Concentrated Employer Stock at 58

The $900,000 employer stock is 50% of the $1.8 million portfolio. A 40% decline would reduce that position to $540,000, a $360,000 loss, or 20% of the total portfolio. Because Tom's paycheck also depends on the same employer, his human capital and financial capital are correlated. The retirement math is tight but not impossible: from age 62 to 67, the couple needs $120,000 a year, or $600,000 over five years, before Social Security. At 67, the gap is $120,000 - $55,000 = $65,000, which is 3.6% of the current $1.8 million. If the stock falls 40% before retirement, the portfolio is $1.44 million and the $600,000 pre-Social Security withdrawals consume about 42% of it, leaving a much higher withdrawal rate afterward. Sequence risk is the main danger. A 50% single-stock position plus a five-year bridge period means the portfolio is not robust enough to support a 62 retirement without reducing concentration.

A practical plan is to reduce the single stock to no more than 15% of the portfolio over three to five years. Because the basis is only $150,000, the embedded gain is high: selling $300,000 would realize about $250,000 of gain, and at a combined 28.8% rate the tax would be about $72,000. Staging sales across tax years can manage bracket and market-impact risk. The exchange fund can defer gains on perhaps $200,000 to $300,000 of stock, but the seven-year lock is a real liquidity constraint; it should not be used for money needed for the retirement bridge. A charitable remainder unitrust funded with $150,000 to $200,000 of low-basis shares could provide an immediate deduction and lifetime income while removing the stock from the taxable estate, consistent with their charitable intent. A donor-advised fund can bunch deductions in a high-income year. Keep 12 to 18 months of spending in cash and short-term bonds, then reinvest sale proceeds into a diversified 60/40 portfolio.

If Tom may lose his job, the correlation between his income and his stock becomes urgent. The couple should build a larger cash reserve, delay any seven-year exchange-fund lock, and avoid selling stock into a forced timeline. They should reduce the single-stock position faster while he still has income and access to employer benefits, but use staged sales or a charitable vehicle rather than a distressed sale. They should also stress-test retirement at 63 or 64 instead of 62 and identify which expenses are discretionary. If the employer stock is volatile and Tom's job is uncertain, holding 50% in that stock is effectively a leveraged bet on one company; the plan should prioritize liquidity and diversification over tax deferral.