How to Guard Against Seller's Remorse When Managing Your RSUs

If you’ve spent any meaningful amount of time accumulating restricted stock units (RSUs), you already know they can be both a gift and a curse. On one hand, RSUs can be one of the most powerful wealth-building tools available to employees of publicly traded companies. On the other, those same shares can quietly compound over time, becoming the single largest source of risk in your overall financial picture.

It is generally advisable that investors regularly pare their holdings so that no single investment represents more than 20% of their overall portfolio’s value—substantially reducing their concentration risk. But for those who remain employed by the same company for decades, it can be easy to watch that one stock gradually grow to represent the lion’s share of your entire net worth. And once that happens, it becomes increasingly difficult to imagine parting with said stock as time goes on.

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CEOs and other corporate insiders who possess material nonpublic information often rely on what are known as Rule 10b5-1 trading plans to sell company stock in a structured and legally compliant manner. Adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, these plans allow insiders to prearrange future stock sales when they are not in possession of said information.  

In practice, an executive works with legal counsel, financial advisors, and their brokerage firm to draft a written plan that specifies the number of shares to be sold, the price parameters, and the timing of the trades in advance. Once the plan is adopted, the trades are automatically executed during an open trading window—according to the preset instructions—regardless of subsequent news or market developments. These plans can be advantageous for those who are not subject to insider trading rules and supervision. 

To help reduce your own concentration risk, you might, for example, decide to sell a portion of your shares on a quarterly basis over the next three to four years. To pre-plan these sales, you could select specific dates on the calendar (e.g., the first of January, April, July, and October) and align them with the start of each calendar quarter. 

By determining the number of shares to sell on these dates well in advance, you eliminate the possibility that you will be in a position to make an emotionally charged decision when the time comes. This systematic approach ensures that your plan is executed consistently, regardless of short-term market fluctuations, and provides a disciplined framework to gradually reduce your exposure to a single stock. 

One obstacle in the way of reducing your portfolio’s concentration in a stock is often the hypothetical sting of watching as recently sold shares continue to rise—also known as seller’s remorse. Having a plan for when and how you will sell those shares well in advance of their vesting date helps minimize the likelihood of suffering such a blow. To take it a step further, it also helps to have something tangible to do with the proceeds from selling. 

When RSUs vest, they are taxed as ordinary income. However, most employers automatically withhold at the federal supplemental rate of 22%, regardless of whether your actual marginal tax rate is significantly higher. For high-income earners in the 32%, 35%, or 37% brackets, that automatic withholding is almost always insufficient.  

If additional shares are not sold to cover the difference, and if quarterly estimated payments are not coordinated properly, you may find yourself writing a substantial check to the IRS the following April. Thus, one of the best uses of the cash proceeds from selling shares involves accounting for the gap between the 22% withholding rate and your true marginal rate and making quarterly estimated payments accordingly. That way, come April, you reduce the likelihood of a surprise tax bill. 

Another way to convert paper gains into something tangible is to eliminate your home mortgage, as there is something transformative about owning your home outright prior to retirement. For households that carry a significant mortgage payment, eliminating that obligation reduces the largest fixed monthly expense in the budget.  

Imagine a family that spends a total of $10,000 a month, including a $3,500 mortgage payment, to support their lifestyle. Once the mortgage disappears, their required monthly expenses drop to $6,500 a month (or by 35%). And going forward, the size of the nest egg needed to sustain their lifestyle in retirement shrinks accordingly.  

In practice, individuals who own their homes outright often find themselves reconsidering how long they truly need to work, as lower fixed expenses reduce sequence-of-returns risk, provide insulation during market downturns, and create flexibility around career decisions. Some choose to retire earlier than planned, while others negotiate more flexibility or transition into part-time, lower-stress roles.  

Now, the shares that were sold no longer represent missed upside. Instead, they represent the mechanism that created optionality in their lives. A structured selling plan is basic risk management, which rarely feels satisfying short term as its value only becomes evident when something goes wrong, such as a market correction. 

Minimizing seller’s remorse is less about perfectly timing the market and more about having a defined process, properly accounting for taxes, and using the proceeds from selling in ways that materially improve your quality of life. When the result of your sales is greater control over your future, it becomes far easier to see those transactions as deliberate steps toward reaching financial independence instead of missed opportunities. 

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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. 

Investments in securities and insurance products are: 

NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE