[USER]

Hi everyone, I’d appreciate your thoughts on my aunt’s financial situation. She recently reached out to me for advice since I’m considered the “financially responsible one” in the family (I’ve built a $300k net worth by age 27).

For some background, my aunt is 36, grew up in a low-income household like me, and worked at Tesla for six years back in 2015-2021.

She recently discovered that her old Tesla stock holdings are now worth $672,000. For additional context, she currently works as a Project Engineer earning a $65k salary.

She has $45k in her 401k, $5k in her Roth IRA, and no cash savings.

She consulted a few financial advisors who recommended liquidating the stock and reallocating the funds into mutual funds to diversify her portfolio.

While I agree that diversification is important, she’s hesitant to sell because she believes Tesla’s stock will continue to rise—her goal is to reach $1M before considering selling.

I’ve explained that this mindset can be risky and borders on gambling, emphasizing the importance of reducing her exposure to a single stock.

She’s also concerned about the tax implications of selling now. Additionally, the sudden realization of having $672k has left her feeling like the money is almost “unreal,” which might be contributing to her hesitation.

She also has $15k in credit card debt, her only debt, but she prefers to pay it off within a year using her current salary rather than selling any Tesla shares to cover it.

If you were in her shoes, what would you do with $672,000 in Tesla stock?

What are some low-risk, moderate-risk, and high-risk strategies or scenarios you’d recommend for her situation?

[Mike]

Perhaps convince her to at least try a modest liquidation. It sounds like the Tesla stock should all be long term cap gains, so pretty favorable tax treatment. Free up 50k.

Wipe out the credit cards, fund the IRA for 2024 and 2025 with something more diversified.

Live off some of the proceeds while maxing out 401k at current gig, again into something more diversified.

Baby steps.

[Chris]

If married, her LTCG tax rate is 0% up to almost 100k. Liquidate the stock slowly each year to fill the 0% tax rate.

If single, it is closer to 50k, so her income puts her over that limit.

[Judy]

Is this in a retirement account or another type of account? If retirement account, she can liquidate part of it within the plan.

If not, she can do little bits at a time.

I am guessing it’s a retirement account otherwise she would have been getting a statement or 1099 every year.

[Jamie]

I think her adviser is right. Should could liquidate a little each year to keep under the cap gain tax rate to keep the taxes low.

She’s going to have to pay them at some point so being able to use the many years she has to manage the taxes is to her advantage.

[Susan]

When I feel hesitant about making a change like this… sometimes it’s easier to convince myself to take half or at least some off the table instead of the whole thing. Additionally you do need to strategize the tax implications of that.

I would definitely start moving some shares into a Roth account at the max annual limit which will avoid the tax implications when you sell and convert to more balanced funds.

Perhaps do that for this year (she can contribute for 2024 &2025.) and also have the goal of paying down the credit card debt.

Then she could start methodically converting a certain amount each year, dollar cost averaging the sales and planning a strategy to pay the 15% capital gains tax on any that she converts outside of her Roth.

[Dara]

I’d sell some, max contribute to her 401k and Roth for both 2024 and 2025. That’ll diversify her some.

Next year she can do the same thing if she doesn’t want to sell Tesla now.,

[Aaron]

I don’t advise people who won’t educate themselves. They just want to emotionally pass the buck on their own decisions.

She should do nothing for 6 months and listen to an episode of a perosnal finance podcasts twice a week for the 6 months.

(Daily would
Be even better but probably won’t do that)

After this when she has a broader base understanding of what retirmemnt is supposed to look like what investing is supposed to look like etc then you can have a more productive conversation with her about what she should be doing.

She probably won’t do any of that and basically in my view since she won’t I would just minimize the time an energy I’d spend reviewing
It with her.

I’d just generally say what you already have and recommend a podcast to her and wish her well .

[Lisa]

She should absolutely be doing what that financial advisor suggested.

[Dean]

I work at Tesla and have been there since 2018. I just turned 34 and although financial advisors will tell me I am way too risky, I feel the Tesla stock will do amazing over the next 5-10 years.

I currently have 4M in tesla stock and don’t plan on doing anything with it until 2030, at which point I will diversify.

I am still maximizing my ESPP to buy more with every check, If I would have listened to the financial advisor I spoke to in 2019/ 2020 I would be down a lot of money today.

[Russell]

Tesla just reported their first drop in sales. Use that headline to point out it’s been a good gamble so far, but it’s time to collect her winnings and move to something safer.

She should sell half of it now, and half in 2026. That will keep her capital gains tax bracket at 15%.

Use the first sale to pay off her credit card debt now. Then put the rest into a low expense index fund.

[Ramiro]

I agree liquidate the stock.

Then but MAGS/Magnificent Seven Tech stocks that includes Tesla which can prove loyalty at work.

[David]

Honestly, her resistance to doing anything with the Tesla stock is a blessing. Your aunt needs to increase her general financial competence – she’s got a load of consumer debt and is more than a decade behind in traditional retirement savings – ignoring the value of the Tesla stock for now.

I would suggest starting with some Dave Ramsey type stuff to get the debt under control, emergency fund built-up, and her 401k & Roth IRA funded.

