When 90% of Your Wealth Is Riding on One Stock

By Chuck Bender, CPA, CFP®

After years of hard work and disciplined saving, one day you realize that a single stock has now grown into the majority of everything you have built.

Now that retirement is getting closer, a question has started forming in the back of your mind: what happens if that stock has a bad year right when I need the money most?

If that thought has crossed your mind, you’re not alone—and you’re asking exactly the right question.

I have worked with many pre-retirees over the years, and the concentrated stock position is one of the most common situations I encounter. Someone has accumulated employer stock over decades, watched it perform well, and understandably feels reluctant to change anything. The problem is that a retirement income plan built on a single equity is far more fragile than it appears on paper.

That was exactly where one couple was when they first came to us. The husband was in his early 60s, his wife was in her mid-50s, and they still had minor children at home. He had done well for himself, but more than 90% of his assets sat in a single equity. The company had been good to him, and he understood that. What he had not fully worked through was what that concentration meant for the retirement he was planning to step into.

Starting With the Full Picture

Before we talked about any strategy, I needed to understand where they actually stood across the board: their taxes, their estate, their income needs in retirement, and what they wanted their life to look like going forward. That is how we approach every new client relationship, through our Financial Physical®, a comprehensive review of your complete financial situation before you make any commitment to work with us.

The tax piece jumped out immediately. He had a significant position with a very low cost basis. Selling it the conventional way would have triggered a substantial capital gains bill. That is the part of concentrated stock positions that often catches people off guard. The wealth is real, but accessing it efficiently takes planning.

A Strategy He Had Not Heard Before

He was already familiar with the concept of net unrealized appreciation, or NUA. For those who hold employer stock inside a 401(k), a net unrealized appreciation strategy allows you to pay ordinary income tax on the original cost basis when you take a lump-sum distribution, then pay the lower capital gains rate on the appreciation when the stock is eventually sold. In a highly appreciated position, that distinction can make a meaningful difference.

What he had not considered was the next step. By transferring appreciated stock directly into a donor-advised fund (DAF), you can avoid capital gains tax on the contributed shares entirely and receive an immediate charitable deduction. This couple was already charitably inclined and gave regularly, but they had never structured their giving this way.

When I laid out how the NUA strategy and the donor-advised fund could work together, I could see the shift happen in real time. He understood immediately, and his wife, who was in the meeting with us, did too.

That combination, taking NUA treatment on a portion of the stock and directing other shares into a DAF, allowed them to reduce that concentrated position in a way that made tax sense, created a vehicle for the causes they cared about, and avoided a significant unnecessary tax bill.

Estate Planning Could Not Wait

Sorting out the investment strategy was only part of the picture. With minor children still at home and a wife who was the less financially involved spouse in the relationship, getting the estate plan right was a priority. We worked with their estate planning attorney to make sure the right documents and protections were in place.

People often defer estate planning, treating it as something to revisit later. When you have dependents, a complex asset situation, and a spouse who has not been the primary driver of financial decisions, gaps in your estate plan carry real consequences for the people you care about most.

Making Sure Both Spouses Were Part of the Process

With most couples, it’s normal for one person to be more engaged in the financial details than the other. In this case, he was clearly the financial decision-maker. She was present, but less involved in the day-to-day.

I made a point of including her in our conversations, walking through the NUA strategy with her, explaining how the donor-advised fund worked, and confirming she understood the reasoning behind the decisions we were making together.

By bringing her into the process from the beginning, she finished those conversations knowing exactly where their money was, why the decisions had been made, and who to call if she ever needed help. That kind of assurance matters, not just in a crisis, but in the everyday confidence that comes from understanding your own financial life.

Where They Are Today

He retired, they are living comfortably, and the plan is working the way we designed it.

Diversifying thoughtfully out of a 90% single-stock concentration while keeping some exposure because she felt strongly about the company gave them a retirement income plan that does not depend on any one outcome going right. That peace matters.

