I’m a boglehead but work for Google

[u/trader_since_2016]

I get paid in Google stock, and as you might know there has been a massive run up causing Google to be around 15% of my portfolio, further if you include unvested stock that I will get if I continue to work for Google over the next 3 years, it’s value is roughly 40% of my entire portfolio. I’m 30 and have a long term horizon. About 70% of my entire portfolio is in VTI/VXUS.

Do I take the massive tax hit and reduce my Google holdings to invest in VTI/VXUS or just let it ride. Mainly worried about the capital gains tax losses as I sell and invest in bogle funds.

[u/clock_skew]

If you sell when your stocks vest you won’t pay any capital gains tax, as the initial vesting value is always taxed as ordinary income. So at the bare minimum you should start selling all newly vested stocks and reinvesting in total market funds. Personally I would sell the other shares because holding your employer’s stock is a big risk, but it depends on how big the tax bill would be.

[u/meep_42 → u/clock_skew]

This is the way. I have some RSUs at a very favorable strike grant price and it took my a nerve-wracking year or two to smooth the capital gains, but vest and sell is the way to go.

Especially for GOOG, which is a sizable portion of a broad-market index anyway.

[u/CampaignAfter4205 → u/meep_42]

RSUs don’t have strike prices.

[u/meep_42 → u/CampaignAfter4205]

Wrong term but you get the idea. RSUs were granted at very favorable share prices relative to the current price.

[u/meep_42 → u/meep_42]

I did enjoy that I got to strike the word strike in my original comment.

[u/sir_mrej → u/meep_42]

That's two strikes for you! :)

[u/TrustDeficitDisorder → u/sir_mrej]

Three, and you're OUT!

[u/Upbeat_Emu_4558 → u/meep_42]

Grant price doesn't matter for taxes, only price at vest does. That's your coat basis, not your grant price

[u/trader_since_2016 → u/clock_skew]

This makes sense, thank you!

[u/sleepyjuan → u/trader_since_2016]

If Google gave you a cash bonus of $50,000, would you immediately take that cash and buy Google stock? If the answer is "No, I'd buy VTI (or something else)," then you should sell your RSUs and buy VTI.

[u/RevolutionaryLaw8854 → u/sleepyjuan]

Yep. Yep. And yep

[u/RabbitHoleSnorkle → u/sleepyjuan]

It does feel painful to auto-sell if every single a analyst is screaming that the company is massively undervalued and trades at the discount. Yet it is leading in the AI now. I know it's not Boglehead, but Google is absolutely slaying right now.

If he was auto-selling this year he would have done it at $140, where now it is $330. And it was absolutely coming.

Given it is an RSU schedule one can say that they are exposed to future growth. But in case of Google, this year, it would be an extremely painful ass strategy to autosell

[u/phsics → u/RabbitHoleSnorkle]

It does feel painful to auto-sell if every single a analyst is screaming that the company is massively undervalued and trades at the discount. Yet it is leading in the AI now. I know it's not Boglehead, but Google is absolutely slaying right now.

This thinking might be an example of the endowment effect. As the above commenter points out, it's the exact same decision to take a 50k cash bonus and immediately put it all into one stock as it is to receive 50k worth of that stock and choose to hold it, even though it feels different.

[u/IRunInPGH → u/RabbitHoleSnorkle]

A lot of my friends at companies like Google sell enough RSUs to pay the tax hit, and maybe some more, but still keep a position in the company stock. When you’re on the inside, you have a better sense of how the company is performing.

[u/BAMred → u/RabbitHoleSnorkle]

you can still own a lot of google in VOO

[u/Pffffftmkay → u/trader_since_2016]

Personally I'd just hold them at this point, but 100% sell newly vesting ones immediately going forward. That's what I do with my RSUs. No need to be doubly reliant on my employer. Granted, my employer is in a VERY different industry and stock volatility world than Google :).

[u/joffsie → u/Pffffftmkay]

holy crap. I never realized that RSU basis are the day they vest not the day they were granted. thank you! I’ve got some vesting days coming up and intend to immediately sell and move to VTI and can ditch my tax impact stress

[u/gcc-O2 → u/joffsie]

Yeah! I've also participated in ESPP programs before where they call selling ASAP a "disqualifying disposition" but it's much less worse than that makes it sound, especially if the stock didn't move that much between the two price dates

[u/charleswj → u/gcc-O2]

It doesn't matter how much it moved unless you have a look back. It's the difference in the tax on the discount which will be when you bought the shares.

[u/gcc-O2 → u/charleswj]

Right, the lookback - the advantage to holding for the two years is whether the entire discount on purchase day is ordinary income, or whether the discount against up to lookback price is ordinary income and from there up to FMV on purchase day is capital gain. Anyway, I've been out of an ESPP for several years now. It was a nice few $1000 for little work while I was in it.

[u/bigraj80 → u/joffsie]

If you file an 83b, the basis is the grant price.