When she proves she has control of the spending and debt problem, slowly diversifying through small stock sales as Tesla hits (hopefully) new peaks is possible.

Obviously try to minimize the cap gains tax on those sales. Continuing to hold an outsized portion of her net worth in a single company isn’t the worst thing if she’s able to fund a diversified retirement portfolio and otherwise put her financial house in order.

[Cecily]

I agree with selling off slowly to minimize capital gains and diversify.

I’m assuming she’s in CA and the state taxes are high for that so she’s going to have to trust that the taxes she pays to sell off stock will be recovered by growth eventually.

[Shannon]

It sounds like she is unwilling to accept the sound advice she’s already gotten. I’d keep it short and say you agree with the advisors.

You’re happy to explain why if she’s interested and to give some logistical advice about how to implement it.

But if she has some psychological block against diversifying and taking advice, she’s going to need to work through that first.

[Chris]

If your aunt were a typical shareholder, the advice she’s receiving might be worthwhile. But she has a unique advantage over the rest of us: she has actually worked at Tesla, so she has insight into how the company is run, as well as its prospects for the future.

If she truly believes that Tesla will grow, she shouldn’t sell the stock.

I personally wouldn’t sell any of it, for various reasons. But if she must, she doesn’t have to sell all of it.

She could even liquidate it a little at a time to keep her capital-gains tax liability low.

[Amy]

Are the shares in a retirement plan acct. If so, there won’t be any tax. Like a pension type acct from the company? Anyway she should definitely diversify.

My opinion is that Tesla is at an all time high right about now due to Musk and Trump getting along so well.

But that will likely change lol. But definitely don’t diversify into mutual funds.

Possibly etfs but mutual fund fees will just kill you. I would do dividend paying blue chip stocks.

If the funds remain within the account ,if it is a pension account, then you can buy and sell whatever without tax. Only taxed if the funds come out of the acct

[Angie]

My goal would be to transfer those funds into an ETF that follows the S&P500 or the NASDAQ100.

To reduce the tax hit, she could do it over a few years, but as you said, she gambling by leaving it with TESLA.

I read that they are facing a lot more competition overseas and will likely go down in the next few years.

[Jeannine]

I would not sell Tesla stock – there are different paths to wealth. Although, a lot of advice here is traditionally sound, $TSLA should do very well in the next 5 years…

It is a single stock but by being in it, she is diversified, as the company is a Car company, energy company, AI company, solving Full Self Driving is closer than ever, Robotaxi rollout in 2025 and humanoid robot in the next few years… etc…

She should eliminate the CC debt as quickly as she can and prioritize funding the Roth IRA…

[Susanne]

I’d take some % of profits off the table and put in a ROTH IRA (so she won’t pay taxes on the gains – could consider that as wiping out cap gains she has the pay now) into an index ETF – part S&P 500, part tech QQQ).

NOT mutual funds!!! And lucky the advisor isn’t trying to sell her an annuity!

[Gloria]

I’d sell the stock in the most tax-efficient way possible. Let her keep 10% of her portfolio in stock if she would like. Diversify with low-cost index funds, fully found a Roth IRA every year as well as any 401(k).

If her company allows after-tax contributions to a Roth Ira after she maxes out her basic 401k contribution limit, I would do that too. Mega backdoor Roth.

depending on her tax bracket she may want to do a 401(k) Roth.

[Crystal]

It’s possible taxes will be automatically taken out when selling it just depends on the program. When I had stocks with a company that were given to me (not espp) the taxes came out and I was left with the proceeds.

So, if she decides to sell she will need to understand that first and act accordingly.

Other points – she has no savings and credit card debt which are concerning which indicate paycheck to paycheck.

I would sell and fund an emergency fund first, pay off the cc debt and put the rest in total stock market fund or etf

Lastly she needs to educate herself in budgeting and other aspects so she doesn’t go back into debt and doesn’t go and spend the emergency fund when ever she can’t pay her bills.

[Tom]

Three words: Full Self Driving. It’s going to be huge and Tesla is way ahead of everybody else. I think it still has a lot of upside potential.

Yes, there are risks involved with holding it, and my financial situation is far different from anybody else’s, but right now, I would hold the stock.

Of course, I’m just some random guy on the Internet.

Keep that in mind! Everybody has to make their own decisions based on their personal risk tolerance levels.

[Rob]

She needs to diversify but she also likes the stock so split the baby–sell half this year and make a decision next year on the other half.

Selling just half should keep her solidly in the 15% capital gains tax rate.

Unless she’s retired/unemployed (or soon to be), she’s unlikely to be able to get the 0% rate so tax implications of selling the big chunk are a non-issue.

[Brian]

I just went through a similar situation but with NVDIA which I started buying in the late 90s. In mid 2024 it was all of a sudden about 12% of my portfolio.

Even at 12% I felt that was too much exposure to a single stock (my cost basis was $2.42!) So, despite not wanting to pay taxes I still sold 80% of the stock and redistributed into my portfolio while retaining 20%.

In your Aunts scenario, I would suggest selling 80-90% of the stock, pay the capital gains tax and put in index fund to start.

She will still have some Tesla stock but likely be in safer long term situation. Or, gamble it all and win/lose big. Good luck!

[Author]

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