A large position in one stock can create a difficult decision as retirement approaches. The shares may have come from years of working for one company, an inheritance, or the sale of a business. Regardless of how you acquired them, the risk is the same: too much of your retirement savings may depend on the performance of one company.
Pre-retirees who built a position over 20 or 30 years through an employee stock purchase plan or years of restricted stock grants have, in some cases, watched half the position’s value disappear in a matter of months when a competitor disrupted the business or the market simply turned against the stock. The position took decades to build and the damage took months.
Below, I’ll walk through how to think clearly about this decision instead of defaulting to either “never sell” or “sell it all.” If you’re sitting on a large position and want an unbiased read on what it means for your retirement plan, email me directly at [email protected] with the details and I’ll give you a straight answer, with no product to sell you either way. As a fee only fiduciary, I don’t earn anything differently whether you keep the stock or sell it, and I work with investors across Colorado and nationally.
What Counts as a “Concentrated” Position, and Why It Matters More Near Retirement
There’s no single percentage that makes a position officially “concentrated.” It depends on your total liquid net worth, your income sources, your timeline, and how much volatility you can tolerate without changing your behavior at the wrong moment. That said, industry benchmarks give you a reference point. Morgan Stanley has defined concentration as five or fewer companies making up 30% or more of a portfolio, and many advisors flag any single company above roughly 10% of liquid net worth as worth a closer look.
What changes near retirement isn’t the definition. It’s the stakes. During your working years, a concentrated position that drops sharply is painful, but you have time, and often ongoing income, to recover. Once you’re drawing from the portfolio for living expenses, a sharp drop in your largest holding doesn’t just cost you paper value. It can force you to sell shares at depressed prices to fund your spending, which locks in the loss permanently instead of giving it time to recover.
Why the Risk Compounds Right Before Retirement
Two separate risks stack on top of each other for a pre-retiree with a concentrated position, and most people only think about one of them.
The first is plain concentration risk. Individual stocks are simply far more volatile than the market as a whole. Since 2014, the Russell 1000 Index has averaged roughly 15% volatility, while the average volatility of individual companies within that same index has run closer to 37%. Research by Elton and Gruber found that diversifying from a single stock into a basket of roughly 20 holdings can cut expected portfolio risk from close to 47% down to under 9%, removing most of the company-specific risk while leaving broad market risk in place. The worst calendar year in S&P 500 history was an 8% decline, in 1931. Individual stocks lose that much in bad weeks, let alone bad years.
The second is sequence of returns risk, which is really a timing problem. Retirement researchers, including work associated with Michael Kitces and Wade Pfau, point to the first decade of retirement as a window of particular vulnerability, because that’s when your portfolio is at its largest relative to your withdrawals. A 20% decline on a $2 million portfolio costs $400,000. The same percentage decline late in retirement, on a portfolio that’s already been drawn down, costs far less in dollar terms.
Put those two risks together and a concentrated position becomes the worst possible combination right before retirement: a holding with individual-stock-level volatility, arriving at the exact moment in your financial life when a sharp decline does the most permanent damage.
The Real Cost of Staying Concentrated
Consider a pre-retiree who spent three decades at one company, steadily accumulating shares through an employee stock purchase plan until the position made up the large majority of a multimillion-dollar portfolio. The stock had been a strong performer for years. Then a competitor’s product displaced the company’s core business, and the shares lost roughly half their value in under six months. A portfolio that took thirty years to build lost a decade’s worth of growth in a single quarter, right as retirement was approaching.
This pattern comes up regularly in retirement planning research, so it deserves attention even when your situation looks very different from the example. A company can be financially strong and still face unexpected problems. Competitive pressures, changes in leadership, new regulations, or a shift in investor sentiment can affect the stock quickly. A diversified portfolio spreads that risk across many companies, while a concentrated position leaves much more of your retirement savings exposed to one outcome.
The Real Cost of Selling
None of this means selling is automatically the right call, because selling has real costs too.
