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How do Amazon RSUs Work? (Restricted Stock Units) - YouTube
Channel: Avier Wealth Advisors
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if you have questions about amazon rsus
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you've almost certainly come to the
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right place now first off what are
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amazon rsus well rsu's are simply
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restricted stock units when you're hired
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on at amazon rsus typically make up a
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component of the total compensation
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package that you're provided now
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restricted stock units are essentially
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just shares of amazon stock but they're
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restricted because they pay out over
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time they don't pay out all at once but
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they pay out over a very specific
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vesting schedule
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in this case let's dive into the vesting
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schedule just to have a look at it here
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so at the end of the first year as an
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amazon employee you receive five percent
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of those shares of amazon stock that
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you've been granted
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at the end of year two we're looking at
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15 percent of those shares years three
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and four it's a little more nuanced so
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it's actually every six months you get
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20
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in year three and in year four so the
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quick math says that 20 and 20 that adds
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up to 40 over the course of the year
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right
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so let's look at an actual example here
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in this case we're going to say that
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somebody receives an initial grant of 4
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000 shares of amazon now admittedly this
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is a very generous grant this is
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probably for somebody that's a level
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seven or an eight um it does make my
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math easy which is why i used it but
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anyway um you can use your own numbers
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plug it in hit pause in the video if
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need be and and just adjust things to
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show what your numbers might look like
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but in this case again somebody who has
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4 000 shares of amazon they've been
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granted at the end of year one that's
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200 shares that they'll receive the end
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of year two is 600 shares and then in
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year three and in year four it's 1600
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shares in each respective year broken up
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800 and 800 shares every six months
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so if we want to really dive in here
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though we can actually isolate year one
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to say well how does this flow actually
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take place right
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so in this case 200 shares we're gonna
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assume that amazon's stock price has
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done pretty well and it's trading up at
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150 dollars per share obviously whatever
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the price is on the day of vest is going
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to be the the number that you want to
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think about but we'll say it's trading
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at 150 dollars a share
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times 200 shares that's 30 000 worth of
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amazon stock that you receive now
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something to think about
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that's 30 000
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of taxable income it's considered all
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taxable now what's really nice
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is by default amazon is going to take 22
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of those shares and they're just going
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to sell them and send that money
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directly to the irs so they're going to
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essentially help you pay your tax bills
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that there's not some big surprise come
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tax time of the following year now with
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the remaining 78 of shares in this case
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156
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shares themselves they're gonna deposit
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those into an individual account for you
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for most of you watching this video that
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would be at fidelity at which point you
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can do whatever you want with those
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shares 156 shares of amazon just sitting
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there do whatever you want with them
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right
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so if this is year one let's jump
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forward to year four
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so in year four we have substantially
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more shares that are vesting in this
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case again we talked about sixteen
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hundred shares vesting over the course
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of the year and let's also
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you know let's be optimistic here and
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assume that amazon stock prices continue
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to move up quite drastically and say
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that we're trading at 175 dollars a
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share
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well in this case that's 280 000
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of total amazon stock that you're
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entitled to now again amazon's gonna
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automatically withhold let's just call
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it 22 percent send that money to the irs
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to pay the tax bill in this case 61 600
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but then you're going to receive the
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other 78 in this case
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248 shares of amazon stock right and
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that's going to be deposited in your
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account you're going to look the day
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after the vest and say holy smokes i got
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a lot of amazon stocks sitting here
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right now two things that we would think
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about in a case like this one if you
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truly have 280 000 worth of amazon stock
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investing in any given year
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22
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it's a good problem to have 22 is almost
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certainly not enough tax withholding now
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what's really nice is that amazon does
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actually allow you to go in and update
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that tax withholding figure
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you can increase it which is probably
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what you want to do if you have numbers
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that are this big and then the other
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thing that we would simply think about
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is diversification you work for amazon
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you've got all these shares of amazon
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that you're receiving i'm going to put
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out a whole nother video all about
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diversification associated with rsu's
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when they vest probably worth the watch
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once that video comes out so
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anyway big picture here
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rsu's there are simply shares of amazon
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stock that you receive as an amazon
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employee over time at a very certain
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investing schedule
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the taxes are withheld or at least a
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portion should be automatically withheld
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for you then we think about
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diversification so anyway pretty
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straightforward if you found this
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helpful just super quick if you could
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like this video it'll help other amazon
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employees have questions about rsu's
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find the video and
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learn the same stuff that you're
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learning we'd certainly appreciate it so
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if you have any additional questions
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please feel free reach out you can find
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me on linkedin i'm pretty easy to get a
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hold of i promise i'm a real person i
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will respond to your request uh lars
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phillips financial advisor lead advisor
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and partner at avior wealth advisors we
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work with a lot of amazon employees and
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i think that we do
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really good work with them so anyway if
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you have any questions please feel free
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to reach out last but not least we have
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to show the standard disclaimer if you
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have any questions please reach out and
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let us know cheers
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