Understanding Severance Packages, Part 3: Stock Awards and Investment Portfolios

Whether it comes after a year, a decade or a whole career, being dismissed from your job is never easy. Routines are upended, relationships are disrupted, and your sense of identity may take a hit. Your next step could be a job in the same field, a new career path, an entrepreneurial project or perhaps even retirement. But while you think it over, you’ll also have some important financial issues to consider.

Welcome to the third article in a five-part series about severance-related issues that you should know about if you ever find yourself in this challenging position. Today, we look at the considerations surrounding stock awards and your investment portfolio.

Managing your stock awards

Many companies offer long-term incentive compensation to key employees. These awards often consist of stock options, restricted stock units (RSUs), and/or performance-based restricted stock. For some people, stock awards represent one of the largest assets on their personal balance sheet. That’s why creating a strategy to unwind these positions thoughtfully is essential once you learn your role is being eliminated.

Award agreements typically include vesting schedules, and in a severance situation, vesting may be accelerated, prorated, or forfeited depending on your plan documents and severance package. Some unvested awards may expire with no value. Understanding these terms early is key to maximizing what you retain.

When restricted stock or performance-based awards vest, the fair market value of the shares is taxed as ordinary income and reported on your pay stub. Your holding period begins on the day the shares are released to you. As a result, selling immediately after release typically creates minimal capital gains.

If you sell within 12 months of the release date, any gain is taxed as short-term capital gains (the same rates as ordinary income). Waiting at least 12 months allows any appreciation to qualify for long-term capital gains rates.¹

Finally, consider the impact that newly released company stock may have on your overall investment concentration. Particularly if you are approaching retirement, allowing a single company stock to exceed a meaningful portion of your net worth can introduce avoidable risk. Many investors choose to limit their exposure to any single stock—often to no more than 10% to 15%—to maintain proper diversification.

Maintain an appropriate investment portfolio

A well-constructed investment portfolio is essential to long-term financial success and should reflect both your goals and your stock-award exposure. Your portfolio should be designed around your cash-flow needs, time horizon, risk tolerance, and tax considerations. Discipline and a long-term mindset help avoid reactive decisions that can undermine your progress.

A strategic asset allocation is the foundation. While employed, much of your investable wealth may have been concentrated in your company’s 401(k) plan, which often includes a limited menu of investments. After separation, you may have the ability to roll your retirement assets into an IRA, expanding your investment universe and allowing a more customized allocation.

That flexibility is valuable, but might also feel overwhelming. A wealth advisor can help evaluate the choices, coordinate your retirement and taxable accounts, and design a portfolio that balances growth, stability, tax efficiency, and liquidity needs at this stage of your life.

We’re here to help

Over the years, our team has helped many executives and professionals navigate the complicated and often overwhelming severance process. We’ll develop a personalized strategy, including investment recommendations, to help you make the most of your severance package and position your finances for long-term success.

If you have questions about your company stock awards or how to restructure your investment portfolio after leaving your employer, please contact a Corient Wealth Advisor today.

¹ https://www.irs.gov/taxtopics/tc409?

ABOUT THE AUTHOR

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5039531 – December 2025