Retiring With A Concentrated Stock Portfolio

Stacy and John Simmons

Stacy and John Simmons came to Artemis to get their financial house in order in preparation for their retirement. They had long managed their investment portfolio on their own but felt they were ready to enlist some professional support, largely because almost half of their portfolio was invested in a single technology company. They knew that they needed to diversify but did not know how to approach the problem, particularly given that John wanted to work 2-3 more years and the portfolio had large, embedded capital gains. In addition, they had several retirement goals – build a vacation home, start a gifting program for their kids and grandkids, establish a donor advised fund (DAF) for charitable giving and sign up for Medicare and Social Security.

How Artemis Helped

  • Our first step was to build a detailed cash flow projection for them to understand what they could safely afford in terms of a second home and gifting, and to demonstrate to what extent their retirement might be at risk should the company stock suddenly decline in value.
  • We then reviewed potential strategies for their concentrated stock including the use of exchange funds, protection funds, stock collars and pre-determined selling.
  • In particular, we demonstrated how we could allocate the rest of their portfolio to complement their concentrated position, and how we would manage the diversified portfolio dynamically as we worked to gradually reduce the concentrated stock position in a tax efficient manner over time.
  • We also covered off on the variety of other issues they came to us with, such as the pros and cons of Medicare Advantage versus Medigap, the ability to claim a Social Security spousal benefit, and how best to maximize the tax benefits of a donor advised fund.
  • Finally, we reviewed their estate plan documents and recommended that they establish revocable trusts as the most efficient way to reduce their state (MA) estate tax burden and distribute assets to the myriad of charities they wanted to help.

How Stacy and John Benefited

  • Stacy and John now have a well-constructed stock diversification strategy with which they are comfortable. Part of their strategy involves creating a “legacy” portfolio for their children and grandchildren that will step up in basis upon their death.
  • Stacy now feels more confident about their ability to purchase a sizable second home and what they can reasonably afford./li>
  • John is completely relieved that they have a game plan in place and has said that he is now sleeping more soundly.
  • Stacy is thrilled to be receiving a Social Security spousal benefit before collecting her own benefit at age 70 – completely “found money” in her view.

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