Client Stories

One of the most common challenges we see with successful professionals is what to do with a concentrated stock position that has grown significantly over time. On paper, the gains look fantastic, but the stock isn’t paying income, and selling shares could trigger a large tax bill.

Recently, a client came to us with exactly this situation. Their shares were worth about $115 each, with a cost basis of just $40. Rather than selling and facing a hefty tax hit, we put a strategy in place to make the most of their position. By carefully implementing covered calls and cash-secured puts, we’re now generating about $5,000 per month in option premiums.

Here’s what that means for them:

That $5,000 covers roughly half of their monthly living expenses.
They still own the stock and participate in its long-term potential.
They’ve transformed a concentrated position into a steady, somewhat predictable stream of income.

This type of strategy isn’t right for everyone, but for clients with highly appreciated stock and the right risk tolerance, it can be a powerful way to create income without immediately selling.

The key takeaway: You don’t have to part with your winners to enjoy reliable cash flow. With the right planning, it’s possible to capture both growth potential and income.

If you’re holding a concentrated stock position, there are smart ways to turn that into reliable cash flow—without giving up growth potential.

A client recently came to me after inheriting a large block of company stock. The shares were trading around $50, but based on everything they know about the business, they believe the “true value” sits closer to $70.

Their goal was simple: hold on until the stock gets back to where they think it should be.
Rather than just sitting tight and hoping, we built a more strategic approach.
1. Using Covered Calls to Get Paid While Waiting
We discussed selling covered calls with a $70 strike price, thelevel where they’d be happy selling anyway.
This brings in substantial premium, reduces their effective cost basis, and rewards them during the wait for a potential recovery.
Based on the number of shares they own, the premium could exceed $50,000 over the next few months, even if the stock just moves sideways.
2. Taking a Little Risk Off the Table
Even though they believe in the company long-term, I recommended selling a small slice of the position now. That way,they secure some gains, reduce concentration risk, and still maintain plenty of upside should the stock rebound.
3. Balanced Strategy, Not All-or-Nothing
It wasn’t about betting the farm on a quick bounce, it was about combining their conviction, practical risk management, and a strategy that works even if the stock takes longer to recover.
Covered calls let them stay invested, generate income, and potentially exit right where they want, all while keeping the overall plan grounded and thoughtful.
This is an actual client scenario. Covered Calls and all option strategies are not suited for all, and like all investing, involves risk. 

As our client prepares to retire in just a couple of months, our focus shifted from “saving for retirement” to confidently living off the plan.

We began by reviewing their retirement income sources, including a small pension that will provide a steady, predictable foundation once paychecks stop.
From there, we mapped out how their portfolio will support the rest of their lifestyle. We walked through when and how to use each type of account, starting with taxable assets, then tax-deferred accounts, and preserving tax-free Roth dollars for later years when flexibility matters most. This sequence helps manage taxes today while keeping future options open.
We also discussed Roth conversion opportunities during the early retirement years, before Social Security and Required Minimum Distributions begin. By intentionally filling lower tax brackets now, the goal is to reduce future tax surprises and create more tax-free income down the road.
Healthcare and Medicare planning were another key part of the conversation. We reviewed enrollment timing, coverage choices, and how income decisions can affect Medicare premiums, making sure there are no gaps or costly missteps during the transition.
Finally, we stress-tested the plan for real life; market volatility, spending flexibility, and the critical first few years of retirement. We confirmed adequate short-term liquidity so long-term investments aren’t forced into bad timing decisions, and we aligned beneficiary designations to ensure assets pass efficiently to loved ones.
The result isn’t just a retirement date, it’s a clear, confident roadmap for the years ahead.
This is just one example of how retirement planning comes together, and every situation is different. If you’re a client or someone new reading along and would like to talk through your own plan, we’re always glad to connect.

