As I mentioned earlier today, employees in my company have been granted restricted stock, vesting in three years. I decided to do some research to try to determine how to track the value in Quicken, which I use for tracking my personal finances.
From what I can tell through some Google research, you don’t track restricted stock as part of your net worth. Those more familiar with the software than I suggest recording a future transaction (for the date of vestment) or using Quicken’s reminder ferature to set up an alert for the date the restricted stock becomes common stock.
I’m not quite sure if I agree. Quicken tracks stock options, which have no real value until the option is exercised vested. Is restricted stock that much different? There’s the chance that the vestment won’t be realized (if I’m not with the company in 2009, for example), but should the value of the stock be included in my current net worth?
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{ 11 comments… read them below or add one }
When my restricted stock vested last month (around 300 shares), they sold 1/3 of it to pay for taxes. But after the restricted stock was awarded and before it vested, I received dividends on the full number of restricted units. I’m not sure how you would account for that in Quicken.
The way it was explained by the company, we are given an “extra” restricted stock unit, representing the dividends which would be reported between now and the vesting date. So there won’t be any dividends accruing in the account over time.
I wouldn’t track/count it at all personally since you won’t own it for three years.
No, a person’s net worth should not reflect future earnings. It should only include everything you presently own, minus everything you presently owe. If people were to incorporate future earnings in their net worth calculations, then they should also include the NPV of theirs pension, the NPV of their social security income, etc. It just doesn’t make sense.
Just consider the stock grant as a bonus paycheck that you’ll see down the road. You certainly don’t include next month’s paycheck in your net worth; the stock grant is no different.
Ah….that’s different than the way my company did it. I actually received the dividends as income in my paycheck once a quarter, even before the restricted shares vested.
You may probably track it as a stock option grant with a striking price of zero.
http://www.pfblog.com/archives/813_stock_award_shares_sold.shtml
If you will be paid for dividend for shares not vested, you might have to track dividends separately.
stock options, which have no real value until the option is exercised
source
Stock option grant has no value until vested, not exercised.
I am not sure I agree with the assertions that Restricted Stock Units (RSU) should just be ignored until vested. If you are working at the same place, and you are trying to balance your portfolio, you will want to know about those shares. Consider working at company X. In that company, you have an Employee Stock Purchase Plan (ESPP) at a discount, you have a Stock Option plan (SO), and you have the opportunity for RSUs.
If your portfolio contains shares of X from four potential sources (Market, ESPP, SO, RSU) and you are trying to balance your portfolio, you will want to see the full picture of these things so that you could, for instance, decrease your Market purchased shares or ESPP shares by recognizing that you have Company X covered by RSU or SO.
I think Quicken needs to enable this “type” of transaction with a simple extension of the Stock Option type they already have, but encompass the nuances of no cost, and any tax implications that are different (I think they are different, but not clear on the details at the moment).
Comments?
I think it’s a really bad idea to ignore these RSUs because you think they have no value. They are worth as much as stock options and need to be tracked.
A few cases in point: A) if I retire, I receive the RSUs no matter what. Do they have value then as a definite occurence?
B) If I die, my wife gets the RSUs. Wouldn’t it just be great if I didn’t record the fact that they’re owed to her and she never gets them?
These aren’t stock options with an exercise price of 0. They can have dividends throughout their life, even before vesting, and on exercise, they’re immediately taxable. In fact, some companies automatically sell a portion for taxes. Quicken needs a way to record this transaction.
I pre-entered RSUs as “shares added” at a future time. When vested, I edited the entry to “shares bought” with cash in the account along with three other transactions. One an income entry with a new salary sub-catagory of “RSU Income”. Another a sale to cover witheld shares. A third “withdraw” cash to the US Government with a split to cover federal income tax, FICA tax, and Medicare tax.