When you are granted RSUs, your grant agreement determines how and when the shares become yours. This matters to you because until they vest, the shares are not yours.
Vesting schedules vary by company. This post walks you through the most common vesting schedules that you might encounter, what each one means for your personal financial planning, and what to watch out for with each type.
What Vesting Actually Means
In simple words, vesting is how you earn your shares over time. On your grant date, you are awarded a specific number of shares. But you do not own them yet. They become yours over time by meeting specific conditions, usually staying employed at the time of vesting. In some cases, particularly with private companies, you might need to meet more than one condition, usually that the company gets acquired or has an IPO. This is called double trigger vesting, and I will expand more on this in the next post.
Each time new shares vest, two things happen: you own the shares outright, and you owe income taxes. Vesting is not just the day you receive the shares, it is also a tax event, and planning around it is important.
💡 Key Concept
Unvested shares are not yours. If you leave the company, are laid off, or are terminated before shares vest, you forfeit them. Understanding your vesting schedule is not just about knowing when you get paid. It is about understanding what you leave behind if you leave or are let go before vesting.
The Four-Year Vesting: One Common Structure in Tech
The most common vesting schedule in tech is a four-year schedule with a one-year cliff. This means that you do not have any shares vesting for the first year, then a portion vests at your one-year mark with the company. If you leave before your one-year anniversary, you leave with no shares.
After the first year, the remaining shares vest gradually, typically monthly or quarterly, over the following three years.
While four years is standard, the vesting structure (meaning, how many shares you receive on different vesting dates) varies significantly by company. For example, Amazon back-loads its vesting with a higher portion vesting in years three and four, Google front-loads its vesting with more shares vesting in year one and fewer shares gradually vesting over the next years, and Meta vests evenly with 25% vesting after the first year and quarterly over the next three years.
📋 Planning Note
If you are considering leaving your job, make sure you read and understand your vesting schedule and the implications of your decision. Sometimes, a few weeks can make the difference between keeping and losing thousands of dollars.
Performance-Based Vesting
Your company might offer you shares based on performance, tied to either company-wide metrics such as revenue targets, or to individual performance goals. So, the number of shares you receive can vary. If you hit your performance goals, they will deliver 100% of the shares, if you exceed your target, they might deliver more shares (although this is not always true), but if you fall short, you are likely to receive fewer shares, or even no shares at all.
Performance-based grants are more difficult to plan around because the number of shares (and therefore, your income) is not fully predictable. If a meaningful portion of your equity compensation is tied to performance metrics, understanding the specific terms of your grant matters for your equity compensation financial planning.
⚠️ Things to Watch Out For
- Performance metrics can change. Make sure you understand whether your metrics are fixed for the life of the grant or subject to annual revision.
- Tax liability on performance RSUs is the same as time-based RSUs: you owe income tax when shares vest.
- Do not count on performance-based shares in your financial planning until they vest. Treat them as potential upside, not guaranteed income.
Double-Trigger Vesting: What It Means at Private Companies
Double-trigger vesting is most common at private companies and pre-IPO startups. It means two separate conditions must be met before shares vest. The first trigger is typically time-based: you stay at the company long enough. The second trigger is usually a liquidity event, such as an acquisition or an IPO.
This structure has completely different implications. You can work at a private company for years and still have no shares because the second trigger has not occurred. And if no liquidity event ever happens, the shares may have no value.
Double-trigger vesting deserves its own dedicated post, which is the next one in this series. If you are currently at a private company or startup, that post is worth reading carefully.
Refresher Grants
One more vesting concept worth understanding is the refresher grant. As your original RSU grant vests out, many companies issue additional grants to keep your equity balance meaningful and maintain retention incentives.
Refresher grants have their own vesting schedules, typically shorter than the original grant. Over time, you may find yourself holding multiple overlapping grants, with each having a different vesting schedule. This layering effect is one of the reasons RSU planning becomes more complex the longer you stay at a company. Keeping a clear picture of all your grants: their grant dates, vest dates, and current values, is a must to properly plan your finances.
How to Find Your Vesting Schedule
You can find the details of your vesting schedule on your grant agreement. If you cannot locate it, your company’s equity plan administrator or HR team can provide it. Many companies also make grant details available through an equity management platform such as Carta, Fidelity, Morgan Stanley, or Schwab.
If you have multiple grants, each one may have its own schedule. Do not assume they are all structured the same way.
🌿 The Valoria Perspective
Your vesting schedule is not just a timeline. It is one of the most important inputs in your financial planning. Knowing exactly when shares vest, how much, and under what conditions lets you make better decisions about everything from when to leave a job to how to manage your tax liability each year. Most people look at this information reactively. The goal is to look at it proactively.
Post 1: What Is an RSU? A Plain-English Guide for Women in Tech |
Post 2 of 5: Vesting Schedules Explained (You are here) |
Post 3: Double Trigger Vesting at Private Companies |
Post 4: The RSU Tax Bill Nobody Warned You About |
Post 5: RSUs and Cost Basis
Not sure what to do with your RSUs?
I help women in tech build a clear, confident plan around their equity compensation.
This content is for informational and educational purposes only and is not intended as individualized financial, investment, or tax advice. Past performance is not indicative of future results. Any opinions expressed are as of the date of publication and may change. Please consult your financial advisor or tax professional regarding your specific situation before making financial decisions.
