PSU vs RSU: what changes when your shares depend on performance
Short answer: RSUs vest on a time schedule and pay out a set number of shares. PSUs, or performance stock units, vest only if the company hits goals over a performance period, often three years, and the number of shares can land below or above the target. Both are generally taxed as wages when shares are delivered.
Side by side
| RSUs | PSUs | |
|---|---|---|
| Vesting trigger | Time | Performance goals over a period, plus time |
| Number of shares | Fixed at grant | A range, often a percentage of target set by the plan |
| Common metrics | None | Relative total shareholder return, revenue, earnings, or other goals |
| Taxed when | Shares delivered at vest | Shares delivered after certification |
| Planning challenge | Concentration, withholding gaps | Uncertain payout size and timing |
Planning around a range, not a number
- Model the low, target, and high payouts before counting PSUs in a home purchase or retirement plan.
- Check whether withholding at delivery will cover your actual bracket.
- Look at how much of your net worth is tied to one stock across RSUs, PSUs, ESPP, and options.
“you can have anything you want you just can’t have everything you want”
— Malcolm Ethridge
Malcolm uses that line when clients have to rank competing goals. He also starts with a one-year question:
“let’s fast forward 12 months. What needs to have happened now 12 months down the road for you to feel like this whole thing has been worth your time.”
— Malcolm Ethridge
Related
ESPP calculator · RSU tax calculator · double-trigger RSUs · advisors for stock option planning
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Frequently asked questions
What are PSUs?
Performance stock units are equity awards that convert to shares only if performance goals are met over a set period.
Can PSUs pay out more than target?
Many plans pay a range above or below target depending on results. Your award agreement sets the range.
How are PSUs taxed?
Generally as wages when shares are delivered, based on their value then, similar to RSUs.
Are PSUs better than RSUs?
Neither is better in general. PSUs add upside and downside tied to company results; RSUs are more predictable.
We offer financial planning and investment management services to senior managers and executives in tech.
See Capital Area Planning Group’s profileRelated reading: performance stock units: 4 situations, RSU planning questions, how RSUs are taxed, RSU cost basis.
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