Concentrated Position Exit Plan

What’s the riskiest asset in most wealthy retirees’ portfolios? The one stock that made them wealthy in the first place. A concentrated position, a big single-company holding from an old employer, a founder’s stake, an inheritance, feels like a winner you’d be foolish to sell. But heading into retirement it’s a live grenade, because your security now depends on the fortunes of one company. A concentrated position exit plan is how you defuse it on purpose, over time, before the company decides the timing for you.

The risk hiding behind the gain

The thing that makes a concentrated position so seductive is the thing that makes it dangerous: it worked. It outperformed, it built your wealth, and selling it feels like betraying the bet that won. That emotional pull is exactly why people hold it long past the point of sense.

But a single stock can fall 50% or more and never recover, and plenty of yesterday’s “safe” blue chips are today’s cautionary tales. When that stock is funding your retirement, its collapse isn’t a setback, it’s the plan. You already won the game with this position. Continuing to bet the house on it isn’t conviction, it’s failing to take the chips off the table.

The tax tail wagging the dog

Here’s where I watch smart people make a real mistake. They refuse to sell because of the capital gains tax, and in doing so they let the tax tail wag the dog.

I see this most with tech employees and founders. The focus narrows to optimizing taxes, and that narrow focus leads to genuinely bad decisions, swapping a liquid concentrated risk for an illiquid one, or simply holding a dangerous position for years to avoid a tax bill that was never as scary as the concentration itself. A tax is a cost of a good outcome. Refusing to diversify a fortune because you’d owe tax on the gain is letting a side issue run the whole show. Pay the tax, take the win, sleep at night.

That said, the tax is real and you should be smart about it. Smart isn’t the same as paralyzed.

How to unwind without panic

The goal is to diversify steadily while managing the tax hit, not to dump everything in one taxable year and hand over a fortune in a single bracket.

• Sell in planned tranches. Spread the sales across multiple years to avoid stacking all the gain into one high-tax year. For 2026 the long-term capital gains rate stays at 15% until taxable income passes $545,500 for a single filer or $613,700 for a married couple, then it jumps to 20%. Plan the slices to stay under your chosen ceiling.
• Harvest the low-income years. Early retirement, before Required Minimum Distributions start at 73 or 75, is when your other income is lowest, which is the cheapest time to realize gains. Some of the gain may even fall in the 0% capital gains bracket, which for 2026 reaches up to $98,900 of taxable income for a married couple.
• Give the shares away. If you’re charitable, donating the appreciated stock through a donor-advised fund lets you skip the capital gains tax entirely and take a deduction at full value. It’s the most tax-efficient exit door there is for the charitable slice.
• Watch the income line. Big realized gains raise your taxable income, and your income two years prior sets your Medicare premium through IRMAA, the income-based surcharge. Pace the sales with that in view.

The illiquidity trap to avoid

One warning, because it’s a move I see pushed hard and it usually makes things worse. Do not solve a concentrated stock problem by rolling the proceeds into something illiquid, a private real estate deal or a private fund, just to defer the tax. You’d be trading a liquid concentrated risk for an illiquid concentrated risk and calling it diversification. When a crisis hits and you need the money, you can’t get it. I don’t manage money for people who can live forever, and I won’t pretend a lockup is a solution. Diversify into things you can actually sell.

The stock that made you rich already did its job. Don’t let it, or the tax on it, run your retirement. Defuse it on a schedule, on your terms, while you still control the timing.