Before You Accept That New Job Offer, Consider the Forfeiture Value of Your Unvested RSUs
When evaluating a job offer, it’s easy to get captivated by the headliners, particularly base salary, seniority level, and/or signing bonus. But if your current employer’s compensation package includes restricted stock units (RSUs), you could be leaving a substantial amount of money on the table by walking away too soon.
One of the most overlooked—and potentially costly—mistakes senior managers and executives make when switching jobs is failing to consider the forfeiture value of unvested equity. Career mobility is vital, and sometimes a new opportunity simply can’t wait. But knowing the forfeiture value of your equity gives you critical negotiating power you may not realize you have.
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RSUs can be a powerful wealth-building tool, especially at high-growth companies. But they come with strings attached. RSUs typically vest over a period of years, and until they do, they remain out of reach. This creates what the IRS calls a “substantial risk of forfeiture,” which in layman’s terms means that if you quit or are terminated before those shares vest, you lose them.
From a financial planning perspective, you should always know the forfeiture value of your unvested RSUs. Knowing how much you’ve earned via equity compensation each year is important, as is knowing how much you’d give up by leaving.
While executives and board directors often have teams helping them track the value and timing of their RSUs, other employees mostly don’t. Tracking the forfeiture value of your unvested RSUs annually is one of the smartest things you can do to chart your path to financial independence.
For example, consider an employee who works for Apple and was awarded 2,500 RSUs when she started 18 months ago. With a 4-year vesting schedule where shares vest in equal installments every 6 months, she has only completed 3 vesting events—meaning 936 shares are fully hers, and the remaining 1,562 shares are still unvested.
With Apple stock trading around $250 per share today, that’s approximately $390,625 worth of equity the employee would risk leaving on the table to accept a new role elsewhere. However, if her next vesting period is only one month away, perhaps she would be better off pushing out her start date and waiting until the next vesting period. This could be the difference between receiving $156,250 in additional compensation or not.
Additionally, having the numbers at hand—down to the dollar—allows you to approach that decision with clarity. Instead of a vague remark that you’d be giving up a lot of stock, you can quantify it, noting that you’d have to forfeit $390,625 to accept a new offer.
With this knowledge, you at least know what you're trading for a new opportunity. Sometimes the career upside justifies the loss, but it should be a conscious decision, not an anecdotal one.
Some companies offer new hires a special signing bonus or equity grant specifically designed to “make whole” what they’re leaving behind. This type of special compensation has become less common among the large, publicly traded companies in recent years. However, companies are more willing to make accommodations for senior leaders performing vital functions, especially if filling the role is time-sensitive.
And while companies may not be willing to buy out your entire lot of unvested RSUs or replicate them share-for-share using their stock, they might be willing to replace fewer RSUs with performance shares instead—affording you the opportunity to earn your way back to even over time.
Ultimately, the decision to leave behind unvested RSUs comes down to weighing opportunity cost. Equity grants are designed to retain talent, which means the forfeiture value of your RSUs may be the price you pay to switch to a new role. And by calculating that cost, you give yourself a clearer framework for deciding whether the timing makes sense or if waiting a few months meaningfully changes your financial outcome.
The key is to make sure that equity doesn’t become an afterthought in your career moves and compensation negotiations. Base salary and title may define how you’re compensated today, but RSUs often represent the largest lever in building long-term wealth.
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Malcolm Ethridge is the Managing Partner at Capital Area Planning Group, based in Washington, D.C. His areas of expertise include retirement planning, investment portfolio development, tax planning, insurance, equity compensation and other executive benefits.
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Disclosures:
The information provided is for educational and informational purposes only, does not constitute investment advice, and should not be relied upon as such. Be sure to consult with your legal advisors before taking any action that could have tax and legal consequences.
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