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Article | Ric Edelman

Q&A: I’m sitting on $1.6 million worth of company stock. Should I sell it all at once or in increments?

Q: I’m 64 and plan to retire within two years. I’m sitting on $1.6 million worth of company stock, both inside and outside my 401(k) and in options. The stock is approaching an all-time high. Should I sell it all at once, one-half or one-third at a time, or in smaller increments? And what about the options? Do I sell them now while the price is high or wait until they get closer to the termination date regardless of the tax consequences? I believe the income from this, along with my pension and Social Security, will be enough to maintain my lifestyle in retirement.

Ric: First, you deserve applause because you understand that you need to diversify. Those who don’t diversify their holdings usually live to regret it. The challenge, of course, is knowing when to sell. You’re probably asking yourself, “Do I sell it and watch it go up, or keep it and watch it go down?”

On a list of the world’s problems, this one is a fun problem to have, but it’s a problem nonetheless — one that can keep you awake at night or cause fights with your spouse. So let me show you how to resolve the dilemma.

You must approach the issue from a lifestyle-based, risk-based perspective. Avoid the “let’s maximize the profit” approach, because that’s how you can get into trouble.

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