Relying on Old Apple Stock at 55: Too Risky for Early Retirement?

When you come upon a winning stock in your portfolio, it’s a good idea to hang onto it and let your shares appreciate in value. Doing so could be a winning formula for your retirement — provided you do that across a diverse mix of stocks.

In this Reddit post, we have someone who’s adopted this strategy but missed the mark a little bit. They have $600,000 in a combination of retirement plans (a 401(k) and IRA) plus $700,000 worth of rental properties. Their primary home also has a small mortgage and they have lots of equity in it.

But the bulk of their assets is in Apple stock that they bought 30 years ago. Now, they’re sitting on a $2.5 million position in Apple, which provides them with a nice financial cushion for an early retirement in theory.

The poster wants to retire at 55. But there are two big issues with the way their portfolio is set up.

Issue #1: A lack of diversification

The poster’s strategy to buy Apple stock and let it gain value clearly paid off. But there’s a big issue with having $2.5 million in a single stock and no other stocks that they mention.

If something were to happen to Apple stock, the value of the poster’s portfolio could tank in a very big way. That could seriously upend their financial plans.

In fact, let’s say Apple stock loses 20% of its value. That would shrink the poster’s portfolio from $2.5 million to $2 million.

Now thankfully, the poster does have other assets to fall back on. But because they’re looking to retire at 55, their 401(k) and IRA may be off the table for roughly their first five years after leaving their job — provided, of course, that they don’t want to take an early withdrawal penalty. And while they own rental properties, they don’t indicate how much income they generate.

So it looks like they’re very reliant on Apple to hold its value. And since no one can see into the future, it’s a dangerous thing to have so much money in one company.

Issue #2: Capital gains taxes

The poster is sitting on a huge gain in their Apple position. But that means they’re going to be looking at a potentially large tax bill as they sell shares of their stock for cash.

Currently, long-term capital gains tax rates max out at 20%, and the poster may fall into the 15% tax bracket for long-term gains. It’s unlikely that their income is low enough to pay 0% on long-term gains. But that’s a tax hit the poster will need to address.

The solution

The poster is in a good position to retire at 55 based on the assets they’ve accumulated. But they need to do two things first:

1. Diversify out of Apple
2. Work with a tax or financial professional to minimize the tax blow

The poster could simultaneously sell out of their Apple position slowly while also diversifying their holdings for more protection. They should be very careful about selling large amounts of Apple shares at once, as this could result in a significant tax bill.

A situation like this is unquestionably tricky. But with the right guidance from a tax professional or financial advisor, the poster will hopefully be able to navigate it appropriately so they can enjoy early retirement without financial stress.

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