Selling Company Stock Over Multiple Years: A Kestrel Bay Retirement Advisors Walkthrough

How far does the stock have to fall to make waiting cost more than the tax?

The stock only has to fall about 1.9% for waiting to cost more than the tax you saved by spreading. In the hypothetical below, Leah assumes that three years of sales save 5 points of tax on a $300,000 gain, which is $15,000. After her first sale she still holds $800,000 of stock, and $15,000 divided by $800,000 is 1.875%, about 1.9%. A drop of that size on the unsold shares wipes out the entire saving.

Now stretch the drop to something a single stock does without much warning. A 20% fall on the same $800,000 costs $160,000, more than ten times the tax she hoped to save. A lower price also shrinks the gain, so after tax the break-even fall is a little over 2%. A rise helps in the other direction, and nobody can forecast which one comes. Investing involves risk, including the possible loss of principal, and one company's stock carries more of that risk than a diversified fund does.

Here is the rule we apply. Divide the tax you expect to save by the dollars you would still hold after the first sale; that is the price drop that wipes out the saving. If the result is under about 5%, sell faster, because a fall that size is a routine event for one stock.

How does Kestrel Bay Retirement Advisors build a three-year schedule?

Kestrel Bay Retirement Advisors builds a three-year schedule in five steps, and you can verify the arithmetic in the first four with a calculator. Leah is the running example: a hypothetical 38-year-old single senior software engineer at a public cloud company, renting, who has never sold a vested RSU. She holds $1,200,000 of stock with $900,000 of basis.

• Step 1: list every lot with its share count, basis per share and holding period. Leah's $300,000 of total gain means one third of the shares carries $100,000 of gain.
• Step 2: estimate ordinary income. Her $260,000 salary plus $150,000 of vests is $410,000; less a $24,500 401(k) deferral and the $16,100 standard deduction, taxable income is $369,400.
• Step 3: set a ceiling below $640,600, where the 37% bracket starts, and size each sale to fit. The top capital gains rate starts lower, so check the current IRS limit too.
• Step 4: check IRMAA, which counts income from two years back. It doesn't touch Leah at 38, but it matters within about three years of age 63, and the first single line is $109,000.
• Step 5: put the sales in the same trading window each year and sell new vests as they arrive.

Leah's sample schedule, year by year

Leah's schedule sells $400,000 of stock a year for three years, and every year looks the same. Each sale carries $100,000 of gain, so taxable income with the gain is $469,400, which is $171,200 under $640,600. A single sale of all $1,200,000 adds $300,000 of gain and puts income at $669,400, $28,800 over the line. In the table's right-hand column, the three yearly rows sit well under the line and the one-year row crosses it.

Assuming the three-year plan saves 5 points of tax on the gain, the saving is $15,000. That figure is an assumption, and a run through tax software replaces it. Because each year stays so far under the line, the schedule has room for a raise or a bigger vest without breaking the plan.

Pros and cons of spreading sales

Spreading sales buys a calmer tax picture and costs you time in the stock. We'd say the second cost is the one people underrate.

• Pro: each year stays $171,200 under the 37% line instead of landing $28,800 over it.
• Pro: a written schedule removes the decision from each trading window, so you aren't debating the price every quarter.
• Con: $800,000 stays unsold after year one, which is 50% of Leah's net worth on its own. Before the first sale, the whole position is 75%.
• Con: three years of orders, estimated tax payments and recalculation, and laws and rates can change before year three.

Mistakes that make a schedule worse than one sale

The costliest mistake is letting tax fear set the pace. Leah could hold $1.2 million, 75% of a $1.6 million net worth, for years to save about $15,000 of tax. A 1.9% drop on the unsold $800,000 erases the saving, and a 20% drop costs $160,000.

Three other errors show up in the reviews we run. Each is easy to avoid once you know it's there.

• Selling only old shares while new vests of up to $150,000 a year before withholding refill the position. Sell new vests as they arrive.
• Selling lots held under one year, which turns the gain into ordinary income taxed at higher rates. Check the holding period on each lot first.
• Choosing lots by default (first in, first out) instead of picking specific lots with the smallest gains.
• Waiting for a better price to start. With no start date there's no schedule, and a fall of just 1.9% already erases the tax saving.

How does the answer change with age or position size?

A small gain usually belongs in one year, and a large position or an older client changes the schedule in specific ways. A $50,000 gain, for example, is usually best sold at once, because the tax saved is a few thousand dollars. If the position is under 10% of net worth, a schedule is rarely worth the exposure either.

At about 55 to 62, add the IRMAA check. Medicare looks back two years, so income in the year you are 63 decides your Part B premium at 65, and the first single line is $109,000 for 2026. A $3 million position may need five years, but the unsold part keeps growing or shrinking, so we'd rather sell the first third quickly.

One more case: a year of unusually low income, such as a sabbatical, is worth accelerating a sale into. Your bracket room that year may be the cheapest you'll see.

Checklist before the first sale

Run through these six items before you place an order. Our equity compensation planning work starts here, and related pages cover concentrated stock positions and donating appreciated stock when a gift fits better than a sale.

• Lot list with holding periods and basis, downloaded from the broker.
• Income estimate for each year, including vests and the 401(k) deferral.
• A ceiling under $640,600 and the gain each year can add.
• Trading window dates and any blackout rules.
• Estimated tax payments for the sale year.
• A written plan for the proceeds, with the tax cost of each change estimated first.

What to do this week, and where Kestrel Bay Retirement Advisors fits

The sample holds the stock price, salary and vests flat, and it ignores state tax and the net investment income tax, so it is a sizing tool, not a tax return. Company trading windows or insider blackouts can limit when you may sell at all. If your gain is small, selling everything in one year usually beats a plan.

Kestrel Bay Retirement Advisors can build the lot list, estimate each year's tax and draft the schedule with you, either by phone or over video. The request form on this site is the first step.

• Download lot-level cost basis and acquisition dates from the broker.
• Ask the company's stock plan administrator for the trading window calendar and blackout rules.
• Estimate this year's taxable income from your last pay stub and vest schedule.
• Send the draft schedule to your CPA and ask for an estimate of the tax in one year versus three.
• Place the first sale if the window is open and the first tranche fits under your ceiling.