A friend came to me seeking guidance on a new job opportunity that had equity compensation attached, and on the surface, it looked like a simple “salary + shares” offer.
But equity comp is a little like ordering fajitas: it arrives sizzling,everyone looks over, and you’re thinking, “This is exciting… but what am I actually committing to here?” And you need to get the meat and veggies off the black flat iron before they overcook.

The Offer (What She Was Told)
The startup offered a competitive salary plus shares granted overtime. The paperwork referenced an extremely low “cost basis”(essentially pennies-on-a-mountain level), and the total potential award was meaningful, hundreds of thousands of shares over a four-year period.
The founders also had an “exit strategy”: they hoped to sell thecompany not long after vesting, with a target price around $6 per share.

Naturally, the question was: “When do I pay taxes on this and how big could that tax bill be?”

The Trap: “Shares” Can Mean Three Completely Different Things
Here’s the part most people don’t realize until it’s too late: when a nemployer says “shares,” they might mean:
1.  Restricted Stock (actual shares issued now, but you canlose them if you leave early)
2.  RSUs (Restricted Stock Units - a promise to deliver shares later)
3.  Stock Options (the right to buy shares later at a set price)

And each one is taxed at a different time:
Restricted Stock: taxed at vesting unless you file a special election
RSUs: taxed at vesting (no special election allowed)
Options: typically taxed at exercise (and sometimes again at sale)

So before we talked tax strategy, we did the most important step:
We translated the offer from “startup speak” into real world terms.

The Moment That Matters: Grant vs. Vest vs. Exercise vs. Sale

Equity comp usually follows a timeline:
Grant → Vest → (Exercise, if options) → Sale

The biggest mistake is assuming taxes only show up at the sale. Sometimes taxes show up years earlier, when shares vest and that tax bill can arrive before there’s any cash to pay it.

The “83(b)” Move (When It’s Relevant)
In her case, the award looked most like restricted stock, meaning she would receive actual shares early, but they would be subject to a vesting schedule (and possibly a four-year cliff).
If that’s the structure, there’s a key planning opportunity called an 83(b) election:
It has to be filed within 30 days of receiving the shares.
It allows you to pay tax up front (when the value is typically very low), rather than paying tax later at vesting when the company might be worth much more.
It can also start the clock sooner for potentially favorable long-term capital gains treatment.

Important caveat: if someone leaves the company early and forfeits unvested shares, they generally don’t get that tax back. So it’s not “always do it,” it is more important to “do it when it fits.”

Why We Took This Seriously (The “Oh Wow” Math)
If everything went perfectly, her shares could be worth: 375,000 shares × $6/share = $2,250,000
Now imagine those shares are taxed as ordinary income at vesting because they’re RSUs or restricted stock without an 83(b).  If the vesting is a four-year cliff, that could mean a large portion becomes taxable all at once.
That’s how people end up with a six- or seven-figure tax bill tied to equity… without the liquidity they expected.

What We Did Next (The Practical Checklist)
Instead of guessing, we requested four specific items:
The award agreement name (RSU vs. Restricted Stock vs.Option Agreement)
The vesting schedule (monthly vs. cliff )
The company’s 409A valuation (private-company fair marketvalue)
Whether she was actually purchasing/receiving shares now (which determines whether an 83(b) is even on the table)

Within minutes, the “mystery” disappeared, and we could map out exactly when taxes would hit, how to avoid unpleasant surprises, and how to coordinate the timing around a potential future liquidity event.

The Takeaway
If you’re ever offered equity compensation, especially from a startup, don’t stop at “how many shares.”
The better questions are:
What type of equity is it, really?
When does it become taxable?
Could I owe taxes before I have cash in hand?
Is there a narrow window for a smart election or filing?

Because in equity comp, the difference between “this is exciting” and“this is expensive” is often one form… and 30 days.

Your RSUs may have paid you. That doesn’t mean they paid your tax bill.

Every year, smart, successful professionals open their tax return and get blindsided by a balance due they did not see coming. In many cases, the culprit is not bad planning, sloppy recordkeeping, or some exotic tax strategy gone wrong.

