Mark, 55: Unwinding a $1.8M Employer Stock Position Before 60

Financial Snapshot

• Total compensation near $480,000: a $260,000 salary plus roughly $220,000 in annual RSU vesting
• Investable assets of roughly $4.0M, not counting a paid-off home
• $1.8M in vested employer stock, about 45% of the portfolio
• $1.1M in a pretax 401(k), $850,000 in a taxable brokerage account, $250,000 in cash
• Target spending of $150,000 per year beginning at 60
• No pension, and a five-year gap before Medicare eligibility at 65

The Challenge

Mark's core problem is concentration, and we would state it bluntly: nearly half of his retirement depends on one company's stock price. He has watched colleagues hold through drawdowns that erased years of vesting. The second problem is quieter. His employer withholds RSU income at the flat supplemental rate, well below his actual bracket, so every April brings a five-figure surprise. The third is structural: if he stops at 60, he needs five years of income before Medicare and several more before claiming Social Security makes sense. Holding the stock and hoping is not a plan. It is a bet.

Our Approach

We started with a written, rules-based selling schedule, similar in spirit to a 10b5-1 plan: fixed dollar amounts sold in each open trading window, no discretion, no reading the news first. New vests sell at vest, which adds no meaningful tax cost because the shares' basis equals their vest-date value. Long-term lots from earlier years sell in stages against an annual capital gains budget so no single year spikes his bracket. The schedule is designed to bring employer stock from roughly 45% of investable assets to a 10% ceiling over an estimated 30 months.

We closed the withholding gap. RSU vests are withheld at the flat supplemental rate while Mark's marginal bracket sits well above it, an estimated $25,000 to $30,000 annual shortfall. We set quarterly estimated payments funded directly from each vest, so the tax is paid when the income arrives rather than discovered the following April.

We read his 401(k) plan document and confirmed it permits after-tax contributions with in-plan Roth conversions. Mark now directs roughly $40,000 per year of after-tax dollars through that channel, on top of his regular deferrals, designed to build an estimated $200,000 of Roth basis before 60. We also repositioned tax location across his accounts: bonds and income-producing assets inside the 401(k), broad equity index funds in taxable.

Finally, we built the bridge. From 60 to 65, spending comes from the taxable account, which the diversification proceeds have deliberately enlarged. Those low-income years become conversion years: partial Roth conversions sized each December against his projected bracket, future Medicare IRMAA exposure, and health insurance premium credits before 65. The 2026 IRMAA threshold for a single filer is $109,000 of MAGI, and crossing it carelessly in later years is an avoidable cost.

Projected Outcomes

Concentration schedule set: A written, rules-based selling plan designed to bring employer stock from roughly 45% of investable assets toward a 10% ceiling over an estimated 30 months, regardless of headlines or hunches.

Withholding gap closed: Quarterly estimated payments designed to cover an estimated $25,000 to $30,000 annual shortfall between the supplemental withholding rate on RSU vests and Mark's actual bracket.

Roth capacity opened: After-tax 401(k) contributions with in-plan conversions designed to add an estimated $200,000 of Roth basis over five working years, positioned for decades of tax-advantaged growth.

Bridge to 65 funded: The taxable account, enlarged by diversification proceeds, is designed to cover an estimated $150,000 of annual spending from 60 to 65 while pretax accounts stay untouched.

Conversion window mapped: Partial Roth conversions in the low-income bridge years could potentially reduce Mark's projected lifetime tax burden by an estimated $150,000 to $250,000 under conservative assumptions.

Methodology

We would review this plan on a set cadence: each vest cycle for the selling schedule, each quarter for estimated taxes, and each December for conversion sizing before year-end. Mark is a hypothetical composite illustration. The figures are estimates under conservative assumptions, not actual results, and no outcome is guaranteed.

Related Reading

• You're Paying More in Taxes Than You Need To
• Backdoor Roth IRAs and Roth Conversions
• Retirement Isn't an Age, It's a Cash Flow

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