Stock Options & Stewarding Wealth: A Fiduciary’s RSU Tax Strategy for Huntsville Engineers
By: Brian Seay, CFA
For the engineers, developers, and tech professionals in Cummings Research Park and across Huntsville, a significant portion of your net worth is likely tied to your company’s stock. Compensation packages heavy in Restricted Stock Units (RSUs) or Incentive Stock Options (ISOs) are a fantastic tool for wealth building, but they present a complex financial challenge.
Receiving a large RSU grant can feel like a windfall, but without a plan, it can quickly become a tax nightmare and a source of unnecessary risk.
As a fee-only fiduciary financial advisor in Huntsville, we specialize in helping tech employees navigate these exact scenarios. Here is a clear strategy for managing your equity compensation.
The RSU Tax Trap: Vesting = Income
The most critical mistake we see Huntsville tech employees make is not preparing for the tax event at vesting.
Here’s the simple truth: When your RSUs vest, the entire value of the shares is taxed as ordinary income. It is added directly to your W-2, just as if you received a cash bonus.
This can easily push you into a higher tax bracket, resulting in a shocking tax bill the following April. While most companies withhold a portion of shares for taxes (typically a flat 22% for federal taxes), this is often not enough to cover the actual tax liability for high-income professionals. Proactive tax planning is not optional; it’s essential.
The Problem of Concentration Risk
After a few years at a company like Lockheed Martin, Northrop Grumman, Adtran, or the various successful startups in our area, it's common to see 30%, 50%, or even 70% of your net worth tied up in a single stock.
This is what we call "concentration risk." While you may feel loyal to your employer, having all your eggs in one basket is a high-risk gamble. We've seen entire retirements derailed by a single company's bad quarter.
Our 3-Step Strategy for RSUs
As a fee-only fiduciary advisor, our advice is not clouded by commissions or the desire to grow our managed assets at all costs. We provide a flat-fee, unbiased plan to integrate your equity compensation into your total financial picture.
Create a Vesting Plan: You must have a plan in place before your shares vest. This includes setting aside a specific percentage for taxes (beyond the automatic withholding) and deciding how much to sell immediately.
Systematically Diversify: We build a strategy to systematically sell a portion of your vested shares over time. This allows you to lock in gains and re-invest the proceeds into a diversified, low-cost portfolio that isn’t tied to your employer's performance.
Align Wealth with Values (Stewardship): This is the core of our philosophy. A sudden increase in wealth from RSUs isn't just a number on a statement; it's a tool and a responsibility. Our goal is to help you use this wealth to secure your family's future, practice intentional generosity, and build a legacy that lasts.
Take Control of Your Equity
Your RSUs are a powerful wealth-building tool, but they require a plan. Don’t wait until a vesting event or a market downturn to get organized.
If you are a contracting professional in Cummings Research Park or the Huntsville/Madison area, we invite you to start a conversation with us. Let’s create a clear RSU tax strategy and a financial plan that reflects your hard work and your values.