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How Do Restricted Stock Units (RSUs) work at Amazon?

An equity grant of Restricted Stock Units (RSUs) is the primary way that Amazon employees receive Amazon stock. One unit of Restricted Stock conveys your right to receive one common share of Amazon stock at a specific time in the future according to a designated “vesting” schedule.   

Once your shares vest, you own the shares outright just like anyone else that owns Amazon Stock. There is a possibility you may have to hold the stock for a period of time due to the company’s insider trading policy.  

What is Amazon's RSU Vesting Schedule?

Most clients we’ve seen at Amazon have vesting schedules that operate under the 3-4 year semi-annual schedule.   Here’s Amazon’s vesting schedule:  Year 1: 5%  Year 2: 15%  Year 3: 40%  Year 4: 40%  And Years 1 and 2 are each a cliff, followed by semi-annual payouts in Years 3 and 4.   So the same 100 shares at Amazon would be paid out like this:  Beginning of Year 2 | 5% payout for Year 1: 5 shares  Beginning of Year 3 | 15% payout for Year 2: 15 shares  Beginning of Month 7 in Year 3 | 20% payout: 20 shares  Beginning of Year 4 | 20% payout: 20 shares  Beginning of Month 7 in Year 4 | 20% payout: 20 shares  Beginning of Year 5 | 20% payout: 20 shares

Making Sense of Your Amazon Pay Stub

Understanding Your 401(k) & IRA Retirement Savings Plans at Amazon

Breaking Down The Tax Treatment of Each Contribution Option:

Amazon 401(k) Automatic Enrollment:

Amazon employees are automatically enrolled in the Traditional 401(k) at a rate of 2% per pay period, on a pre-tax basis. The Pre-tax Contribution rate will be automatically increased by 1% each year on the anniversary of your automatic enrollment date until it reaches 10% of your Compensation.  You can change these parameters by logging in to your accounts at netbenefits.com/amazon401k or Contact Fidelity Netbenefits at 800-835-5095.

Contribution Limits For Your Amazon 401(k):

The IRS imposes limits on the money that you can contribute to your 401(k). 

Your contributions to the Traditional (Pre-Tax ) and the Roth accounts cannot exceed $20,500 per year combined.

For example, you can contribute $20,500 Traditional to your Amazon 401(k) or $20,500 to your Roth 401(k), or $10,000 to the Traditional and $10,500 to the Roth, but the aggregate can be no more than $20,500. 

Helpful tip: if you moved to Amazon midway through the year, your contributions at your previous firm count as part of this $20,500 so it’s important to include those figures in determining your eligibility.

After-Tax Contributions at Amazon:

Amazon also has an After-Tax 401(k) that you can contribute money into ON TOP OF the $20,500 that we’ve already discussed. 

The IRS allows you (as an employee) to contribute a maximum of $58,000 to your 401(k) across all contribution types. This includes: Traditional (Pre-tax) + Roth contributions, + company match + the After-Tax portion.

(Important reminder: an After-Tax 401(k) is separate and different from contributing to the Roth 401(k) as we’ve described it above.)

Mega Backdoor Roth IRA at Amazon

Here’s why we LOVE Amazon's plan & in particular what you can do to maximize it. 

You can do what is called an in-plan conversion and convert these After-Tax dollars into the actual Roth 401(k) plan (a tax-free maneuver).

Then these funds won’t just grow tax-deferred, those earnings will also be tax-free when you take the money out in retirement (just like all other Roth accounts!) 

This creates a unique planning opportunity for high income earners at Amazon. Book a Right Fit call with our team to learn more.

Frequently asked questions:

401(k) Saving & Goal Mapping: 

Setting your participation amounts needs to be coordinated with your entire financial outlook and done so in a way that addresses your immediate & short-term financial goals.

How much you should be saving into your retirement accounts cannot be done in a vacuum!

You must first address important questions such as,

• Are you saving up for a house in 3 years and need help building your down payment to get there?
• Are your kids planning on going to private school in 3 years?
• Are you planning on retiring before you can access these funds at full retirement age (59.5)?

These are the sort of questions we seek to address as we design your Financial Life Plan®.

 If you need help mapping out your immediate, short term and long-term goals and savings plan, book your “Right Fit” introductory call today.

Want to learn more?

To learn more about RSUs are and how they work, read here.

To get started on designing your financial road map, Book Your "Right Fit" Call now.

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*Information is provided for educational purposes only and does not constitute a recommendation. All data is derived from sources deemed reliable.