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Google RSU and 401k: What You Need To Know Thumbnail

Google RSU and 401k: What You Need To Know


Google is known for taking care of its employees and not just physically or emotionally - they care for their employees' well-being too. Google does this by offering financial benefits, including a 401K match, a deferred compensation plan to decrease taxes on bonuses, and with Google RSUs.

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What Is a Google RSU?

Google offers employees Google RSUs as a part of their employee compensation package. A GSU is a certificate that entitles you to Alphabet Inc. capital stock. One RSU equals one share of Google company stock. However, your certificate isn't worth anything until your units vest, which occurs according to Google's vesting schedule, which we discuss below. 

You can determine the value of your Google stock units GSUs by taking the intended value as defined in your offer letter divided by the current closing price of Alphabet Class C capital stock. You'll use the value of the stock on the date just before your grant date.

Class C shares of stock are typically held by employees without voting rates. They may be inexpensive to purchase at first but will have higher fees in the long-term.

For example, let's say your intended value, as defined in your letter, is $50,000, and the current stock price on the date before your grant date is $1,600. You would have 31.25 GSUs. 

You'd then receive the percentage as outlined in your offer letter of the vested GSUs. If your initial vesting is 25%, you'd receive 8 GSUs or 8 shares after the initial 12-month cliff period. 

A cliff refers to when the first portion of your option grant vests. During this time period, you must stay at the company in order for any portion to vest. After the initial time period, it's common for your remaining options to vest at a rate of each month or each quarter.

For example, if your cliff period is up and you have the option to exercise 8 shares at the grant price ($1,600), and the current price is $2,000, you would pay $12,800 but have $16,000 vested.

Related Article | The Ultimate Guide on Equity Compensation and Taxation

Things You Need to Know About Google Restricted Stock Units

First, it's most important to note that Google Restricted Stock Units are not stocks until you are vested. The certificate is an offer of a benefit, but it's worth nothing unless you're employed on the vesting date. 

Google provides the RSUs in a brokerage account. Once you're vested, you are free to do what you want with the shares. If you want to sell them, you can just make sure you're aware of the tax implications that occur with capital gains. We discuss additional information on your income tax impacts below. However, it's best to talk to your tax advisor before making any changes.

Other things to know about Google RSUs

  • You must stay employed to receive your vested shares. If you leave the company before you're vested, you lose the shares.
  • Your shares are worth the current price. If the price happens to drop the day before your vesting date, you get the lower value. 
  • You can keep the stock as long as you want. If you do accumulate them at a lower value, you can keep the stock and wait for it to increase. 
  • If you keep the RSUs for longer than one year, you're taxed at the long-term capital gains rate, which is lower than most ordinary tax brackets. 

Related Article | 8 Tips If You're Being Compensated With Incentive Stock Options (ISOs)

2022 Google Stock Split

As of July 15, 2022, Google stock split 20:1. Fortunately, this didn't change Google's market capitalization. It's still one of the most valuable companies in the country. The split just made a share of Google stock much more affordable for the everyday investor.

As far as your Google stock units go, the value doesn't change, but the number of shares you'll get for the value of your benefit will.

Google RSU Vesting Schedule

Google operates on a 4-year vesting schedule. You must be at Google for at least 12 months before the first vesting date.

At your first vesting date, you receive 25% of your RSUs. You then receive an additional 25% each year after that date. 

Related Article | 5 Things to Know About Your Restricted Stock Units

After Your RSUs Vest- Investments to Consider

After your RSU vesting period, you can do what you want with them. This includes keeping the shares of company stock or selling them and using the funds for other purposes, such as the following.

Contribute to Savings

If you don't have a fully stocked emergency fund, consider contributing your funds to it. Selling your vested stock units and putting the funds in a high-yield savings account ensures the cash grows but is in a liquid enough account to help during financial crises.

Pay Off Debt

If you have a lot of high-interest debt, you'll likely make more paying off your debt than keeping the stocks. Most stocks don't have more than a 10% annual rate of return, but most credit cards have interest rates that far surpass 10%. Using the money to pay off your debts is like investing in yourself and giving yourself a much greater rate of return.

Increase 401K

The earlier you invest in your 401K, the more time your money has to grow. Google may even match a portion of your 401K contributions with a dollar-for-dollar match, growing your retirement fund even faster.

529 Account

If you're concerned about the cost of college for your kids, you can contribute funds to a 529 college savings account. A college savings account has tax-deferred benefits, allowing your contributions to grow tax-free, and if you use the funds for qualified educational expenses, your withdrawals are tax-free too.

Understanding Your Tax Impacts as a Google Employee

Your Google RSUs create a tax liability a few times.

  1. You'll pay taxes upon initial vesting. Google will withhold 22% of your vested amount back for taxes. However, this may or may not cover your full tax liability. It's important to talk with your tax advisor about the liability to make sure you're prepared at tax time should you owe more.
  2. You'll pay taxes anytime you trade the stocks too. If you immediately sell the stock when you become vested, you'll pay capital gains on the difference between the sales price and original vested price. If you wait a few years, you'll still pay taxes, but possibly at a lower tax bracket as it becomes a long-term capital gain. 

For example, if you are an employee who is awarded $1,000 RSUs at no cost, here is what your tax liability will look like after vesting and making a sale. You will pay ordinary income taxes from fair market value (FMV) at the grant price ($1) until the FMV at vesting ($3). Between FMV at vesting and FMV at the sale ($10), you will pay capital gains taxes.

As of 2020, this graphic represents the capital gains rates you can expect to pay based on the amount of time you have held the shares. The short-term capital gains tax rate is based on holding the shares for less than or equal to one year. The long-term capital gains tax rate is based on holding the shares greater than one year.

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Understanding Your Google 401k Match

Google supports its employees even more by providing a dollar-for-dollar match on your 401K contributions up to $3,000 or a 50% match on contributions up to $9,000. Your matched contributions are fully vested right away. If you left Google, you could take your contributions and the matched contributions with you, either rolling them over or withdrawing them, but this incurs a 10% penalty plus taxes.

Related Article | What Is The Difference Between A 401K And An IRA?

Google Stock FAQs

How Many RSUs Do Google Employees Get?

Each employee gets a different number of RSUs, as it's a part of their compensation package. Like your salary, you can negotiate your equity compensation. If owning a large number of tech stocks is important to you, for example, you may give up a sign-up bonus or take a lower salary in exchange for more RSUs.

What Is the Difference Between an RSU vs. Options?

Comparing the value of RSU vs. stock options is an important consideration. RSUs tend to be more valuable because they are always worth something as long as the company's stock has some value. Stock options, however, are worthless if the company's stock price drops below the 'strike or buy' price of your option.

What Are Stock Grants?

A stock grant is another form of an employee compensation package. If you're a recipient of grant stock, you are given a certain number of shares after your vesting period. For example, if you're promised 60 shares after two years, if you're still with the company in two years, you'll receive your 60 shares.

Know the Value of Your Google Benefits - The Bottom Line

Google pays well, but sometimes pay means more than the monetary compensation and cash bonuses they provide. The financial benefits Google offers help employees in more ways than one. 

Know the monetary value of the benefits they offer you, including your Google RSU benefits, 401K match, and other financial benefits that stack up, helping you and your family while you work for one of the most amazing companies in the United States. 

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