Navigating Concentrated Stock Risk Near Retirement: A Strategic Approach
As heard on Today’s Business Radio, which airs on Twin Cities radio stations KFAN and KTLK.
TBR host, Tom Lyons is joined by Sharon Calhoun, Managing Director and a Senior Wealth Advisor at Vector Wealth Management for a discussion focused on understanding the risk and resolution of a concentrated stock position.
Once paychecks stop, you’re no longer replenishing your savings, and market downturns could have a lasting impact on your income stream.
Navigating Concentrated Stock Risk Near Retirement
Many professionals accumulate company stock over the course of their careers, often through incentive plans, stock options, or direct investments. This can be a powerful tool for wealth creation—but also a silent risk. A concentrated stock position, where a large portion of your net worth is tied to a single company, can leave your financial future exposed.
At Vector Wealth Management, we frequently work with clients who hold significant company stock as they approach retirement. It’s natural to feel loyal to the company that provided decades of employment, but it’s important to separate emotional loyalty from strategic financial planning.
The Risk of Concentration
When your financial well-being hinges on a single company, you’re vulnerable to factors beyond your control: market corrections, regulatory changes, and industry disruption. Diversification helps reduce this exposure by spreading investments across asset classes, sectors, and geographies.
However, selling a concentrated stock position isn’t always straightforward. Large gains can trigger significant tax consequences, and moving too quickly without a reinvestment strategy can introduce new risks.
Example Case Study: “Steve’s De-Concentration Strategy”
Steve, a 63-year-old engineer, came to us with 45% of his retirement savings in his company’s stock. He planned to retire within two years. While the stock had performed well, it made his financial plan contingent on the future success of one investment.
At Vector, we model phased diversification strategies for clients. For example, over 36 months, Steve could gradually sell portions of his holdings, taking advantage of favorable tax windows and reinvesting into a customized portfolio aligned with his retirement goals. Keeping a small portion (5-10%) of the original stock allowed Steve preserve the upside potential and his sense of connection to the company—without compromising his financial security.
Timing Matters
Two to three years before retirement is the ideal window to assess your portfolio. Why? Once paychecks stop, you’re no longer replenishing your savings, and market downturns could have a lasting impact on your income stream. Risk tolerance, liquidity needs, and long-term goals all need evaluation.
Moving Forward
The best next step? Partner with a fee-based advisory firm like Vector Wealth Management. We help clients navigate these pivotal moments with structured, tax-aware strategies tailored to their unique circumstances.
Don’t let loyalty overshadow logic. It’s not about abandoning your roots—it’s about building a secure, flexible future.
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