No Result
View All Result
Global Finances Daily
  • Alternative Investments
  • Crypto
  • Financial Markets
  • Investments
  • Lifestyle
  • Protection
  • Retirement
  • Savings
  • Work & Careers
No Result
View All Result
  • Alternative Investments
  • Crypto
  • Financial Markets
  • Investments
  • Lifestyle
  • Protection
  • Retirement
  • Savings
  • Work & Careers
  • Login
Global Finances Daily
No Result
View All Result
Home Savings

Ask an Advisor: RSUs Vs. Stock Options

August 3, 2025
in Savings
0
Ask an Advisor: RSUs Vs. Stock Options


If you’ve found yourself in the position of getting both restricted stock units (RSUs) and stock options from an employer — or you’re comparing benefits in multiple job offers — it’s time to do your homework. Stock-based benefits like RSUs and options may be a major part of your total pay package. But how they work, their tax implications and their potential value can differ significantly.

“Both are great ways to get upside exposure to the company you’re working for,” says Daniel Messeca, a certified financial planner and co-founder of Craftwork Capital in Alexandria, Virginia. But “it’s apples and oranges.”

Understanding the key features of and differences between RSUs and stock options could help you determine which might be a better incentive for you.

Understanding RSUs and stock options

RSUs and stock options are types of equity compensation that employers may offer to attract and retain talented employees. The value of these incentives is tied to the company’s stock performance, which help to align workers’ interests with the company. If the company succeeds, workers holding company stock also benefit.

What are restricted stock units?

With restricted stock units, or RSUs, a company promises shares that the employee will receive after meeting certain conditions. Those conditions generally include a vesting period, but also could include other stipulations. Once the shares vest — typically in batches over several years — ownership of the shares transfers to the employee at no out-of-pocket cost. At that point, the employee can opt to sell or hold the shares.

What are stock options?

With stock options, a company promises to sell a certain number of shares to an employee at a set price, known as the strike price. Stock options also tend to have a vesting period. Once the shares vest, the employee has the right to purchase those shares at the strike price. This step is known as exercising your options, and it can occur any time until the options expire, up to 10 years after the options are granted.

There are two kinds of stock options.

  1. Incentive stock options, or ISOs, can only be granted to employees and must meet certain statutory requirements. They have certain tax benefits.

  2. Non-qualified stock options, or NSOs, can be granted to non-employees, such as advisors or board directors. But they don’t enjoy the tax benefits of ISOs.

RSUs vs. stock options

Consider the key differences between RSUs and stock options.

Restricted stock units (RSUs)

No. Employees receive shares once they vest.

Yes. Employees receive the right to purchase shares at a set price once they vest.

What are the typical stages?

What is the value based on?

The market price. Because you don’t pay to acquire the shares, they’ll always have some value, unless the share price of your company goes to $0.

The bargain element — that is, the difference between the strike price and the market value of the shares at the time they’re exercised. Because you pay to acquire the shares, they’ll only have value if the strike price is lower than the market price.

The market value of the vested shares is taxed as ordinary income.

You may also be taxed on any capital gains when you sell.

ISOs: Taxes are deferred until you sell your shares, though you may face an alternative minimum tax at the time you exercise.

If you meet certain holding period requirements when you sell, any income is taxed at the typically lower capital gains tax rate.

NSOs: The bargain element is taxed as ordinary income.

You may owe capital gains tax when you sell.

When the shares vest. This means employees don’t have the ability to time the tax event.

When you exercise your options. This means employees have some ability to time the tax event.

No. Any vested RSUs remain yours, even after you leave the company.

Yes. Options typically must be exercised within 10 years from the date they’re granted. When you leave a company, you may have to exercise any vested options within 90 days. In both cases, the actual time period may differ between companies.

Lower risk because they require no upfront cost and will retain their value.

Higher risk because they require some upfront cost, could expire, and could lose all value if the market price is lower than the strike price.

RSUs vs. stock options: Which is better?

Stock options and RSUs each have their advantages and disadvantages. But there could be circumstances in which one is more helpful than the other, says Messeca of Craftwork Capital.

Scenario A: You need the money

Which might be better? RSUs

Why? RSUs follow predictable timelines and retain their value. “If I’m trying to fund education for my children, I know when an RSU vests, I have the net of those shares, I can sell them right away and pay for school or invest them in another fund,” Messeca says.

Scenario B: You don’t need the money

Which might be better? Stock options.

Why? Stock options generally are seen as a “high risk, high reward” incentive, Messeca says, which is why startups and other companies with high-growth potential might use them to attract top talent. “If I’m in the investor mindset and in good shape, doing everything I need to do, maybe I’m more willing to focus my efforts on options because my potential upside is very large there.”

Other considerations for RSUs, stock options

While the risk associated with RSUs and stock options may be a key factor to weigh, it’s not the only one. To assess whether RSUs or stock options might be best for you, Messeca recommends gathering the specific details of your plans, including:

  • The value of the company today. This can give you an idea of what your equity compensation might be worth. Though it’s important to keep in mind that the value likely will change during the vesting period.

  • The vesting schedule. You’ll want to know when you actually gain a right to the shares.

  • How readily you could sell the shares. In public companies, selling shares is pretty straightforward. But private companies might have additional stipulations or fewer opportunities to sell any stock you acquire. It could make the tax implications more or less attractive.

And for options, specifically:

  • The strike price and how it compares to the current value.

  • Whether it’s an ISO or NSO. That will affect how your shares would be taxed.

  • Whether your company offers cashless exercising. Some companies permit employees to exercise their options without paying any upfront costs. Instead, the company is reimbursed out of the proceeds of the stock sale.

Editorial Team

Editorial Team

Related Posts

Staff issues: William Davies (left) and Daniel Keenan
Savings

TONY HETHERINGTON: What’s the truth about this energy firm promising me 12% returns?

August 2, 2025
Architecture, Building, Clock Tower
Savings

The Cheapest Days to Go to Disney World

August 2, 2025
New dawn: It's time to think again if you thought trusts ¿ some set up in Victorian days ¿ were an anachronism
Savings

How to profit from the cheap investment trusts that are bouncing back

August 1, 2025
Haley Sacks (Mrs. Dow Jones): Take Care of Future You So Present You Can 'Vibe'
Savings

Haley Sacks (Mrs. Dow Jones): Take Care of Future You So Present You Can ‘Vibe’

August 1, 2025
A car delivered to Her Majesty Queen Elizabeth II in 2006 for her personal use will be sold at auction later this month. And its Royal connection means it is worth a fair chunk more than the typical value of one of these motors...
Savings

Queen Elizabeth II’s supercharged Range Rover heads to auction – and it’s covered big mileage

July 31, 2025
Man looking at screen
Savings

No Fed Action in Key Market Week; Mortgage Rates Flatten

July 31, 2025
Load More
Next Post
CFTC

CFTC Announces "Crypto Sprint", Pledges To Support Of SEC's Project Crypto

Popular News

  • The 10 best banks for college students in 2025

    The 10 best banks for college students in 2025

    0 shares
    Share 0 Tweet 0
  • How to Contact Hilton Customer Service

    0 shares
    Share 0 Tweet 0
  • Hybrid fund models attracting ‘growing interest’ from managers

    0 shares
    Share 0 Tweet 0
  • Polestar Automotive Holding UK PLC (PSNY) Secures $200M Investment to Accelerate EV Expansion

    0 shares
    Share 0 Tweet 0
  • CFTC Announces “Crypto Sprint”, Pledges To Support Of SEC’s Project Crypto

    0 shares
    Share 0 Tweet 0

Latest News

CFTC

CFTC Announces “Crypto Sprint”, Pledges To Support Of SEC’s Project Crypto

August 3, 2025
0

Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure The US Commodity Futures Trading Commission (CFTC)...

Ask an Advisor: RSUs Vs. Stock Options

Ask an Advisor: RSUs Vs. Stock Options

August 3, 2025
0

If you’ve found yourself in the position of getting both restricted stock units (RSUs) and stock options from an employer...

OPEC+ agrees in principle another large oil output hike, sources say

OPEC+ agrees in principle another large oil output hike, sources say

August 3, 2025
0

OPEC+ agrees in principle another large oil output hike, sources say

Condé Nast Traveler

The Best Ear Protection for Kids to Wear at Concerts, Fireworks, and Sporting Events

August 3, 2025
0

There’s a reason your child covers their ears every time you walk past a construction site. Little ears are sensitive—and...

Global Finances Daily

Welcome to Global Finances Daily, your go-to source for all things finance. Our mission is to provide our readers with valuable information and insights to help them achieve their financial goals and secure their financial future.

Subscribe

  • About Us
  • Contact
  • Privacy Policy
  • Terms of Use
  • Editorial Process

© 2025 All Rights Reserved - Global Finances Daily.

No Result
View All Result
  • Alternative Investments
  • Crypto
  • Financial Markets
  • Investments
  • Lifestyle
  • Protection
  • Retirement
  • Savings
  • Work & Careers

© 2025 All Rights Reserved - Global Finances Daily.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.