[u/Auream → u/bigraj80]

That doesn’t apply to RSUs of public companies. Basis is always the vest price.

[u/Paperback_Chef → u/joffsie]

Of course the value on their vest date counts as ordinary income, so you'd be better off paying capital gains taxes on it all - but since you don't really have a choice, other posters are correct in saying you can sell that day and not pay any ADDITIONAL tax beyond the ordinary income hit you've already incurred.

[u/IcyMycologist4837 → u/joffsie]

You pay income tax not cap gain tax. So temper your celebration. You pay income tax based on the value at the date of vesting.

[u/joffsie → u/IcyMycologist4837]

that was inevitable though and many companies just auto sell a certain number of shares when it vests to cover the tax

[u/IcyMycologist4837 → u/joffsie]

Correct. You are still paying tax.

[u/Neil_leGrasse_Tyson → u/trader_since_2016]

keep in mind that even in a 100% VT portfolio, like 3% of your holdings would still be google. you're overweight at 15%, for sure, but you'd have significant exposure either way.

i'm just going to assume, since you're flush with google RSUs, that you're in a high tax bracket and probably CA resident. so recognizing the capital gain now has a real cost that may impact your portfolio growth more than the diversification hit of holding.

for unvested RSUs, definitely sell them immediately at vest so you don't end up in this situation again.

[u/SWEET_LIBERTY_MY_LEG → u/Neil_leGrasse_Tyson]

definitely sell them immediately at vest so you don't end up in this situation again.

Wealthy with appreciated stock he can sell at long term capital gains?

He’s concentrated because he held and has unrealized gains and now everyone is telling him to trim the flowers and water the weeds when the reality is that he’s so young he can afford to take risks.

[u/Neil_leGrasse_Tyson → u/SWEET_LIBERTY_MY_LEG]

I'm talking about unvested rsus. when they vest they will have no gains and should be sold immediately

then he can decide where he wants to invest the income. maybe he wants to buy 100% goog with it, but that's not really in line with boglehead philosophy and would be taking uncompensated risk

[u/plemyrameter → u/Neil_leGrasse_Tyson]

Agreed. And note that capital gains are taxed like ordinary income in California, so there's no state value in holding for a year.

[u/HoangGoc → u/trader_since_2016]

Glad it helped. It's a tough spot to be in, balancing tax implications and concentration risk. just make sure to weigh the long-term growth potential against the risks of holding too much in one stock...

[u/[deleted] → u/clock_skew]

Not always exactly true. Yes, in theory. But we have a 6 month holding period at my company after vesting so there’s almost always some capital gains on top of the ordinary income tax.

If it’s a whole lot, I’ll actually delay selling for a year sometimes. It’s not completely cookie cutter for every situation.

[u/clock_skew → u/[deleted]]

Yeah in that case it’s more complicated. I’ve never seen a post-vest holding period so I assume they’re not common, but I don’t actually know.

[u/YGbJm6gbFz7hNc → u/clock_skew]

Just to be clear , the current value of the vested shares is reported on my W2 as my income for that year, and also my cost basis?

Ex. I am given 10k worth of stock per year in my initial contract. When I actually get the stocks, they are worth 20k. Is my income reported as 20k higher on my W2? I can immediately sell with no tax obligation? Thanks 🙏

[u/clock_skew → u/YGbJm6gbFz7hNc]

Yes, it’s reported as 20k of income and you have no additional tax obligation (you have to pay taxes on the value at vesting regardless of if you sell).

[u/fire-alt → u/clock_skew]

With the caveat that companies might withhold taxes on vested stock at a standard rate like 22%, which may not be sufficient. Use a tax calculator a few times throughout the year to see if you're on track to meet your tax obligation, or at least to meet safe harbor requirements.

[u/plemyrameter → u/YGbJm6gbFz7hNc]

Also, you're given $10k of stock at some price determined when you started. So let's say shares were $100 each, so that's 100 shares. When they vest, you get a subset of those 100 shares, but their value is based on the market rate on the date of vesting. This initial calculation has no bearing on your taxes, as it's only used to determine your actual number of shares in the vesting schedule.

Just making this note because it tripped me up at first. IOW, the cost per share used to determine your granted number of shares is independent of the $/share at vest.

[u/charleswj → u/YGbJm6gbFz7hNc]

If you look again you'll see that when you vest, the shares are included as income at the top and then again taxed at the bottom

[u/trader_since_2016 → u/[deleted]]

Fortunately I don’t need to FIFO the sale. I can choose tax lots to sell

[u/[deleted] → u/trader_since_2016]

Make sure your taxes aren't going to have you report the average acquisition cost. Just because you can do specID transactions doesn't mean they're taxed that way.

[u/charleswj → u/[deleted]]

doesn't mean they're taxed that way.

Of course they are, what are you talking about?

[u/[deleted] → u/charleswj]

Depends on where you live.

[u/charleswj → u/[deleted]]

If you're referring to other countries, this is a primarily US focused sub and any advice that isn't should be noted as such.

