Picture a retiree who spent three decades accumulating IBM (NYSE:IBM | IBM Price Prediction) shares in a taxable brokerage account. The stock was supposed to be the boring part of the plan. A Dividend Aristocrat. Thirty-one consecutive years of dividend increases. Quarterly checks paid every single quarter since 1916. The kind of holding a spouse could inherit without needing to learn about markets.
On July 14, shares plummeted roughly 25%, the steepest single-day drop in the company’s history, outdoing even the Black Monday crash of Oct. 19, 1987, when IBM stock fell 23%. Year to date, the stock is down about 26%. Earnings were fine. First-quarter adjusted EPS of $1.91 came in above expectations, revenue grew 9%, and in April the dividend was raised yet again. The stock crashed anyway, on concerns about AI capital spending crowding out traditional IT budgets. In a letter to investors, CEO Arvind Krishna admitted “this quarter we faltered.”
On one Reddit thread with nearly 700 upvotes, an investor asked whether this was a company stumble or a sector-wide reset. Every retiree who leaned on IBM for income should be asking the same question about their own plan.
Concentration Risk Hiding Inside a Blue Chip
Reliability of past dividend payments tells you nothing about the share price at which you can sell when you actually need the income. If IBM was 30% of the portfolio and it drops 30%, the retiree just lost 9% of their entire nest egg in a week, on a holding they classified as “safe.” That is the mechanic behind sequence-of-returns risk: a crash while you are drawing income permanently shrinks the base that produces future income.
This is where Social Security silently does something no individual stock can. The benefit is guaranteed by the federal government and adjusted for inflation every year. The 2026 cost-of-living adjustment (COLA) came in at 2.8%, applied automatically to every check. A $2,400 monthly benefit became roughly $2,467 without the retiree lifting a finger, and it did not care what IBM’s share price did in July.
The Tax Trap Behind a Concentrated Position
Here is the Social Security detail that catches retirees off guard when they try to unwind a concentrated position. Selling appreciated shares creates capital gains, and those profits flow into what the IRS calls provisional income. Once provisional income clears the $25,000 threshold for a single filer or $32,000 for a couple, up to half of Social Security becomes taxable. Above $34,000 and $44,000, up to 85% is taxable. A retiree who tries to trim a $300,000 IBM stake in one tax year can easily push another chunk of their benefit into taxable territory and lift their Medicare premium two years later through the income-related surcharge.
The strategic approach is to trim over several years, harvest losses where they exist, and, if doable, consider donating appreciated shares directly to charity if giving is already in the plan. Each move preserves more of the Social Security check the retiree already earned.
How the Pieces Fit
Think of retirement income in layers. The bottom layer is the Social Security floor, indexed to inflation and shielded from market drawdowns. On top sits whatever the portfolio produces: dividends, interest, and measured withdrawals. The floor exists precisely so the top layer can be sensibly diversified rather than concentrated in whichever stock the retiree feels loyal to. A retiree collecting $6.73 per share (trailing 12 months) from IBM was earning a yield around 2.3%. That income stream did not crash, but the principal behind it lost roughly a quarter of its value in weeks. Yield only counts as guaranteed income when the principal behind it is stable.
A reasonable working rule: no single stock should represent more than 5% to 10% of a portfolio you actually draw living expenses from. If you are past that line, the real question is how to trim without triggering an avoidable tax bill (our research team’s Retiree’s Tax Trap Map walks through the interactions).
What to Take Away
Start with this: the hardest mistake to undo in retirement is discovering that a safe holding was actually a concentrated bet, after the price has already moved against you. Second, the Social Security check is the one piece of the plan that will keep arriving, adjusted for inflation, regardless of what IBM, or any single company, does. Build the rest of the portfolio around that certainty rather than around a story about a stock, even one with a dividend streak stretching back to 1916.
Circumstances vary, cost basis matters, and the right trimming pace depends on your tax bracket and other income. If a legacy position has quietly grown into the majority of your nest egg, that is a conversation worth having with a fiduciary before the next crash forces the timing on you.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks