When your company stock is too much of your net worth

Key takeaways

• Single-stock risk builds gradually while you're focused on other things. Then a bad earnings report comes out, and you realize how concentrated you are in a single company's stock.
• A common planning rule of thumb: anything above 10-15% of your liquid net worth in a single stock is concentrated. Above that level, the position should have a written plan around it rather than running on autopilot.
• Selling feels hard for three reasons: taxes, behavioral attachment, and the fear of selling at a "low." All three are addressable with planning, not willpower.
• Several paths can move you out of the position. Direct sale, charitable giving via a donor-advised fund, and a 10b5-1 plan if you're an insider are the most common starting points. More advanced tools (direct indexing offsets, exchange funds, 351 exchanges) exist but rarely come first.
• A fee-only advisor's job is to understand your goals first (retirement timing, charitable giving, what the wealth is actually for), then sequence the right tools across several years to get you there with the lowest tax cost.

Let's say someone has been a software engineer at a public tech company for six years. RSUs vest every quarter, the stock has roughly doubled over that span, and they've been holding everything. By the end of year six, the position is around 60% of their liquid net worth. They didn't plan it that way. The shares stacked up faster than they could spend or rebalance, the price kept rising, and one day the math caught up with them: one ticker is driving their retirement, their kid's college funding, and their mortgage payoff timing. They're building a financial plan on top of one company's earnings reports.

Concentration risk rarely arrives as a decision. It accumulates while you're paying attention to your job.

How this happens to you specifically

If you're a high earner at a public company, your equity comp is often paid as restricted stock units (RSUs). Your employer issues shares on a vesting schedule, and the default at most companies is that the shares sit in your brokerage account after vest. You decide when to sell.

Many people don't decide. The shares pile up because selling feels like a separate task, the price has been rising, and your colleagues are holding too. ESPPs add another layer: you're buying employer stock at a 15% discount every six months, which feels like free money, so you hold it. NSO and ISO exercises add even more complexity.

If your company is doing well, the position grows on two axes at once: more shares vesting and a higher price per share. By year four or five, the position can become the largest line item on your balance sheet without you ever having intentionally bought it.

This pattern is common with engineers at large public tech employers, but it shows up in any industry where stock comp is a meaningful piece of total pay.

The number that matters

A common planning threshold is 10-15% of your liquid net worth in any single stock. Above that, it's safe to call that position "concentrated".

Picture the numbers on a 60% concentration. Liquid net worth around $2.4M. Employer stock: $1.5M. Diversified accounts (401(k), brokerage, Roth) totaling about $900K. A 30% drop in the employer's stock price erases $450K of net worth in a quarter. The same drop on a diversified portfolio of similar size erases a fraction of that, because the underlying positions don't all move together.

A diversified portfolio holding thousands of stocks doesn't depend on one company's earnings call. A concentrated position does. And when the same company also pays your salary, your downside is correlated to your income on top of that. A bad year for the stock can mean a bad year for hiring, comp, and bonus pools.

Why selling feels hard

Three forces pull against diversifying, and ignoring any of them is how plans fall apart.

The first is taxes. Selling appreciated stock is a taxable event. On RSU shares held more than a year past vest, gains are long-term capital gains: 15% or 20% federal, plus the 3.8% Net Investment Income Tax once your modified AGI clears $200K single or $250K married filing jointly, plus any applicable state tax. For an Arizona resident in a 35% federal bracket, that's roughly 26% on every dollar of gain. ISO shares have their own rule set, and some sales convert favorable long-term treatment back into ordinary income.

The second is behavioral attachment. You believe in the company, you watched the price rise, and selling now feels like quitting on a winner. Loss aversion compounds that feeling: nobody wants to sell at $80 if they remember refusing to sell at $90.

The third is the fear of timing. The stock might keep going up. Nobody wants to be the person who sold the week before the rally. This one never resolves itself with information. It resolves with a written plan you don't override in the moment.

The main paths out

Three approaches cover most situations. The right answer for any given person is a sequence built from a few of them, fit to your tax situation, your goals, and your time horizon.

Direct sale plus diversification is the simplest path. You sell shares, pay the capital gains tax on the gain, and reinvest the proceeds into a diversified portfolio. The cost is the tax bill. The benefit is immediate risk reduction.

Donating appreciated shares to a donor-advised fund is a tax-efficient option if you're already charitably inclined. You skip the capital gains tax entirely on the donated shares and get an income tax deduction at the full fair market value. The tax savings on a sizable donation can fund several years of giving in a single move. The donation also lets you replace the donated shares in your portfolio with cash you would have given anyway, which moves you out of the concentration without triggering a sale.

A 10b5-1 plan is a written, pre-set selling schedule that lets you sell shares on a calendar even during company blackout windows. For insiders or anyone with regular access to material non-public information, the locked-in timing is what makes selling possible at all. The plan can also help non-insiders enforce discipline by removing the in-the-moment "should I sell today" decision.

A few more advanced tools exist (direct indexing in a separately managed account to harvest offsetting losses, exchange funds, 351 exchanges) and can be the right move at higher position sizes or for specific tax situations. They're worth a conversation with an advisor if your case calls for them, but they rarely come first.

Where the tax angle changes the math

The reason a tool-by-tool answer rarely works in isolation is that your tax situation changes which tool fits.

If you're in a year with unusually high income (a promotion, a bonus year, a big vest year), selling more company stock that year stacks gains on top of already-high ordinary income, which can push you into a higher capital gains bracket, trigger NIIT, and increase Medicare premiums two years out via IRMAA.

If you're in a year with lower income (a sabbatical, a transition, a partial year), some of the gain might fit inside the 0% long-term capital gains bracket. For 2026, that bracket goes up to $49,450 of taxable income single and $98,900 married filing jointly. Those thresholds are indexed annually, so verify the current-year figure if you're reading this later.

The same diversification move can cost you $20K of tax in one year and close to $0 in another. Sequencing the sales across the right tax years is the actual work. That sequencing pulls together long-term capital gains brackets, NIIT thresholds, IRMAA two years out, charitable deduction timing, and whatever else is happening on your return for that year. A multi-year sale schedule fits all of those pieces together so the diversification gets done at the lowest tax cost the calendar allows.

What the next step looks like

If you're reading this and recognizing yourself, the work starts with two conversations before any selling decisions get made.

The first is about goals. What is the wealth for? Retirement at 55, kids through school, charitable giving, a second home, leaving an estate. The right diversification plan looks different for someone targeting early retirement than for someone planning to give half of it away. Tool selection is downstream of the goal.

The second is about measurement. A planner needs a current statement of the single-stock position, the value of the diversified accounts, and the percentage one ticker represents of your liquid net worth. Then a breakdown of the position itself: cost basis, holding period, and source (RSU, ISO, ESPP, or open-market purchases). Different shares carry different tax treatments on sale, and the order they're sold matters.

Goals plus data drive a multi-year diversification plan. The plan usually has a target percentage to reduce to, a tax-aware sale schedule across two or three calendar years, a 10b5-1 plan if insider rules apply, and a donor-advised fund contribution layered in if you're charitably inclined.

The plan is built from several tools, sequenced across several years, fit to your goals and to whatever else is on your tax return.

If your company stock has gone from a nice piece of compensation to the thing your retirement is riding on, that's the conversation worth having before the next earnings release decides for you.

This post is general information, not personalized advice. Talk to a fee-only fiduciary about your specific situation.