How Much Employer Stock Is Too Much?
If you receive employer stock as part of your compensation, it’s easy for that stock to grow into a large portion of your net worth—especially if you’ve been at the company for a while or the stock has significantly appreciated.
At some point, you may start wondering: Do I own too much? And could this be putting my financial future at risk?
Rules of Thumb (and Why I Don’t Love Them)
There’s a common rule of thumb that says you shouldn’t hold more than 10%–20% of your invested assets in employer stock. It’s not a bad starting point—it helps illustrate the importance of diversification. But like most rules of thumb, it doesn’t account for your personal situation.
That’s why, when I work with clients, I use a more tailored approach.
My 4-Step Process for Deciding How Much Employer Stock to Sell
If you’ve built up a large employer stock position, here’s how I help clients decide how much to sell:
Sell enough to cover short-term needs
Sell enough to keep your long-term plan on track
Sell enough to cover taxes
Diversify for the sake of diversification
1. Sell Enough to Cover Short-Term Needs
If your cash compensation doesn’t fully cover your expenses, it’s okay to sell stock to fill the gap. Just be intentional about it.
I recommend planning for any known expenses in the next two years—things like housing, travel, or major purchases—using either cash or a strategy that includes stock sales. Make sure there’s a “Plan B” in place if your company’s stock price drops.
2. Sell Enough to Keep Your Long-Term Plan on Track
When employer stock makes up a significant portion of your net worth, I run retirement projections with and without the stock included. This shows us how dependent your financial plan is on that one asset.
If your plan falls apart without the stock, that’s a sign you may be overconcentrated. A diversified portfolio won’t go to zero. A single stock can.
3. Sell Enough to Cover Taxes
RSUs and stock option exercises typically create taxable income—and they often don’t withhold enough to cover the full tax bill. I believe part of your equity comp should be sold to help pay the taxes it triggers.
Planning ahead can prevent a nasty surprise come April.
4. Diversify for the Sake of Diversification
Even after you’ve sold enough for near-term needs, long-term goals, and taxes—it may still make sense to sell more.
Here’s when additional diversification might be worth considering:
You’re unsure about your company’s long-term prospects
Stock price swings are keeping you up at night
You don’t want to tie your financial future to your employer
Final Thoughts
Employer stock can be a valuable part of your compensation—but too much of a good thing can turn into a risk.
There’s no one-size-fits-all answer. But with a thoughtful plan and a clear understanding of your goals, you can make smarter decisions about when, and how much, to sell.
If you're wondering how your company stock fits into your bigger financial picture, let's talk.