It is RSUs.

And the frustrating part is this: the income was real, the withholding was real, and the tax surprise is real too.

RSU vesting is income, not free money.

When restricted stock units vest, the value of those shares is generally treated as wage income. That amount is typically included on your Form W-2, and employers generally report the fair market value of the vested shares as compensation.

That means RSUs are not some separate side bucket of “investment income.” For tax purposes, vesting usually lands right in the same general neighborhood as salary, bonus, and other compensation.

This is where many people get tripped up.

They look at vested shares and think, “Great, I got stock.”

The IRS looks at it and says, “Great, you got paid.”

The real issue: withholding often does not keep up.

The problem usually is not that high earners make too much money. It is that withholding often does not keep pace with how that income is taxed.

The IRS rules for supplemental wages allow a flat federal withholding rate of 22% in many cases, and 37% once an employee’s supplemental wages exceed $1 million during the calendar year.

That sounds tidy. It is not always enough.

A high earner may be in a federal marginal bracket well above 22%, especially once salary, bonus, spouse income, investment income, or multiple vesting events stack together. For 2026, the top federal rate remains 37%, with that bracket beginning above $640,600 for single filers and $768,700 for married couples filing jointly.

So if RSUs are withheld at 22%, but the marginal tax bite on that income is materially higher, the gap does not disappear. It simply waits patiently until tax season, like an uninvited cousin with a suitcase.

Why “sell to cover” does not always fully cover

A lot of employees assume “sell to cover” solves the problem automatically.

Sometimes it helps. Sometimes it helps a lot. But it does not guarantee the tax bill is fully handled.

Why? Because “sell to cover” is usually just a mechanism to generate cash for withholding. If the withholding formula itself is too low relative to your actual tax bracket, then selling shares to cover withholding still may leave you short. The system may have covered the withholding requirement, but not your full eventual tax liability.

In plain English: covering the payroll withholding is not the same thing as covering the real tax bill.c

That distinction matters a lot for executives, highly compensated employees, and anyone with multiple vest dates in the same year.

The April surprise usually starts months earlier.

Tax pain in April is often created in March, June, September, or November — whenever the shares vested.

That is why one of the best habits for RSU recipients is to review their vesting calendar before year-end, not after the W-2 arrives.

A simple review can help answer questions like:

How much income is likely to hit this year?
What withholding rate is likely being applied?
Are there multiple vesting events clustered together?
Is there a cash bonus hitting in the same year?
Should additional withholding or estimated payments be considered?
The earlier this gets reviewed, the more options you usually have.

The later it gets reviewed, the more likely the conversation turns into, “Well… that is unfortunate.”

A practical way to think about it:

RSUs are a compensation event first and an investment decision second.

That is an important mindset shift.

Once the shares vest, you generally need to think through two separate questions:

1. What tax bill did this create?
2. Do I still want to own this stock after it vests?

Those are not the same question, and too many people answer only the second one.

What high earners should do now

If you receive RSUs, a few planning moves can make a big difference:

Review your vesting schedule early in the year.
Estimate how much W-2 income those vestings may create.
Compare likely withholding with your actual marginal tax rate.
Decide whether extra withholding or estimated tax payments may be needed.
Coordinate RSU planning with bonuses, option exercises, and other concentrated stock decisions.

This is especially important for executives whose compensation is lumpy, stock-heavy, or spread across multiple awards.

Bottom line

RSUs are valuable. They can be a meaningful wealth-building tool.

But they also create taxable income, and the withholding process does not always keep up with reality for high earners. RSU income is generally reported on the W-2 as wages, while federal supplemental withholding may be only 22% in many cases unless higher thresholds apply.

That is why so many successful people end up surprised every single year.

Not because they did something foolish.

Because the system often withholds based on a rule of thumb, while their real tax bill is based on actual income.

And those two numbers are not always close.