What I Want Other Pre-Retirees to Take Away

If you are sitting on a concentrated stock position, the worst thing you can do is wait. Not because the stock will necessarily decline, but because the longer you wait, the fewer options you have to unwind it efficiently. Strategies such as NUA and donor-advised funds require careful planning and timing. They do not work as well, or at all, if you try to implement them after the fact.

The good news is that a conversation costs you nothing.

At Financial Consulate, our Financial Physical® gives you a complete picture of where you stand before you make any decisions or commitments. We review your investment accounts, your last three years of tax returns, your estate plan, and your insurance coverage. We look for the things many advisors overlook: missed opportunities, unnecessary tax exposure, gaps that only become visible when someone looks at everything together.

You have spent years building what you have. Before you make any moves with it, make sure you understand all of your options.

If you would like to talk through your situation, our team is happy to help. Reach out to schedule your Financial Physical® and see what a second set of eyes from a fee-only financial advisor might find.

Common Questions About NUA, Concentrated Stock, and Donor-Advised Funds

What is a net unrealized appreciation strategy, and who does it apply to? 

A net unrealized appreciation (NUA) strategy applies to people who hold appreciated employer stock inside a 401(k) or other qualified retirement plan. Instead of rolling the stock into an IRA where all future distributions would be taxed as ordinary income, you take a lump-sum distribution of the stock and pay ordinary income tax only on the original cost basis. When you eventually sell the shares, the appreciation is taxed at the lower long-term capital gains rate rather than your ordinary income rate. The larger the gap between what you originally paid for the stock and its current value, the more impactful this strategy can be.

What are the risks of holding a concentrated stock position going into retirement? 

The most significant risk is that your financial stability becomes dependent on a single company’s performance. No matter how strong that company has been historically, retirement income needs to be predictable. A major decline in one stock can dramatically change your retirement picture when you no longer have a paycheck to absorb the loss. Concentration also creates tax complexity; the larger the position and the lower the cost basis, the more planning is required to unwind it efficiently.

When does it make sense to combine a net unrealized appreciation strategy with a donor-advised fund? 

When someone has a large, highly appreciated stock position and is also charitably inclined, these two strategies can complement each other well. NUA treatment can be applied to a portion of the stock to manage the tax impact of transitioning into retirement. For shares the person wants to give away rather than sell, contributing them directly to a donor-advised fund eliminates the capital gains tax entirely and generates an immediate charitable deduction. Used together, they give you more control over how the concentration is unwound and how much of that wealth ultimately goes to taxes versus your family and the causes you care about.

What is a donor-advised fund, and how does it work? 

A donor-advised fund is a charitable giving account held at a sponsoring organization, typically a public charity affiliated with a financial institution. You contribute assets to the fund, receive an immediate tax deduction in the year of the contribution, and then recommend grants to the charities of your choice over time. It is worth noting that while you can recommend where the grants go, the sponsoring organization is not legally required to follow those recommendations, though in practice they typically do for qualifying charities. When you contribute appreciated securities directly, you avoid paying capital gains tax on those gains entirely. The fund sells the shares and the full proceeds are available for charitable giving. For people who give regularly, a DAF can make that giving significantly more tax-efficient.

About Chuck

Chuck Bender, CPA, CFP®, is Chief Financial Officer and a Wealth Advisor at The Financial Consulate. As CFO, he oversees the firm’s financial operations and strategic planning, while also working directly with clients through the financial planning process. Chuck specializes in tax planning, estate planning, investment planning, and retirement planning, helping individuals and families make informed financial decisions with clarity and confidence.

Chuck earned his MBA from Loyola University Maryland and a bachelor’s degree in accounting from Virginia Tech and holds the CERTIFIED FINANCIAL PLANNER® designation. Prior to joining Financial Consulate, he built his career in accounting and corporate finance, working in assurance services at Ernst & Young and later in finance and accounting roles at McCormick & Company. He transitioned into personal financial planning to apply his experience more directly to helping individuals and families make informed financial decisions.

Outside the office, Chuck enjoys spending time with his wife and children, hiking, golfing, and exploring new podcasts. He also coaches some of his son’s sports teams and recently joined his church’s leadership team. To learn more about Chuck, connect with him on LinkedIn.