Performance Shares and Performance Stock Units
Compensation and retirement
Performance shares and performance stock units depend on their award terms, including service, company or individual results, certification, and settlement. Use vested and available assets for your retirement baseline, and model unearned awards as uncertain additional compensation.
Plan around performance conditions without treating target awards as guaranteed wealth.
Target value is not a payout promise
An award may show a target number of shares while allowing a lower payout, a higher payout, or none. Read the performance period, measures, payout formula, service requirements, and who certifies the result. Confirm whether settlement is in shares, cash, or either.
The labels performance share and performance unit do not establish ownership or tax timing. An actual transfer of restricted shares may be treated differently from a future contractual promise.
Read the retirement and departure provisions
A plan may allow prorated treatment, continued vesting, forfeiture, or accelerated treatment after a qualifying retirement. A company definition of retirement can depend on age, service, notice, and other conditions. Do not substitute your intended last day for the plan definition.
Ask what happens to performance testing after departure and when a final payment becomes available. An award can survive employment but remain uncertain or illiquid.
Plan for both the payment and its absence
Model zero, reduced, and target payouts without presenting those scenarios as predictions. Check taxes and withholding when an award settles or otherwise becomes taxable, based on its legal structure.
Once company shares are delivered, decide how they fit your total employer exposure. A performance award can add concentration at the same time a salary and other grants already depend on that employer.
Before you act
This guide provides general U.S. educational information, not individualized investment, tax, legal, benefits, or employment advice. State rules, award agreements, plan terms, and your circumstances can change the result. Confirm current requirements with the plan administrator and the appropriate tax, legal, and financial professionals. Investment values and future payments are not guaranteed.
What to think about next
- Collect the grant agreement and performance schedule.
- Confirm retirement eligibility and settlement terms in writing.
- Build a retirement case that does not require target performance.
When to consider working with a CFP®
Consider coordinated planning when a compensation decision affects retirement timing, household cash needs, employer concentration, taxes, or benefits. A financial planner can help organize those tradeoffs while your CPA, attorney, and administrator address their respective areas.
Sources and further reading
Discuss how your compensation fits your retirement plan.
Connect with a CFP® to help you navigate this decision and build a comprehensive financial strategy.
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