Scotia Wealth Management: turning a concentrated stock position into retirement withdrawals

When does a concentrated stock position start to shape your retirement withdrawals?

A concentrated stock position starts shaping your retirement withdrawals about three years before your last paycheck, because officers usually need a Rule 10b5-1 schedule by then, with a cooling-off period of up to 120 days, and the lowest-income years for realizing gains are about to begin.

Most executives treat company shares as a separate pile they'll sell someday. Once the salary stops, share sales become part of the money you live on each month, so the work is a sale amount for each year, not one exit date. Lots differ inside one position. Shares from vested RSUs carry a basis equal to their value when they vested, and the oldest grants usually carry most of the gain. We open the lot report before we look at the total balance. Whether your stake is too big is a separate question another page covers; here we assume it is and deal with how the sales pay for your life.

Where a tax preparer or estate attorney takes over

Many executives assume one advisor handles everything that touches their shares. This service sets which shares to sell, in which year, and how the sales feed your withdrawals; it doesn't pick a sale price or predict the stock. The shares can fall, and the diversified portfolio they move into can lose money too, principal included. Your CPA files the returns and sets estimated payments, an estate attorney drafts any trust or charitable remainder trust, and company counsel pre-clears every officer trade, so all three get a copy of the sale schedule.

How Scotia Wealth Management sequences share sales around your withdrawals

Executives near retirement often expect a new advisor to rebuild everything. At Scotia Wealth Management we start from the schedule you already have. We check each year's sale against your spending gap, check each lot's gain and check the Medicare lookback years. Then we rewrite only the years that fail. In Vernon and Judy's case, the ten-year deferred compensation election stayed as filed, and only the sale amounts around age 63 were tested.

• Step 1: You send the brokerage lot report (basis and acquisition date for each lot), the deferred compensation election confirmation, your current advisor's sale schedule if one exists, and last year's return.
• Step 2: We mark what already works and leave it alone. Vernon, the hypothetical executive in the next section, keeps his ten-year installment election exactly as filed, because it already covers $110,000 annually of withdrawals.
• Step 3: We build a year table from the last paycheck onward: spending, minus installments, leaves the gap that share sales must cover. Each year's sale is sized, and the age-63 year is tested against Medicare's two-year lookback.
• Step 4: Draft sale amounts go to company counsel for the 10b5-1 plan, and your CPA gets the estimated-tax figures. You receive the roadmap with each year's sale amount and the reason behind it.

What happens if two couples bring the same $2.8 million question?

Two couples holding the same $2.8 million in company shares can need opposite answers, because cost basis decides how much of each sale is taxable gain. (hypothetical, round numbers) With a $280,000 basis, 90 percent of every sale is gain and spreading sales over eight years makes sense; with a $2.5 million basis, diversifying in year one makes more sense.

Vernon, 59, is chief operating officer at a public industrial manufacturer; Judy, 57, is a retired pharmacist, and they've kept the same advisor for 15 years. Vernon retires in two years with $2.8 million in low-basis company shares and $1.1 million in deferred compensation. They want $240,000 annually once his salary stops at 61. His deferred balance pays about $110,000 annually for ten years, so share sales must cover the other $130,000.

Selling everything in his last working year puts $2.52 million of gain on one return ($2.8 million times 90 percent). Selling $350,000 annually from 61 to 68 realizes $315,000 of gain a year instead ($350,000 times 90 percent). Say it honestly: spreading the sales doesn't shrink the $2.52 million. It moves each slice into years with no salary, and it keeps concentration risk alive for eight years. That is the price.

The second couple is identical except that their shares came from recent RSU vests with a $2.5 million basis. They face only $300,000 of gain in total, so the tax reason to wait mostly disappears and they diversify in year one.

Our shortcut: if 90 percent or more of each sale is gain and your salary ends within three years, put most sales in the years after the last paycheck and before the age-63 Medicare lookback year. If your basis is close to today's price, concentration risk should set the pace.

Once the last paycheck clears

Vernon and Judy's monthly picture is simple: installments supply about $9,167 a month and share sales about $10,833, which together make $20,000 a month. We'd hold $260,000 in cash from the first two years of sales, which equals two years of the $130,000 gap, because being forced to sell shares in a down year is what really hurts a sell-down. Wage withholding ends with the last paycheck, so taxes on share sales then need quarterly estimated payments or extra withholding on the installments, and executives often miss this in their first retired year. The IRAs and 401(k) stay untouched; required minimum distributions start at 75 for people born in 1960 or later, so those accounts can wait.

A flat $350,000 sale schedule, the kind careful people set and forget, adds about $315,000 of gain to $110,000 of installments at 63. That joint MAGI of about $425,000 sets Vernon's Part B premium at 65 at $649.20 monthly (2026 Medicare figures) instead of $202.90, which is $446.30 more a month and about $5,356 for that year. The table assumes $350,000 sold each year from 61 at today's price, and shows the ages where something changes.

When does the sale schedule get reopened early?

At Scotia Wealth Management the schedule gets a full review once a year, before the window to adopt the next 10b5-1 plan, and an extra review if the stock moves about 25 percent from the price the schedule assumed, the company announces a merger, either spouse has a health change, or Judy approaches Medicare.

Judy is two years younger, so her own lookback year falls when Vernon is 65, and the IRMAA watch runs two years longer than his alone.

Four decisions between your first call and the first share sale

Week one, the first call: you decide whether to send the lot report and the election confirmation so the review can start. In weeks two to four we build the year table, and you decide the spending number ($240,000 annually in the example), since every sale amount hangs on it. Around week five, at the review meeting, you decide the yearly sale amounts and which parts of your current arrangement stay as they are. After that, company counsel adopts the 10b5-1 plan, and with a cooling-off period of up to 120 days you decide whether the first sale lands before or after the last paycheck.