Tax Planning with Concentrated Stock

Meet Nelson and Diane

Nelson and Diane are a married couple in their mid-50s who hoped to retire early. They had built significant wealth through employer stock grants over the years. While they were grateful for the growth, they had become uncomfortable with how much of their net worth was tied to a single company. With accounts scattered across different institutions and no unified strategy, they wanted help diversifying without triggering a large tax bill.

Their Situation

Their investments were spread across multiple accounts at different firms with no coordinated strategy. Between demanding careers and a major home renovation, they hadn’t found the time to piece it all together. The concentration risk kept them up at night. If the stock declined sharply, their retirement timeline could be at risk. They needed clarity on how to move forward without making their situation worse.

How We Helped

We started by reviewing all of their investment accounts and their most recent tax return. During that review, we identified a large capital loss carryover from a prior year. We explained how that carryover could be used to offset the gains from selling their concentrated stock, allowing them to diversify their portfolio without adding to their current tax burden. We also recommended coordinating the timing and approach with their accountant to make sure everything aligned.

What Changed

Nelson and Diane were relieved to learn they could reduce their concentration risk without the tax hit they had expected. They moved forward with a diversified portfolio that better matched their risk tolerance and retirement timeline. More than anything, they gained confidence knowing their accounts were working together with a clear plan behind them.

Insights for Your Own Plan

If you hold concentrated stock in a taxable account, it’s worth reviewing your prior tax returns to see if you have unused capital losses that could help offset gains. Even without a large capital loss carryover, other strategies exist to help create diversification in a tax-smart way. The right approach depends on your specific situation, but the key is having a plan that considers both your investment goals and your tax picture at the same time.