The biggest mistakes first-time executives make with RSUs and stock options (and how to avoid them)
You did it—you landed your first executive role. Pop the champagne. You’ve hit a major milestone and shattered your own glass ceiling.
Your new role probably came with Restricted Stock Units (RSUs) or stock options and a whole lot of fine print, deadlines, tax traps, a lot of confusing acronyms, and a steep learning curve if no one teaches you the rules.
Here’s how to avoid seven mistakes that could cost you.
tl;dr
RSUs and stock options can be serious wealth-building tools if you know how to use them. But they’re not “free money.” Without a strategy, you could end up with a surprise tax bill or lose out on thousands in potential gains. Working with a financial planner who understands equity compensation is the move. Here are seven common mistakes to avoid that will help you move in the right direction.
Executive compensation vs. equity compensation
First, a couple of quick definitions to make sure we’re on the same page.
First up is your executive compensation package. It’s made up of your total pay and benefits. It usually includes your base salary, bonus, equity compensation, employee and company paid benefits and other perks.
Executive compensation is not the same thing as equity compensation. Equity compensation is part of an executive compensation package. RSUs and stock options are part of your equity compensation.
The most common RSU and stock option mistakes
Equity compensation can build serious wealth, but only if you play it smart. It’s easy to make expensive mistakes early on, especially if no one’s handed you the rulebook. A financial planner who specializes in executive compensation can help you skip the trial and error of these seven common mistakes.
Mistake #1: Thinking RSUs and stock options are “free money”
Equity comp might look like a windfall, but it comes with strings attached. RSUs don’t belong to you until they vest. Stock options only gain value if the share price rises above your exercise price (aka when you choose to buy the stock), and even then, you have to act at the right time to benefit. Taxes and timing can shrink what you actually take home.
Different types of equity, like RSUs, NSOs, and ISOs, each come with their own rules around ownership, taxation, and risk. Understanding what you’ve been granted is the first step in avoiding costly mistakes and building a smart, long-term plan.
Key details like your vesting schedule, cliff, and acceleration clauses are just as important. The vesting schedule shows when you earn your shares. The cliff is the minimum time you need to stay (usually a year) to receive anything. Acceleration clauses can speed things up if the company is sold or if you’re laid off.
This is a lot to manage while also crushing it at work and keeping your life together. That’s where a financial advisor comes in. They’ll break down what you’ve got, model different scenarios, and help you turn complex equity compensation into a strategic tool for building wealth.
Mistake #2: Underestimating the tax hit
Taxes on equity are trickier than they look. RSUs get taxed as ordinary income the moment they vest. Stock options, especially non-qualified ones, can trigger a tax event as soon as you exercise, even if you don’t sell. Some companies withhold tax, but not always enough, resulting in surprise tax bills or having to sell stock in a hurry.
Taxes aren’t a guessing game. They’re based on rules, timelines, and thresholds. With the right guidance, you can predict them, plan ahead, and avoid surprises. Work with a financial advisor before your RSUs vest or before you exercise options. Get a tax strategy in place so you’re not caught off guard.
Mistake #3: Waiting too long to diversify
Loyalty and hope are nice. But not when your job, paycheck, and net worth all hang on the same company. That’s now a risk. If the stock tumbles, your financial life takes a hit from all sides.
A financial advisor helps you create a smart diversification plan, one that balances risk, tax impact, and your goals. They may suggest selling some shares as they vest to fund things like a home, education, or retirement. That way, your wealth doesn’t ride on a single stock’s performance.
Mistake #4: Letting options expire
Stock options come with strict deadlines. Typically, they expire after 10 years or within 90 days of leaving a company. Missing that window or not having the funds to exercise means those options simply disappear. Tracking expiration dates carefully is essential. It’s equally important to understand your strike price compared to the current market value.
Mistake #5: Forgetting to align equity with real life goals
Equity isn’t just something to hold onto. It’s a tool to help you reach major life milestones, whether that’s buying a home, launching a business, or retiring comfortably. Using it effectively requires a clear plan. A financial advisor can guide you on when to sell, how it impacts your cash flow, and the tax consequences involved. The goal is to make your equity work for you, not the other way around.
Mistake #6: Missing out on tax-smart opportunities
Managing equity smarter can save you a lot in taxes, but many executives don’t learn these strategies until it’s too late. This often leads to paying more taxes than necessary or missing out on ways to use equity to your advantage.
Working with a financial advisor can help you lower your tax bill and maximize your equity’s potential. Options include paying taxes earlier at a lower rate, donating stock to charity for a tax break, or using investment losses to offset gains. A pro can help you build a year-by-year plan to make sure you don’t miss these opportunities.
Mistake #7: Treating equity as a bonus, not a business asset
Equity needs to be treated as a serious part of your compensation, not a bonus, perk, or afterthought.
Missing the 90-day deadline to exercise stock options after leaving a company means losing valuable shares.
Without a plan, exercising a large number of options can lead to surprise tax bills, forcing you to scramble for cash or sell shares at the wrong time.
Misvaluing your equity can cause you to make major financial decisions based on what unvested RSUs might be worth in the future, but if the stock drops or you leave before vesting, that value can disappear.
It’s a lot to juggle on top of your busy life, but a financial advisor who knows executive equity can keep you organized and help you make smart financial moves.
You’ve earned it, now maximize it
RSUs and stock options are serious wealth-building tools, but they come with a lot of fine print that catches you off guard if you’re not careful. To get the most out of your equity compensation, team up with a financial expert specializing in equity comp. They’ll help you build a plan tailored to your goals and make sure your equity is working as hard as you are.
Executive-level equity needs executive-level planning
You’ve worked hard for these benefits. CURO can help you maximize every component of your equity compensation package so you can take full advantage of all your plan offers.
This material is intended for informational/educational purposes only and should not be construed as investment, tax, or legal advice. CURO Wealth Management does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.