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Author: jeffbuck Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: all in one stock Date: 12/3/1998 3:00 PM
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I have a unique situation. I have a lot of money saved for retirement, 47yrs old, but it is all in one stock. To sell the stock to diversify would expose me to large capital gains taxes which would erode my savings. Approximately 1/4 is in a 401k which I can transfer funds from the Company stock (HD) to mutual funds. The balance is in stock options which all are mature and can be exercised. I know that I should diversify but the stock is doing well and the cost of diversifying could have a serious negative tax impact. Any ideas?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6989 of 75383
Subject: Re: all in one stock Date: 12/4/1998 11:02 AM
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Greetings, Jeffbuck, and welcome. You asked:

<<I have a unique situation. I have a lot of money saved for retirement, 47yrs old, but it is all in one stock. To sell the stock to diversify would expose me to large capital gains taxes which would erode my savings. Approximately 1/4 is in a 401k which I can transfer funds from the Company stock (HD) to mutual funds. The balance is in stock options which all are mature and can be exercised. I know that I should diversify but the stock is doing well and the cost of diversifying could have a serious negative tax impact. Any ideas?>>

What would you rather do, lose some to taxes or a lot to a stock market decline? Nothing says you have to convert all of it at once to something else, but to have your retirement funds tied up in one entity is an enormous, totally unneeded risk. Personally, I get exceedingly uncomfortable whenever one security represents more than 25% of my portfolio. But that's me. As for you, keep in mind you're gonna have to pay the tax piper at some point anyway. If you don't, then your heirs will. So why take the risk of principal loss as well? IMHO you don't have to and shouldn't.

Just one Fool's opinion FWIW.

Regards….Pixy



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Author: DownwardSpiral One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7010 of 75383
Subject: Re: all in one stock Date: 12/4/1998 6:40 PM
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<<Pixy replying to Jeffbuck about a major portion of assets in company stock (&options).>>

I agree with you 100%, Pixy, about the "sleep factor" of having so many eggs in one basket. But, depending on a lot of factors, at least SOME of the tax bullet could be dodged...

--in a 401(k), I beleive that the capital gains can be postponed in some cases when the company stock is moved out of the 401(k)

--if you are charitable, donating appreciated stock gives you the full deduction & you avoid the capital gains

--if some of this is left over for the estate, the heirs get the stepped-up basis of value at death.

Even with these possibilities, it is pretty scary to hope that the company's stock price would never crash in the 50 years until it is part of the estate. I would probably diversify as much as practical, or maybe a portion each year.

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