I have stock awards in my companies stock with shares going back 10 years. My oldest shares have a cost basis $190 less than my most recent shares. My stocks are roughly spread over the entire decade with a regular upward trend in the stock price. To date, when I sell, I derive my target payout by selling the stocks that I have the smallest capital gains on (i.e. more recent, though still long term). This has resulted in my portfolio being weighted towards stock with a lot of gains. When these are eventually sold, there will be a larger tax hit due to the increased gain. I am currently wondering if this has been the best strategy or if I should have been selling older ones and taking the tax hit as I go. Note that I am in my early 50's, and I am wondering if maybe it would be better to wait to sell these until after I retire (which I expect to do in 7 years) when I will not have income from working. thanks, ~john
The general theme would be to sell the positions with the largest amount of taxable gain when your tax bracket is the lowest. For most people, that's after retirement. Another factor to consider is that selling the larger gain positions results in a larger tax bite and that reduces your capital for reinvestment. Because of this, since my annual income is dependent on each year's trading so it's variable. In lower income years, I sell some positions with larger cap gains. In higher income years, I sell less or nothing.
