5 Costly Mistakes Railroaders Should Avoid with their RSUs

Transcript:

Has the railroad, given you some RSUs? Watch this video to learn five costly mistakes you should avoid.

    Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara with Highball Advisors and today we're going to talk about restricted stock units, RSUs. They're granted to employees as extra compensation. Usually railroaders in the managerial positions, they'll get sometimes stock options and another one is RSUs.

    So for those who've gotten those, I thought I'd go through a video on things you want to be aware of, be proactive, avoid these types of mistakes. So I came up with five of them. Let's go through them and then you can just have mental notes for them or write them down, that type of thing.

    So the first thing you want to do with your RSU is understand how it works. What's the vesting schedule on it? Is it pre or post-tax? Those type of things. You can read all that in the stock plan document that they'll give you when you get the RSUs. Go through that. All that information is in there. So that's the first one.

    Second one is the taxes. Everything, planning is really all about taxes. So not understanding the tax. What's the withholding. Are they taking out enough money? So your railroad might only be withholding at 20 or 22%. Oh, by the way, you're in a 35% bracket. So come tax time, you're going to have a bigger nut to pay out to the IRS, so to speak. So you want to model that. You want to plan for those, model those scenarios, that type of thing.

    Then you can look at certain strategies say, oh, okay, well, I got some RSUs coming this year. Maybe I'll defer some income this year or maybe hey, I haven't really done all my 401k. You may max out that 401k, because you're going to have this additional RSU income coming in all. So that's two there.

    Number three is if you're thinking of leaving the railroad, how does that affect your RSUs? So say maybe hey, I'm getting out of the railroad. I might have another position, but understand your vesting schedule. Maybe you'll wait a couple months before you do that until your RSUs vest. So you want to understand that and then also understand your life events with your RSUs. What happens if something happens to you? Where do your RSUs go? Does it go to your family? Does it go to your spouse? What's the estate planning ramifications around your RSUs? Very, very important stuff because those are all assets to you. You've worked hard for them.

    Then have a plan for the shares. You're invested in the railroad already, it's your career. Now you're getting equity possibly in your railroad. So are you over concentrated in your railroad? How about diversification? So the question I always ask is if the railroad gave you money through the RSUs, would you use that money to buy the company's stock? So that's why you might want to say, well yeah, it's a great company, but diversification's probably the smarter way to go. So think about that on your overall plan.

    Then finally, seek financial and tax planning help. Really, really important. It's almost penny wise, pound foolish sometimes when you're starting to accumulate these RSUs. It's significant income and you say, "Hey, my buddy Joe, he's doing this. That should be fine." Every situation's different. So go reach out to somebody who understands the RSUs and I think it will help you give you a sense of comfort and go a long way to helping you achieve what you're trying to work towards.

    So I hope you found this video helpful. Feel free to reach out to me, go through my boarding for railroad retirement process. Really great stuff. Especially if your railroaders near or at retirement. Or help go through your RSU process if you need to understand that. Reach out to me. Please subscribe to the video. I appreciate that. Click on the notification bell to get the latest and until next time everyone, please stay safe. Stay on track and take care. So long everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.