Retirement Dilemma: Cash Out Stock Worth Millions or Hold for Kids' Future?
In a world where financial security often feels like a distant dream, one Redditor stands at the precipice of retirement with a unique challenge. Sitting on a jaw-dropping $3.7 million from a single stock investment, this individual faces an intricate dilemma: should they cash it all out or hold on for their children’s benefit through a step-up basis?
As noted in a recent discussion on the Fat FIRE Reddit community, the decision isn’t as clear-cut as one might think. The stock in question forms the cornerstone of the Redditor’s $9.25 million net worth, making it a critical factor in their retirement planning.
The Tax Advantage Tactic
A strategic move discussed by commenters centers on relocating to a state with no income tax, like Florida. As some suggested, such a move could enable the Redditor to significantly minimize state taxes when eventually selling the stock. One user shared personal insights, having moved to Florida before selling a business to dodge hefty state taxes. For a Redditor planning a lavish $250k annual retirement, this could prove to be a crucial consideration according to 24/7 Wall St..
Calculating the Gains: A Planned Approach
The Redditor considers selling shares based on cost bases. This method, focusing on shares with the lowest capital gains, ensures a minimized tax impact. With children aged 22 and 18, the idea of transferring high-gain shares to them upon inheritance becomes an intriguing component. It resets those gains, offering a fresh financial start for the offspring.
An insightful twist to this plan lies in potentially turning existing properties into rental homes, thereby leveraging depreciation to further reduce tax liabilities during the transition.
Diversification: The Key to Peace of Mind
Diversifying the stock-heavy portfolio is another pivotal conversation thread. The Redditor acknowledges that a gradual reduction of shares is necessary to alleviate the burden of a single-stock dependency. The lingering question is how much to sell annually to maintain a balance between diversification and capital gains taxes.
A well-thought-out reduction strategy, whether curbing shares by 20% or halving them, will guide the Redditor towards a more diversified and secure financial future.
Retirement Mindset: It’s All About Control
Ultimately, this journey boils down to personal control over financial destiny. It’s not merely about numbers on a ledger, but peace of mind and a future unencumbered by financial anxiety. By implementing a calculated and phased approach, the Redditor can navigate the path of retirement with confidence, ensuring both personal well-being and a legacy for the next generation.
With expert financial advice readily accessible, and strategies well-laid out, this Redditor’s journey serves as a compelling case study for anyone contemplating retirement strategies amid financial uncertainty.
