Granted vs Owned
When you receive an RSU grant, you don't immediately own those shares. The grant is a promise that you'll receive shares in the future, contingent on continued employment.
Example: You're granted 1,000 RSUs worth $100,000 at a $100 stock price. You don't own any shares yet — you own the right to receive shares as they vest.
How Vesting Works
Vesting is the process by which RSUs become actual shares you own. Most RSU grants have a 4-year vesting schedule with a 1-year cliff.
- Cliff period: No shares vest until you complete 1 year of employment
- At the cliff: 25% of your RSUs vest all at once
- After the cliff: Remaining RSUs vest monthly or quarterly over 3 years
- At 4 years: All RSUs have vested and you own 100% of the shares
What Happens If You Leave
When you leave a company (voluntarily or involuntarily), your unvested RSUs are typically forfeited. Only vested shares belong to you.
Important: If you leave before the 1-year cliff, you typically receive nothing from that RSU grant, regardless of how close you were to the cliff date.
Real Example: 4-Year Timeline
You receive 1,000 RSUs at $100/share ($100,000 total grant value):
| Year | Shares Vesting | Stock Price | Value |
|---|---|---|---|
| Year 1 | 250 shares | $120 | $30,000 |
| Year 2 | 250 shares | $90 | $22,500 |
| Year 3 | 250 shares | $150 | $37,500 |
| Year 4 | 250 shares | $130 | $32,500 |
| Total | 1,000 shares | — | $122,500 |
Note: The total value ($122,500) differs from the grant value ($100,000) because stock prices changed over time.
Stock Price Risk
RSU value depends entirely on the stock price at vesting. This creates both opportunity (prices can rise) and risk (prices can fall).
- If the stock doubles, your RSUs are worth 2x the grant value
- If the stock drops 50%, your RSUs are worth half the grant value
- In rare cases of bankruptcy, RSUs can become worthless
Frequently Asked Questions
What happens to my RSUs if I leave the company?
Unvested RSUs are typically forfeited when you leave. Only RSUs that have already vested belong to you. If you leave before the cliff (usually 1 year), you receive nothing.
When do I pay taxes on RSUs?
RSUs are taxed as ordinary income when they vest, not when they're granted. The value at vesting is added to your W-2 income for that year.
What's the difference between granted and vested RSUs?
Granted RSUs are promised to you but not yet yours. Vested RSUs have completed the vesting period and are actual shares you own (or their cash equivalent).
Can RSUs lose value?
Yes. RSU value depends on the stock price when they vest. If the stock price drops 50% from your grant date, your RSUs will be worth 50% less than originally projected.
What is a cliff period?
The cliff is the minimum time you must work before any RSUs vest (typically 1 year). If you leave before the cliff, you receive no equity from that grant.
Model Your RSUs
Use our RSU calculator to see what your RSUs could be worth over time.
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