Retirement Success Stories: The Concentrated Nest Egg

Life is about balancing risk and reward. Every day we take calculated risks; some of which pan out, while others don’t, and in the pursuit of retirement, some risk-taking is essential. 

For some individuals, risk-taking looks like a balanced portfolio of broad-based stock and bond ETFs. For others, it may look like a heavy exposure to equities through actively managed mutual funds. Others may choose to bet on individual companies, which is a riskier proposition. But when the bet pays off for those who take risks, which is not usually the case, the reward can be a sizable appreciation of their nest egg.

Some individuals may accumulate large individual stock positions through stock options they receive at work. Others may receive a discount for purchasing their employer's stock in their 401(k). Others may believe in the company and are willing to back that conviction by concentrating their investments.

Whatever the reason, when this strategy pays off, an individual accumulates a sizable position in one company that makes up the majority of their net worth. But how you proceed from here defines what success looks like in retirement.

Take, for example, the story of one of our clients who built a large position in one company over thirty-plus years. Had they not made the initial investment, they likely would not be in the same place financially today, meaning the bet paid off. However, as their retirement unfolded, they realized they could not tolerate the risk and daily swings in their nest egg that one stock presented. 

So, this individual reached out to us, and we began creating a holistic retirement plan that included a cash flow analysis and a redistribution of their assets. Now, they are far better prepared for market volatility and relieved to have unloaded such a sizable, risky position that could have jeopardized their retirement. Furthermore, because of favorable long-term capital gains rates for those without other sources of income, they were able to minimize their tax bill.

While everyone's story is different, we have seen many client scenarios, and at Lundeen Abrams Advisors, we are here to help. Whether you are nearing retirement, already in it, or planning your legacy, we look forward to learning how we can help you achieve your financial goals. Please call us to schedule an appointment today, and we look forward to meeting with you soon.