At 53 with a $9.25 million net worth, I’m eyeing three ways to handle my concentrated stock – which strategy avoids the biggest tax bite?

A Redditor is currently sitting on a massive $9.25 million net worth, but there is one small catch. This individual has one stock that has logged a $3.7 million long-term capital gain.

That’s an impressive gain, but it also means that the Redditor’s portfolio is heavily concentrated into a single asset. The Redditor wants to diversify a bit more while minimizing their tax bill, and that’s why the 53-year-old turned to the Fat FIRE Reddit community for advice.

The Redditor lays out their net worth in this Fat FIRE Reddit post and shares some of their thoughts. Redditors jumped into the comments to offer some advice, but it is good to speak with a financial advisor if you can.

Move to a State with No Income Taxes When You Sell

One commenter mentioned that he moved to Florida right before selling his business. Then, he didn’t have to pay any state income taxes. Those savings allowed the commenter to get a “very nice home on a very nice resort island for free.”

The Redditor currently faces a state income tax that will range from 7.8% to 9.8%. Most of their state taxes will be at 9.8% by the time they sell shares. This plan only works if the Redditor retires or works remotely. It’s good to speak with a professional to ensure you can make this move and avoid any state taxes in your current location.

Determine How Many Shares You Want to Keep

While the Redditor wants to unwind their large position, chances are that the Redditor doesn’t want to sell off their entire position. Knowing how many shares you want to have when you retire can help you estimate how many shares you have to sell to reach that goal.

For instance, if you have 30,000 shares and want to have 10,000 shares when you retire, then you have to sell 20,000 shares. Then, you can break down how many shares you have to sell each year over the next decade. If you want to sell 20,000 shares over 10 years, then you have to sell 2,000 shares each year.

The Redditor can start with their shares that have the highest cost basis to reduce their tax bill. Then, the Redditor can apply general strategies, like selling any of their capital losses to offset some of the gains.

The Redditor Has Some Diversification

The investor mentioned having $3.7 million in long-term capital gains taxes, but they also have a $9.25 million net worth. The 53-year-old has 56% in stocks, 8% in traditional retirement accounts, 35% in Roth accounts, and 1% in cash. Although it’s not shown in this calculation, the Redditor has also likely paid off their house.

It would be interesting to see the percentage of the Redditor’s wealth that is tied to the stock. The Redditor already mentioned setting aside shares with the highest long-term capital gains for charity or step-up basis.

The Redditor doesn’t have to rush to unwind their position, especially if the stock is already doing well. Some diversification offers a bit of flexibility before rushing to sell shares. A gradual approach will minimize taxes,