Concentrated Stock Positions and Retirement Risk

Most of your retirement account sits in one stock, a concentrated position built from your employer's shares or one you've held for decades.

That wasn't a choice. It built up quietly, and now carries a large, untaxed gain. Here's how that changes in retirement, what selling it costs, and what else can be done instead.

Figures are for tax year 2026, checked against IRS Topic No. 409 and Revenue Procedure 2025-32. Educational only, not tax, legal, or financial advice.

How Did This Position Get So Large?

A concentrated position usually isn't a choice. It builds through one of three paths: years of employer stock, an inherited block of shares, or a single investment that grew into the dominant holding.

• Employer stock: restricted stock units, an employee stock purchase plan, exercised options, or company stock inside a workplace retirement plan, added one grant at a time.
• Inherited shares: a position never selected, often held out of a sense that selling it would be disloyal to the person who left it.
• A long-held winner: a stock bought decades ago that grew into the dominant line item without any additional purchases.

Each path tends to end the same way: a low cost basis against today's value, which creates a large embedded gain that is taxed only when sold. That gain is exactly what changes shape once retirement arrives.

Why Does Retirement Change the Risk?

During working years, a falling stock can be waited out. Income keeps arriving, no shares have to be sold at the bottom, and time is available for a recovery that may or may not come.

Retirement removes both of those cushions at once. The same compression shows up for anyone whose earning years are packed into a short window, which is often exactly how a concentrated position got built in the first place.

This is where concentration collides with sequence of returns risk, the danger that the order of returns, not the average, determines how long savings last. Selling more shares at depressed prices permanently reduces the base that participates in any later recovery, and a single company can fall for reasons that have nothing to do with the broader economy.

Employer stock adds one more layer for anyone still working. Salary, health coverage, any pension, and the largest holding in the portfolio all depend on the same company's outcome, and those exposures move together in exactly the scenario a retirement plan can least absorb. The reason most people still don't address it is the tax bill.

Why Does the Tax Bill Stop People From Selling?

The tax bill, not attachment, is the top reason concentrated positions go unaddressed. Selling shares held longer than a year triggers a long-term capital gain taxed at 0%, 15%, or 20% federally depending on taxable income, per IRS Topic No. 409.

For tax year 2026, Revenue Procedure 2025-32 puts the top of the 0% band at $98,900 of taxable income for joint filers and $49,450 for single filers. The 15% band runs to $613,700 for joint filers and $545,500 for single filers.

A large one-year sale doesn't sit in one band. It fills every band from the bottom up, so the same total gain can be taxed very differently depending on how many calendar years it's spread across.

Working the other way, capital losses offset gains first, then up to $3,000 of ordinary income a year ($1,500 if married filing separately), with any remainder carried forward indefinitely, per Topic No. 409. That only helps if the losses were harvested before the sale.

Company stock held inside a workplace retirement plan follows different rules than shares in a taxable brokerage account. The 401(k) rollover rules page covers how those accounts move if old plan balances are part of the picture.

What Other Costs Stack on Top of the Tax Bill?

Two more costs often get missed, and both stack on top of the federal rate above. The net investment income tax adds 3.8% on the lesser of net investment income or modified adjusted gross income (MAGI) above $250,000 for joint filers and $200,000 for single filers, per the IRS.

A large realized gain also raises MAGI, which under the two-year Medicare lookback can raise Part B premiums two years later. For 2026, the first surcharge tier begins above $109,000 MAGI for single filers and $218,000 for joint filers.

State income tax is separate again and varies widely, so a full picture is never federal-only.

What Structures Exist for Managing a Concentrated Position?

Selling everything at once isn't the only option. Several structures exist for managing a concentrated position without an immediate full sale, each carrying its own cost, complexity, eligibility limits, and tax consequences that need professional review before anyone acts.

• Staged or scheduled selling: a set portion sold on a defined schedule over multiple years, spreading realized gains across tax years.
• Rule 10b5-1 trading plans (for corporate insiders): a written plan for future trades, adopted before an insider holds material nonpublic information, subject to the conditions in SEC Rule 10b5-1, including a mandatory cooling-off period.
• Exchange funds: pooled vehicles that trade concentrated shares for an interest in a diversified pool, generally with a multi-year commitment and accredited investor eligibility requirements.
• Protective collars and other hedges: options that bracket a range of outcomes, though the constructive sale rules under IRC section 1259 can treat a hedge that eliminates substantially all risk as a taxable sale.
• Charitable remainder trusts and gifts of appreciated stock: an irrevocable trust or outright gift that routes charitable intent through the shares themselves, not cash raised by selling them.
• Direct indexing around the position: a separately managed set of stocks tracking an index while under-weighting the concentrated holding, subject to the wash sale rule in IRS Publication 550, which reaches 30 days before and after a sale, including purchases in a spouse's account.

"Sell it" and "keep it" aren't the only two options. Each of those is only available if it's set up before the shares are sold.

Why Must the Structure Exist Before You Sell?

This decides whether any of the above is available at all. Nearly every mechanism on that list has to be in place before the shares are sold, because the moment of sale is the moment the options collapse.

• A charitable remainder trust funded after a sale receives cash that's already been taxed, a different transaction than funding it with the appreciated shares.
• A hedge is only useful while the position is still held.
• An insider can't adopt a 10b5-1 plan while holding material nonpublic information or during a blackout window, and the cooling-off period delays when trading can start.
• Loss carryforwards have to already exist to offset a gain; they can't be created retroactively.
• Spreading gains across tax years takes years by definition, so a schedule that starts the same month someone retires has no runway left.

There's also a timing problem nobody controls. Acquisitions, tender offers, lockup expirations, and forced retirement dates arrive on someone else's schedule. A plan built in advance survives that; a plan started after the event is a reaction, and reactions here are expensive.

Who Should Be Part of This Conversation?

Three professionals typically share this work. A financial advisor models the position against the rest of the retirement picture: how much income the household needs, how many years of spending sit outside the concentrated holding, and where each year's realized gain would land.

A CPA or enrolled agent handles the return-level consequences and the specific tax positions. For corporate insiders, securities counsel handles the trading rules, and none of that is optional overhead; it's the difference between a structure that works and one discovered to be unavailable at the worst possible time.

The broader 2026 tax context these decisions land in, including the capital gains bands, Medicare surcharges, and the rules on charitable routing, is covered on the retirement tax planning in 2026 page. To see how a portfolio holds up against different market and spending assumptions, the retirement income stress test and the retirement savings calculator are reasonable starting points, though neither can model an individual company's risk.

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