Nobody plans to paint themselves into a corner. They just keep making good decisions until they’re standing in one. Funny how that works, a “good problem to have” and still a problem.
There are two versions of this we see more than any other. Different starting points, same corner. One is an executive at a well known public company sitting on a large concentrated equity position built through years of compensation. The other is someone who’s spent twenty or thirty years quietly building a taxable account of mutual funds and ETFs, contributing consistently, staying invested, doing what they were told was right the whole way through.
Take the concentrated stock situation first. At some point someone is told the responsible move is to sell part of that position and diversify into a broader index. That’s usually good advice. But the bigger issue isn’t the diversification itself. It’s that the sale gets decided on before anyone’s built a tax game plan around it. Think about a basketball team walking into a big game with no plan and no sense of who’s guarding who, relying on talent and good vibes to carry the win. Sometimes that works. More often, a string of misfires and unforced turnovers ends up killing the possession, and by the time you realize you needed a plan, the game’s already underway and you’re reacting instead of running plays. Having the game plan first is what makes it proactive instead of reactive. A large single sale without one can push someone into a higher tax bracket for the year, and depending on the state, add a real state tax bill on top of the capital gains hit itself. Sometimes the plan means spreading a sale across a few years instead of doing it all at once, or simply timing it around a year when income is naturally lower. Diversifying can still be the goal. It just shouldn’t be the first play called.
The quieter version of this shows up in a completely different type of case. Someone who’s been saving into a taxable account for two or three decades, same handful of funds, same steady contributions, never made one big concentrated bet, and somehow ends up in a version of the same spot. Nobody decided to build a concentrated, tax heavy position. It happened because consistency looked like the right thing to do the entire time, and mostly, it was. Save into the account, buy the same handful of funds, let time and the market do the rest. What rarely happens along the way is someone stopping to ask what this specific money is actually for, and what it looks like, tax-wise, the year it’s finally needed. The saving got all the attention. The eventual use of it got almost none. That gap, between building the portfolio and understanding how it’s meant to be used against someone’s actual goals, is exactly where the corner gets built without anyone noticing. But twenty five years of unrealized gains sitting in one account is its own kind of concentration. Concentrated in time, in built up tax exposure, in flexibility that quietly went away one contribution at a time.
This is usually where the numbers do the convincing better than we can. We’ll sit down with someone five years out from retirement, starting to architect a distribution plan, holding a mix of qualified and non-qualified assets, with the non-qualified side carrying exactly the kind of concentrated, embedded gains we just described. Walk through what happens when part of that account needs to fund income, and it’s rarely just the capital gains tax. A large gain can push more of someone’s Social Security benefit into taxable territory. It can also raise Medicare premiums two years later, since Medicare looks back two years at income to set that year’s cost. Put projected numbers in front of someone and show the difference between a distribution plan built five years ahead versus one built the year it’s needed, and that’s usually when it stops being a concept and becomes something they wish they’d started sooner.
We think being intentional with taxes deserves the same seat at the table as return and risk, not something handled once someone’s already at the finish line. It doesn’t feel urgent twenty years out. Saving compounds in your favor the whole time. Ignore the tax side long enough, and it compounds too, just against you.
What that actually looks like depends on where someone sits. For one household it might be tax loss harvesting inside the core portfolio, or just being more thoughtful about which account a new dollar of savings goes into. For someone carrying a larger or more concentrated position, it can mean something more involved, a long-short strategy built around gain realization, a donor advised fund gift timed to a high income year, or a charitable remainder trust pairing a deduction now with income later. Not every tool fits every situation, which is exactly why the conversation matters more than any single tactic.
Good habits rarely feel risky while they’re happening. They build up quietly, and one day you look up and realize how much flexibility got spent along the way. Might be worth asking whether your own plan has ever really had that conversation.
