The Malcolm On Money Guide to Restricted Stock Units

For high-income earners who routinely receive large bonuses, have significant RSU vesting events, or experience a once in a lifetime liquidity event such as an IPO, few tax strategies generate more attention and confusion online than the so-called "short-term rental loophole.” This loophole allows bona fide real estate investors to use losses generated by a short-term rental property to offset ordinary income. 

The strategy can sound almost too good to be true. In some cases, it is; but in other cases, the short-term rental loophole can be a powerful planning opportunity. The key is understanding what it actually does, who it is designed for, and why the greatest benefit may not be reducing taxes presently but rather creating an opportunity to reposition wealth more tax-efficiently for decades to come.

The world’s largest technology companies—Alphabet, Microsoft, Amazon, along with Meta Platforms—are widely perceived to be spending at unprecedented levels to secure their positions in what many believe will be the defining technological shift of the next decade. Nevertheless, there is a narrative forming around the artificial intelligence (AI) arms race that seems incomplete. 

The assumption—reinforced almost daily by headlines and prepared statements on quarterly earnings calls—is that nearly all this capital is being funneled into the infrastructure needed to power increasingly complex AI workloads. But buried within the financial statements is the sobering reality that a meaningful portion of the capital currently being raised isn’t going toward AI infrastructure at all. Instead, it’s going to the IRS.

A stock market bubble is best defined as an episode of rapid price appreciation, followed by an equally dramatic decline. While these moments are often framed as anomalies, they are actually recurring features of the system. And while each cycle is assigned its own narrative, the underlying mechanics tend to look strikingly similar. 

Boom. Bust. Repeat. This is the rhythm of financial markets, tending to become most visible only in hindsight. Understanding that rhythm won’t allow you to predict the exact peak or trough. But it does offer context for recognizing where you might be in the cycle, which is arguably more valuable. 

Early retirement offers usually include some combination of severance, healthcare continuation, retirement plan decisions, and special treatment for certain forms of compensation. The exact terms vary by company, but most offers are built around a simple tradeoff, whereby the company offers some financial support to leave voluntarily. In exchange, you agree to end your employment on a defined timeline.

In a typical early retirement package, the severance component might be based on years of service, weeks of pay, or job level. Some companies also offer extended healthcare coverage, accelerated 401(k) vesting, pension enhancements, outplacement support, or more favorable treatment of unvested stock.

Microsoft’s offer appears more generous than many standard early retirement packages in a few important ways. But the detail likely to matter most for many long-tenured Microsoft employees is the treatment of company stock.

By most recent estimates, the U.S. is home to more than 22 million millionaires, which reflects the highest figure ever recorded. This growth has primarily been fueled by a decade-long rise in both equity markets and home values. Yet beneath that headline sits the sobering reality that a meaningful share of that wealth may never reach the next generation, the way it’s intended.  

For many high earners who have saved diligently over the course of their career, the difference between a well-structured estate plan and a neglected one can translate into hundreds of thousands—or even millions—of dollars unintentionally being gifted to the government. That means the biggest threat to the largest expected wealth transfer in history isn’t that markets reverse or that spending runs rampant, but an absence of planning. 

For younger investors coming into a stock market that is defined by the outsized gains of high-growth technology companies resulting from the IPOs of venture-backed decacorns, dividend-paying stocks are often viewed as a thing of the past. These stocks are mistakenly considered appropriate only for retirees seeking income—not for those still in the accumulation phase of their careers. 

While understandable, this perception is incomplete. It reflects a short-term view of investing that completely misses what dividends signal about the underlying businesses that pay them. But when viewed through a more comprehensive lens, dividends are not only a source of income; they are also a byproduct of fiscal discipline and long-term financial strength. 

For the first time in its 51-year history, Microsoft just announced that it will be offering voluntary retirement to thousands of its employees in the U.S. An estimated 7% of its U.S. workforce will be eligible for the buyouts, which includes personnel whose years of service plus their age totals 70 or more.  

While the move by Microsoft may feel uncharacteristic for a firm that has a history of celebrating its long-tenured workforce, it also reflects a practical response to the current market dynamics. Big tech companies like Microsoft have been looking for ways to trim their expenses as they pour hundreds of billions of dollars into building out their AI infrastructure for the future and reallocate resources toward the next phase of growth.

There is a particular kind of pressure that sets in during the final days before the tax filing deadline, and it’s equal parts urgency and avoidance. For many taxpayers, the realization that they’re up against a hard deadline, paired with the hope that it can still be wrapped up quickly is a source of anxiety.

For many taxpayers, especially those with increasingly complex financial lives, this is the moment when the temptation to “just get it done” using a do-it-yourself software solution sets in. But in reality, rushing through your tax filing might be the most expensive financial decision you can make.

In 2021—the early days of the current bull market—many software companies’ trading multiples seemed untethered from reality. At the time, however, very few shareholders complained that 15%, 20%, or even 25% of annual revenues were being paid out to company employees in stock-based compensation.

Equity grants were framed as a necessary cost of attracting top engineering talent, and buybacks designed to offset dilution were described as a sensible allocation of capital. But as the air has come out of many high-growth software names, and concerns mount that generative AI could commoditize swaths of traditional enterprise software, patience is wearing thin among the investor class.

There is a quiet shift happening among affluent retirees. After decades of saving, investing, and watching their portfolios compound, many are arriving at the realization that they are unlikely to live long enough to spend everything they have accumulated. 

For some, that realization brings peace of mind. For others, it introduces a new and more nuanced question about the purpose of continuing to hold assets that will almost certainly outlive them.