that changes the numbers?