The Company Stock Countdown: A Game Plan for the Years Before You Retire

Retirement planning usually comes down to two questions: when can you stop working, and how much can you spend once you do. If a real chunk of your net worth is sitting in your employer's stock, there's a third question hiding underneath those two: how do you create income from it? Get that wrong and the IRS, Social Security, and Medicare all find a way to notice.

One stock makes an unpredictable paycheck

Once you retire, a diversified portfolio quietly does two jobs at once. It keeps growing, and it can fund a paycheck each month without you having to think hard about which holding is paying for it. A concentrated stock position can't do that as cleanly. Your income depends on one company's dividend decisions, its earnings calendar, and whatever the stock happens to be doing the week you need cash. That's a lot riding on a single earnings call.

The Wall Street Journal recently profiled a woman in almost exactly this spot, newly divorced with a large chunk of her portfolio still parked in employer stock. The advice she got was to bring the position down gradually and shift toward a more balanced mix built to produce steady income, not sell it all in one afternoon.¹ That's the right instinct for turning a concentrated position into something you can actually live on. A three to five year schedule, trimming a set amount each year regardless of what the stock did that week, tends to build a more dependable paycheck than waiting for a “good time” to sell everything at once. We cover the case for why concentration itself is risky in a separate article (Too Much of a Good Thing), so we won't repeat it here. This one is about the income side.

Stack your gains where the taxes are cheapest

Long term capital gains are taxed at 0%, 15%, or 20%, and which rate applies depends on your total taxable income for the year, not just the size of the gain. For 2026, a married couple filing jointly can have up to $98,900 of taxable income and pay 0% federal tax on long term gains stacked on top of it. The 15% rate runs all the way to $613,700 before the 20% rate takes over.²

That makes the stretch between your last paycheck and the start of Social Security and required minimum distributions, which now begin at age 73 for most people,³ often the cheapest window you'll ever get to convert concentrated stock into income. Working years come with W2 income that already fills up the low brackets. Social Security and RMDs eventually fill them back up too. The years in between, sometimes called the gap years, are usually when the real work of turning stock into a paycheck should happen.

Two surprises that show up later

Selling a large position doesn't just settle this year's tax bill. It can quietly reach into two other corners of your retirement income. Social Security first. Up to 85% of your benefit can become taxable, based on “combined income,” which is your adjusted gross income plus tax exempt interest plus half your Social Security benefit.⁴ Those thresholds, $25,000 for single filers and $32,000 for joint filers, were set in 1983 and have never been adjusted for inflation since. A big stock sale in the same year you start claiming can push more of your benefit into taxable territory than you'd expect.

Medicare is the other one. Your Part B and Part D premiums are based on your income from two years earlier. For 2026, a single filer pays the standard $202.90 monthly Part B premium up to $109,000 of income, and a married couple filing jointly up to $218,000. Cross that line and surcharges kick in, all based on that two year old tax return.⁵ A concentrated stock sale in your early sixties can raise your Medicare bill without your noticing the connection until the bill arrives.

If the stock is sitting inside an old 401(k), stop first

Company stock held inside a retirement plan follows an entirely different rulebook, and rolling it straight into an IRA by default can be an expensive habit. We've written a full article on the strategy that applies here, called net unrealized appreciation (The Tax Break Hiding in Your Old 401(k)). The short version: it only works if the stock comes out as actual shares, as part of a full distribution of the whole plan, after a specific trigger like leaving the company or turning 59 and a half. Miss a step and there's no redo.

A rough order of operations

• 3 to 5 years out: start a scheduled plan to convert the position into income instead of waiting for a signal from the stock price.
• The year you stop working: often your lowest income year in decades, and a good one for realizing gains.
• Before Social Security starts: check what a large sale would do to the taxable share of your benefit that year.
• Anywhere near Medicare eligibility: remember the two year lookback before selling anything sizable.
• Employer stock in an old 401(k): check on NUA before any of it gets rolled anywhere.

The bottom line

None of this calls for panic, and it's definitely not a reason to dump everything on your first day of retirement. It's a reason to have a plan for turning one stock into a paycheck you can actually count on. If retirement is somewhere on the horizon and company stock is a real piece of your picture, let's map out how to turn it into income together, well before the year it actually matters.

This is general education, not personalized tax or investment advice. The right sequence depends on your income sources, your filing status, and how the stock is held, so let's run your numbers before anything gets sold.

Sources

1. Demetria Gallegos, The Wall Street Journal, “Newly Single She Wants to Be Financially Secure and Splurge a Bit. Can She Afford It?” February 7, 2026, as summarized by the CFP Board. cfp.net/news/2026/02/newly-single-she-wants-to-be-financially-secure-and-splurge-a-bit-can-she-afford-it
2. IRS Revenue Procedure 2025-32: 2026 long term capital gains rate thresholds. irs.gov/pub/irs-drop/rp-25-32.pdf
3. IRS, “Retirement topics: Required minimum distributions (RMDs)”: RMD starting age of 73, rising to 75 for those born in 1960 or later under SECURE 2.0. irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
4. Social Security Administration, “Income Taxes and Your Social Security Benefits”: combined income thresholds of $25,000 (single) and $32,000 (joint). faq.ssa.gov/en-US/Topic/article/KA-02471
5. Medicare.gov, “Medicare Costs” for 2026: Part B standard premium and income related monthly adjustment thresholds, based on income from two years prior. medicare.gov/media/5251