Diversifying my ESOP account.

[5.56Geo]

I have worked for a true privately owned ESOP (Employee Stock Ownership Plan) company for 21 years. I am 57 and I just transfer/diversified 25% of my ESOP stock into an IRA account. I am leaving IRA with the same investment managers of ESOP account for the sake of ease. I am eligible in making 3 more yearly diversification, 25%, 25%, and 50%. Each diversification can be up to 25% of the remaining amount, and 50% the last year. My ESOP stock is not publicly traded and valued once a year. It increased in value 8% last year. Each year our company deposits a percentage of our gross income depending on how much our company makes. Last years, 2025, contribution to the ESOP was 11% of my gross yearly income.

I was conflicted on whether to diversify or keep it in the ESOP. We did extremely well during COVID. One year our ESOP stock went up in value 27%, and the following year it went up 48%! Getting close to my retirement years I feel I need to take out as much as I can out of the ESOP before it gets locked up for 5 years. It’s my understanding that what ever is left in the ESOP at retirement will be untouchable for 5 years. I would like to retire at 60, or no later than 62.

Any advice on future diversifications? It’s scary because it’s real money. Is anybody in a similar position, what did you do? Thanks guys -George

 

[ikeo1]

I have worked for a true privately owned ESOP (Employee Stock Ownership Plan) company for 21 years. I am 57 and I just transfer/diversified 25% of my ESOP stock into an IRA account. I am leaving IRA with the same investment managers of ESOP account for the sake of ease. I am eligible in making 3 more yearly diversification, 25%, 25%, and 50%. Each diversification can be up to 25% of the remaining amount, and 50% the last year. My ESOP stock is not publicly traded and valued once a year. It increased in value 8% last year. Each year our company deposits a percentage of our gross income depending on how much our company makes. Last years, 2025, contribution to the ESOP was 11% of my gross yearly income.

I was conflicted on whether to diversify or keep it in the ESOP. We did extremely well during COVID. One year our ESOP stock went up in value 27%, and the following year it went up 48%! Getting close to my retirement years I feel I need to take out as much as I can out of the ESOP before it gets locked up for 5 years. It’s my understanding that what ever is left in the ESOP at retirement will be untouchable for 5 years. I would like to retire at 60, or no later than 62.

Any advice on future diversifications? It’s scary because it’s real money. Is anybody in a similar position, what did you do? Thanks guys -George

For ESOP if it’s not on the market it’s not Liquid. If you want to be conservative you can just put it in the SPY or hold a % in a money market account for the time being. Leave the main balance to continue to continue to grow but take some off the table to make it liquid. You can do 10-20% if you made a good amount already that won’t hurt but will be something to diversify into. Everything is a little scary right now.

For me having a good stash is important and just take care of the fundamentals.

 

[RustyIron]

Any advice on future diversifications? It’s scary because it’s real money.

It's scary because you're approaching the end of the road, and there's little time remaining to correct blunders. You mentioned a few good years for the company, so now might be the wise time to take some of it off the table reinvest in a way that provides some diversity. Excessive concentration worries me. I can't give you specific advice, but I'd suggest finding a different investment manager to handle your IRA. Diversification is important in all areas of finance, and you might find that you like one manager better than the other. Go with one of the big firms. The level of service you receive will be proportional to the stack of cash you want to hand them, but they all have experience in dealing with customers with different needs.

 

[5.56Geo]

I guess the million dollar question is... Where will the IRA/ESOP be in 5-7 years when I need it? When I started 21 years a go the company stock was valued at $27 a share, now (2025) it was valued at $147. I have to leave it for 1.5 years where the IRA at or I incur some kind of penalty. I'll transfer it over to one of the other big investment firm after, @ RustyIron solid advise. Thanks guys. -George

 

[Trapper]

After a number of bank buy outs and mergers, I found myself with a large firm. Tried to make the most out of it, connected with a local advisor but found the service provided was severely lacking. The service received was proportional to the amount invested, under $1 million, they were slow to respond, sent pod cast links, and pushed products from their firm which had high expense rations and management fees. At age 50 I created a living trust for protection. Then researched local independent firms, met face to face with representatives and went with the one who best fit my investing goals. Now I deal with one person, communication is better, performance is much better. Fees are transparent, they charge a fixed percentage, purchase mostly stocks and ETFs which moved me away from mutual fund management fees and expenses. I’m planning to retire in seven years and feeling much more comfortable.
In retirement, I plan to remain in moderate risk investments and will work with my advisor to determine when to start withdrawing from my IRA, Roth IRA, and brokerage accounts.