- Home
- Retirement
- Retirement Planning
Holding too much company stock can be disastrous — as employees at Silicon Valley Bank and Kodak learned the hard way. The key is to diversify as soon as you're given the chance.
By
Peter Newman, CFA
published
10 April 2026
in Features
When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works.
- Copy link
- X
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Contact me with news and offers from other Future brands Receive email from us on behalf of our trusted partners or sponsors By submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Signup +
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Signup +
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Signup +
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Signup +
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Signup +
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Signup +
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Signup +
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Signup +
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
Signup + An account already exists for this email address, please log in. Subscribe to our newsletter
Editor's note: This is the second article of a six-part series about financial planning related to employee stock ownership plans (ESOPs), with a focus on getting the right financial advice for you, strategies for diversifying and preparing for retirement. Part one is Why High-Net-Worth Families Need a Financial Quarterback to Protect Their Wealth.
Imagine you're 60 years old with $800,000 in your employee stock ownership plan (ESOP). Your company's stock has climbed 40% over the past three years. When you have the opportunity to diversify, you decide to wait. After all, why sell shares when they're performing so well?
Then disaster strikes. An unexpected event triggers a catastrophic 60% decline in your company's stock value. Your $800,000 ESOP balance plummets to $320,000.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
CLICK FOR FREE ISSUE
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Sign upInstead of retiring at 62 as planned, you're now facing a decade of additional work to rebuild what you've lost.
This isn't just fear-mongering. This is exactly what happened to ESOP participants at Silicon Valley Bank (SVB).
In March 2023, SVB went from announcing a $1.8 billion loss to watching $42 billion flee in bank runs to federal takeover in just 48 hours. Employees who'd been riding high on company stock watched their retirement plans disintegrate faster than they could process what was happening.
Here's the reality: When you're holding concentrated company stock and you have the ability to diversify, waiting because "things are going well" may be one of the most expensive mistakes you'll ever make.
About Adviser Intel
The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
Understanding your diversification rights
ESOP participants have specific diversification opportunities designed to help reduce concentration risk as retirement approaches. Once you reach age 55 (with at least 10 years in the plan), you can begin moving up to 25% of your ESOP into other investments all at once or over a five-year period.
Then at 60, you can diversify up to a total of 50%. This means if you're 60 and have never diversified, you could potentially move half of your ESOP holdings into other investment vehicles.
Here is an example. If you have a $600,000 ESOP balance at age 55, you could move $150,000 out of company stock and into something more balanced, such as an IRA with a stock or bond mutual fund. At 60, you could diversify another $150,000. That's half of your retirement savings protected from company-specific risk.
Many ESOP participants make costly mistakes because they don't understand the specific timing rules for diversification. There are limited windows with firm deadlines.
After you become eligible for diversification, you typically have a 90-day window following the plan year to notify your company that you want to diversify. Miss this window, and you may have to wait another full year.
This means you need to know your plan's schedule. Check with your ESOP representative to understand these critical dates. They're not negotiable, and missing them could prove costly.
The distribution deadline: Another layer of complexity
After you elect to diversify, there's another potential delay to receiving your payout. Companies have up to 180 days to actually distribute your money. So if you're counting on those funds for something time-sensitive, build in that buffer. I've seen people caught off guard by this delay, assuming the money would show up in weeks, not months.
For example, if you elect to diversify $200,000 at age 60 in January, you might not receive those funds until July or later. This gap could affect other financial decisions you're making.
The Kodak story: When waiting becomes devastating
Kodak dominated photography for 131 years. Employees believed in that legacy, maybe too much. Even as digital cameras ate into their market and the company clung stubbornly to film, ESOP participants held on. Surely Kodak would figure it out, right? The company had survived everything else.
By January 2012, Kodak filed for bankruptcy. People who could have diversified 50% of their accounts at 60 watched those shares become essentially worthless. The cruel irony? They had time.
Unlike SVB's 48-hour implosion, Kodak's decline unfolded over years. Participants could see the problems. But seeing problems and acting on them are two different things, especially when it means acknowledging that the company you've built your career around might not make it.
Your diversification roadmap: Actionable steps
Understanding these rules matters, but taking action matters more. Here's your road map for navigating diversification opportunities:
Immediate actions:
- Review your ESOP plan documents to understand your specific diversification schedule, election windows, and distribution timelines
- Calculate your current diversification eligibility based on your age and years of participation
- Mark your calendar with upcoming 90-day election windows so you don't miss critical deadlines
- Assess your current concentration risk. What percentage of your total retirement assets are in company stock?
Strategic planning:
- Consider diversifying the maximum allowable amount at each opportunity rather than waiting for "better" timing
- Coordinate diversification elections with your overall retirement income strategy and tax planning
- Plan for the potential 180-day distribution delay when making financial decisions
- Work with a financial adviser experienced in ESOP diversification rules
Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.
Ongoing management:
- Review your diversification strategy annually
- Don't let strong recent performance convince you to delay prudent diversification
- Remember that you can't time the market or predict company-specific events that could devastate concentrated holdings
Take action before your window closes
The participants at Silicon Valley Bank and Eastman Kodak didn't lack intelligence or financial sophistication. What many lacked was a clear understanding of their diversification rights and the willingness to act when those windows opened.
Your ESOP represents years of hard work and dedication. Transforming concentrated wealth into reliable retirement income requires understanding the diversification limits, timing windows and distribution deadlines that govern ESOPs.
This strategy may help preserve your retirement timeline and reduce the concentration risk that has derailed countless retirement plans.
If you're approaching age 55 or 60 with substantial ESOP holdings, don't wait for a crisis to think about diversification. The time to act is when you have options.
For readers looking to better understand how ESOP strategies apply to their own situation, Peter Newman created My ESOP Planner — a resource focused on helping employee-owners plan for diversification, retirement income and legacy decisions. Learn more at www.myesopplanner.com.
Related Content
- Why Company Stock May Be Riskier Than Employees Realize
- I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock Basket
- Employee Stock Options: Understanding the Benefits and Risks
- Should an ESOP Be Your Only Retirement Account?
- Five Things Employee Owners Need to Know About Their ESOP
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
TOPICS Adviser Intel Get Kiplinger Today newsletter — freeContact me with news and offers from other Future brandsReceive email from us on behalf of our trusted partners or sponsorsBy submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.
Peter Newman, CFASocial Links NavigationPresident, Peak Wealth Planning, LLCPeter Newman founded Peak Wealth Planning, LLC in 2014 to provide financial planning and investment management for individuals who built their wealth through ESOP participation, business ownership or real estate investing. He helps families diversify their concentrated stock, reduce estate taxes, preserve wealth and generate stable retirement income. Peter holds the Chartered Financial Analyst designation, considered by many to be the gold standard for investment management.
