Can RSU bring you close to being semi-rich?

New / Eng gncaiye
Nov 8 20 Comments

Sorry everyone if this is a newbie question.

My understanding is that engineers in tech companies after working for 5 to 10 yours depending on which company they work at, they usually are able to save up quite abit due to the RSU that they receive as most large tech companies doubled their stocks in the past 5 years if not more.

For instance, an engineer who started working 5 years ago at company X with an average salary of 145k per year and was given 70K RSU annually ($280k vested over 4 yrs which is $70k / yr).

After 5 years of comfortable living with the 145k salary he would be collecting 5 * 70 * 2 = 700k from RSUs.

Is this more or less a true story or the reality is very different? If so how different is it?

Thank you!

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TOP 20 Comments
  • Twitter
    🐨 koala

    Twitter

    BIO
    I got a bio now. Do you?
    🐨 koalamore
    No one gets rich working for someone else.

    Well a few people. Like the ceo of google.
    Nov 8 7
    • Cohesity / Product pink brick
      Agree - it’s relative.
      Nov 8
    • Salesforce cattleman
      Why does it have to be liquid assets? Everyone knows that people with high net worth aren’t that way because their assets are liquid
      Nov 8
    • Riverbed Technology siegel
      The question is about being semi-rich. So twitter you can gtfo with your nonsense.
      Nov 8
    • Drift VMx00
      Because if you own a $15m house and have no cash, you still have to work to pay your monthly bills. Now, if it’s $15m in real estate with the majority kicking you rental income, I’d consider that rich regardless of liquidity ease.
      Nov 8
    • Tinder trolol
      @koala There are absolutely engineers in tech with 15M+ in liquid assets. Several of the original Tinder engineers achieved that. But then again, 50X stock appreciation is pretty rare.
      Nov 9
  • Apple ijyA68
    Your math is off. It would probably be $70k split over multiple years. Plus it counts as income when it vests, so a good chunk immediately goes to taxes. At the end, you might have enough for a down payment on a modest condo in a not-so-great neighborhood in Silicon Valley.
    Nov 8 4
    • New / Eng gncaiye
      OP
      The person is offered $280k (70k / yr) in RSU. Vested over 4 yrs.
      What you mean by $70k split over multiple years?
      Nov 9
    • Apple ijyA68
      The $70k is split over 4 years. That’s $17.5k/year before tax.
      Nov 9
    • New / Eng gncaiye
      OP
      No the total amount to be vested over 4 yrs is $280k which is $70k per year.
      Nov 9
    • Apple ijyA68
      So maybe around $40k/year after tax if you are in a blue state. Arely enough to keep up with housing.
      Nov 9
  • Google swinglyf
    Define semi rich.

    Also you didn’t subtract taxes from rsu? What’s the multiplier of 2?
    Nov 8 0
  • Facebook
    Reja

    Facebook

    BIO
    that would be telling
    Rejamore
    If you joined FB in 2012/2013, stock was in the 20s. It’s now 200 (+/- 10 or 20 over the past year or so).
    Nov 8 0
  • Salesforce cattleman
    Oh yea, you won’t be rich. I agree. OP, there’s a new definition of rich in this league
    Nov 8 0
  • Salesforce cattleman
    It can be true. Except most companies give 4 year packages. Some companies give refresh packages to extend you past that.
    Nov 8 0
  • Apple StoveJabs
    Your calculation assumes that the company will double in size at the end of year 5 (and that your refreshers vest immediately and in full). For your sake, before making any monetary decisions in the future speak with an actual financial adviser. Your math is so off it's scary.
    Nov 9 2
    • New / Eng gncaiye
      OP
      Could you give an example that you think makes sense?
      Nov 9
    • Apple StoveJabs
      I don't remember the formula off the top of my head but some pointers: you need to split the rsus in what vests every year, tax them and add what remains to the principal annually (or 6monthly if you want more accurate results). Then every year you multiply the principal with whatever growth you're assuming the company had (again you can go more fine grained to increase accuracy). You were ignoring compounding and the effect of the vesting schedule as well as its relation to sequence of returns. Btw this is all assuming people keep their stocks, otherwise you have to also account for that. Hope this helps.
      Nov 9

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