The most obvious is the tax bill. If the position has a low cost basis relative to its current value, selling triggers a capital gains tax, potentially pushing you into a higher bracket for the year and, depending on your income, exposing you to the net investment income tax. Selling all at once can mean paying tax at the highest marginal rate on the entire gain in a single year, which is often far less efficient than spreading the sale over several years.
There are also practical restrictions to consider. If you’re a company insider or hold restricted shares, selling may need to happen through a formal 10b5-1 trading plan rather than at a time of your choosing. And there’s a behavioral cost that’s easy to underestimate: selling a stock that’s made you wealthy can feel like giving up on something that’s worked, even when the numbers say otherwise.
A Framework for Deciding, Not a Rule of Thumb
Instead of a fixed percentage or a one-size answer, work through these questions:
- How much of your liquid net worth does the position represent? The higher the percentage, the more a bad outcome in that one stock can derail your entire retirement, not just one portion of your portfolio.
- How large is the embedded gain relative to the position? A large unrealized gain doesn’t mean you shouldn’t sell. It means the sale needs a plan, likely spread over multiple years, and possibly coordinated with other strategies.
- How much of your income already depends on this company? If you also worked there, or a pension or deferred compensation is tied to the same employer, you may have more overlapping risk than the portfolio alone suggests.
- How soon do you need to draw on this money? A position you don’t plan to touch for 15 years can absorb more risk than one funding next year’s spending.
- Are you restricted in when or how you can sell? Insiders and holders of restricted stock need to build selling into a compliant plan well ahead of when they actually need the cash.
- How would you actually react to a 40% drop in this one holding? Not how you think you’d react. How you’ve actually behaved the last time a single investment dropped sharply.
What This Looks Like in Practice
A pre-retiree five years from retiring, with a concentrated position worth 15% of their liquid net worth, a modest embedded gain, and a pension covering most of their fixed expenses, has real flexibility. They can afford to trim the position gradually over several tax years without much urgency.
A pre-retiree one year from retiring, with a concentrated position worth 60% of their liquid net worth, a large embedded gain, and no other income source besides Social Security and the portfolio itself, is in a very different situation. Waiting for the “right” time to sell is itself a risk, and a staged diversification plan, potentially combined with tax-aware strategies, usually needs to start now rather than after retirement begins.
Where This Leaves You
If you decide diversifying makes sense, the tax bill doesn’t have to arrive all at once. There are several tools, from staged selling to exchange funds to tax-aware overlay strategies, that can spread that cost out or offset it. We cover that toolkit in detail in the next article in this series.
If you’re sitting on a concentrated position and want a second opinion on where you stand, email me directly at [email protected] with the details. You can also see how I work and what I charge on the services and fees page, or schedule a conversation directly.
Key Takeaways
- There’s no universal percentage that defines a “concentrated” position, but many advisors flag any single company above roughly 10% of liquid net worth as worth reviewing
- Concentration risk and sequence of returns risk compound right before retirement, since that’s when a sharp decline in your largest holding does the most permanent damage
- Diversifying from a single stock to a basket of holdings can cut expected portfolio risk dramatically by removing company-specific risk while leaving market risk in place
- Selling has real costs too, mainly the tax bill and, for insiders, trading restrictions, so the decision should weigh both sides honestly rather than defaulting to either extreme
- A useful framework looks at the position’s share of your net worth, the size of the embedded gain, overlapping income risk, your timeline, and how you’ve actually behaved through past volatility, not how you think you’d behave
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest LLC, a fee-only fiduciary retirement financial advisor and financial planner based in Greenwood Village, Colorado. He works with high-net-worth pre-retirees and retirees throughout south Denver, across Colorado, and nationally. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more about Gabriel and Inclinevest or schedule a conversation.
Sources
- Sequence Returns, Concentration Risk: A Case Framework to Stress-Test Pre-Retiree Portfolios – Advisor Perspectives, December 2025
- Timing Matters: Understanding Sequence of Returns Risk – Advisor Perspectives
- Sequence of Returns Risk – ICFS
- Risk Reduction and Portfolio Size: An Analytical Solution – Elton, E.J. and Gruber, M.J., discussed via ETF Trends
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
