Amazon employees typically receive restricted stock units (RSUs) as part of their compensation package, and for many, these RSUs can make up a large portion of their total compensation package.
When Do My Amazon RSUs Vest?
The total amount of on–hire RSUs you will receive is determined when you are hired.
These RSUs will vest over the first four years of your employment. For the first two years of your employment, RSUs are distributed at the end of years one and two. The distribution frequency increases to 6 months (2x/year) in years 3 and 4 at Amazon.
Let’s look at an example of someone who receives $500,000 in RSUs.
In this example, the stock price does not change. Your vesting schedule will look like this:
- End of year one: 5% of your initial grant will vest ($25,000)
- End of year two: 15% will vest ($75,000)
- Six months later: 20% will vest ($100,000)
- End of year three: 20% will vest ($100,000)
- Six months later: 20% will vest ($100,000)
- End of year four: 20% will vest ($100,000)
Many Amazonians allow their vested RSUs to build up over time, but we prefer to think of vesting RSUs as cash. Essentially, when your Amazon RSUs vest, it’s like Amazon just handed you cash. Cash that you decided to purchase Amazon stock with IF you don’t sell your shares as soon as they vest.
Many Amazonians allow their vested RSUs to build up over time, but we prefer to think of vesting RSUs as cash.
Essentially, when your Amazon RSUs vest, it’s like Amazon just handed you cash. Cash that you decided to purchase Amazon stock with IF you don’t sell your shares as soon as they vest.
Should I Hold or Sell My Vesting Amazon RSUs
First and most importantly – if you sell your Amazon RSUs the moment they vest, from a tax perspective it’s basically as if Amazon paid you in cash instead of stock.
I will always encourage Amazon Employees to sell their RSUs as soon as they vest, but I think the following thought experiment will help you decide what’s the best route for you.
Imagine you’re at work and someone from Amazon corporate hands you an envelope full of cash. What would you do with this cash? Would you:
- Invest in a diversified index fund that owns 10,000+ companies?
- Set money aside in a 529 college savings account for your kid?
- Save for a down payment on a house?
- Increase cashflow so you can more easily contribute to your Amazon Mega Backdoor Roth?
- Use every penny and buy more Amazon stock?
If your answer is “Use every penny and buy more Amazon stock?” – you’re in luck. Essentially that is the default decision being made for you if don’t take any action when your RSUs vest.
If you allow all these RSUs to build up in your brokerage account, you could end up with a portfolio that is heavily concentrated in Amazon stock. (This is not only risky because it’s a single stock, but also risky because it’s the company you work for! While this may have felt amazing 2010-2020, it didn’t feel so good 2021-2022.)
If your answer is “no, I would use that money for something other than Amazon stock” – then you need to act when your RSUs vest. Sell your RSUs as soon as they vest and make the decision for yourself as to how you’ll use the proceeds.
Sell Your Amazon RSUs When They Vest
Sell your RSUs as soon as they vest and make the decision for yourself as to how you’ll use the proceeds.
Everyone’s situation is unique. If you have questions about your Amazon RSUs, I encourage you to schedule time with our team.