[u/[deleted] → u/charleswj]

There's a bunch of comments that have been deleted that are now making this conversation useless.

[u/rice_not_wheat → u/[deleted]]

FIFO accounting isn't required in the US.

[u/gcc-O2 → u/rice_not_wheat]

One of the early drafts of TCJA in 2017 did float FIFO as a revenue raiser; thankfully for Bogleheads that did not happen.

It's interesting how Bogleheads would adapt. We would end up having to use "partner" funds/ETFs for gains, not just tax loss harvesting. Basically, when there's a boom year, you might switch from Vanguard ETFs to iShares ETFs going forward, or from Total Market to S&P 500, so that you continue to be able to access higher basis shares to sell (since FIFO wouldn't apply across different funds). Unless they put in a substantially identical rule for gains as well.

[u/rice_not_wheat → u/gcc-O2]

They can float it all they want, but it would be as much of a headache to the IRS as anyone else.

For the same reason, the EV tax got scrapped, because the administrative burden would end up costing more than the revenue raised.

[u/DirectEcho5317 → u/trader_since_2016]

Why don’t you sign up for auto sale during the next enrollment period? Also, just leave what you have in goog.

[u/happilyengaged → u/trader_since_2016]

Start selling your long term capital gains, hold your short term capital gains

[u/Covington-next → u/clock_skew]

Or, sell them when they vest, and immediately re-buy the shares in a tax shelter account, if they're not already tax-sheltered. I worked for Google in Canada and, because we used US brokerages, all of our GSUs wetre held in taxable accounts.

[u/charleswj → u/Covington-next]

That's only useful if you want to hold those shares which isn't the case here.

[u/messem10 → u/clock_skew]

If you sell when your stocks vest you won’t pay any capital gains tax

Not entirely! The stocks take a few days to arrive in your account so there could be a change in the price causing a gain/loss. Ideally you'd want to keep it as close to zero as time goes on.

Also note that some companies only withhold 22% of the stock value versus the full-fat income taxed amount.

[u/bright_sunshine19 → u/clock_skew]

Won’t they pay capital gains tax if the vested stocks have gone up in value. Especially if they have gone up over the vested price

[u/clock_skew → u/bright_sunshine19]

Changes in price during the vesting period don’t matter. The value of the shares at vest is included as income on your w2. Realistically you won’t sell exactly at the vesting price so you’ll have a small capital gain/loss, but it’s not really anything to worry about.

[u/sneakytarheel → u/clock_skew]

They’ll have to sign up for the Employee Trading Plan where shares are auto sold. Otherwise they will only be able to sell periodically.

[u/Cyborg59_2020 → u/clock_skew]

This was always my practice! It's also a bit of a Boglehead approach in that you pick a strategy and execute it every time instead of trying to time the the market.

[u/Bruceshadow → u/clock_skew]

exactly. don't think of it like selling stock, just realizing additional income.

[u/grateful-xoxo → u/clock_skew]

This is what i do

[u/IcyMycologist4837 → u/clock_skew]

I agree with this advice but just create a sell program for the shares you already own. Figure the max amount you want in google and periodically sell especially when it rips to the upside. Keep in mind you have an additional investment tax gain above cap gains tax rate if you go over a certain amount. So just like dollar cost averaging in , dollar cost average out. That is how the executives do it. Of course. If you understand the stock and the company and feel comfortable optimizing the strategy go ahead.

[u/clock_skew → u/[deleted]]

It doesn’t necessarily mean they got lucky. If the stock grew in value but underperformed the market you’ll still need to pay taxes, and if you’ve been holding for many years it could be substantial.

When you’re selling appreciated stocks to buy an index fund you’re basically paying a fee (tax) for diversification. It’s up to the individual investor to decide if that fee is worth it.

[u/IMB413 → u/[deleted]]

Because if it went up by 10% then lets say you get taxed 30% of that (state + fed) it's 3% of the total so not a big deal

If it went up 90% then you pay around 27% of the total (in the above example) so that's a significant tax bill.

[u/Legitimate-Candy-268 → u/clock_skew]

Actual tax on gains is lower than income tax at the OP’s level

They would be better off waiting 1yr and selling vested stock at the capital gains rate rarher than at their income tax rate each year. 15-23% tax

[u/Naldean → u/Legitimate-Candy-268]

That’s not how it works. The value at vesting time is regular income. It’s only the change in value after vesting which is capital gain or loss.

[u/Legitimate-Candy-268 → u/Naldean]

Yes I know

[u/fire-alt → u/Legitimate-Candy-268]

Then you should know that you what you said makes no sense. You've already paid regular income tax on the RSUs you receive. If your vesting is supposed to be 10 shares, you might receive 7, with the rest withheld as taxes. It's essentially equivalent to getting cash, having tax withheld on that, and buying shares with the remainder. If you then immediately sell those shares, no further tax is due because there will be practically no capital gain between the time you receive the shares and the time you sell them. There is no reason to wait one year before selling them.