Managing Concentration Risk After NUA as a P&G Retiree
/September 23, 2026
Net Unrealized Appreciation (NUA) solves a tax problem for P&G retirees. It moves PG stock out of the PST (Procter & Gamble Profit Sharing Trust) into a taxable brokerage account, where the appreciation is taxed at long-term capital gains rates instead of ordinary income rates. What it doesn't solve is concentration. The day after the distribution, you own exactly as much P&G stock as you did the day before. It just sits in different accounts.
That shifts the planning question. It's no longer whether to use NUA but how to manage a large P&G position spread across a taxable account, an IRA, and often a set of stock options, each with its own tax rules. There is no single right answer. The right pace and mix depend on your spending, your income in the years ahead, your other assets, and how you feel about the stock. This article walks through how we think about that unwind, using a worked example to show the trade-offs. If you are still deciding whether to use NUA or how much stock to elect, start with our NUA decision framework. If you are still working at P&G, our article on managing concentrated P&G stock positions covers the years before retirement.
Count Every Share, Not Just the NUA Shares
Most concentration conversations focus on the NUA block because it's the largest and the most visible. The risk, though, lives in your total P&G position, wherever it's held.
For P&G retirees, that position is built into the plan structure. Before age 45, vested PST participants can invest only in five core options: the money market fund, two bond index funds, the real return fund, and P&G stock. At 45 the full menu opens, but at least 40% of the PST must stay in P&G stock. Years of that structure, plus Savings Plan holdings and LTIP grants, leave many retirees with P&G as their largest position by a wide margin.
After the distribution, that exposure typically lands in a few places:
The taxable NUA block, usually the largest piece
PG stock in your IRA, from the Frank Duke rollback and any common shares or Savings Plan stock you rolled over instead of electing NUA
Unexercised LTIP stock options, which stay with you after retirement and carry P&G exposure until you exercise them or they expire
Any P&G shares already in a brokerage account, including stock bought through P&G's employee stock purchase program
Loyalty to the company's stock runs deep, and for many retirees the shares represent a career's worth of work. We respect that connection. The goal isn't to sell every share. It's to bring total exposure to a level your retirement can absorb if P&G has a bad stretch, since even a stable consumer staple can trail the broader market for years at a time.
What the NUA Shares Look Like After the Rollback
In most P&G distributions, the Frank Duke rollback returns value at least equal to the cost basis to an IRA within 60 days, bringing the distribution-year tax on that basis to zero. The trade-off is that the shares left in the taxable account carry essentially zero basis. Nearly their full value is taxed as capital gain when you sell, and the NUA portion counts as long-term no matter how soon after the distribution you sell. Households that decline the rollback pay ordinary income tax on the basis up front and keep that basis in the shares.
The shares also bring a new source of taxable income. In a taxable account, every quarterly dividend is taxable in the year it's paid, and it adds to the income picture you are managing.
A Worked Example: $1.7 Million of P&G in a $5 Million Portfolio
Consider a 62-year-old retired couple filing jointly with a $5 million portfolio. They elected NUA on 8,276 preferred shares worth $1,200,020 at $145 per share, with a cost basis of $6.82 per share ($56,442). Using the rollback, they returned 420 shares ($60,900, a small cushion above the basis) to an IRA. They also rolled 1,580 common shares to the IRA instead of electing NUA on them.
Their P&G exposure now looks like this:
Taxable NUA shares: 7,856 shares, $1,139,120, essentially zero basis
IRA: 2,000 shares, $290,000
LTIP stock options: 12,000 options at an average grant price of $120, worth about $300,000 in-the-money at $145
That's roughly $1.73 million, or 35% of the portfolio, in one company. The NUA shares alone also pay about $34,200 a year in dividends at the current quarterly rate of $1.0885 per share, all of it now taxable.
Start With the IRA
The IRA shares are often the easiest place to begin, because selling them costs nothing in tax. Proceeds stay inside the IRA and are taxed only when withdrawn, the same as any other IRA dollar.
In our example, diversifying the 2,000 IRA shares cuts total P&G exposure from about $1.73 million (35% of the portfolio) to about $1.44 million (29%) without a single taxable sale.
How quickly to sell comes down to comfort. Some retirees sell the IRA shares immediately. Others prefer a reverse dollar-cost averaging approach, selling in equal pieces over several months so no single day's price decides the outcome. There's no tax reason to wait inside an IRA, and spreading sales doesn't improve expected returns. What it does is make the transition easier for someone who has held P&G for 30 years, and that has real value if it keeps the plan on track.
Stock Options: Exposure on a Clock
LTIP and STAR Award stock options are easy to leave out of the concentration picture because they don't show up as shares. They should be counted. Options awarded during your career stay with you after retirement, and each grant has a 10-year life from its grant date. Until you exercise or it expires, its value rises and falls with PG.
Options also move faster than the stock. In our example, the options are worth $25 each above the $120 average grant price. A 10% drop in PG, $14.50 a share, cuts their value from $300,000 to $126,000, a 58% loss. Grants near their grant price can lose most of their value in an ordinary pullback.
Because P&G's options are non-qualified stock options, the spread at exercise is taxed as ordinary income. That makes exercise timing part of the same tax plan as your NUA sales. For some households, exercising in years with lighter income and selling the shares at exercise reduces both concentration and tax drag. Others hold longer-dated grants to keep some upside in the stock. The expiration dates and your income picture usually decide which approach fits. Our LTIP article covers how the options work.
The Taxable Shares: Spend Them on Your Schedule
Once the IRA is diversified and the options have a plan, the taxable NUA block is often the concentration households are most willing to carry for a while. Those shares can become a funding source, drawn on for lifestyle needs such as annual spending, a home project, or help with grandchildren's education, and trimmed further in tax years that make sense. How much to carry, and for how long, varies a great deal from one household to the next.
Tax alone isn't a strong reason to hold them, though, and it's worth knowing why. With about $150,000 of other taxable income in 2026, selling all 7,856 shares in one year would put roughly $463,700 of gain in the 15% bracket and $675,420 above the $613,700 threshold in the 20% bracket, for about $204,600 in federal income tax. Spreading the same sales evenly over four years keeps every dollar in the 15% bracket, for about $170,900. (These figures use 2026 federal income tax brackets and ignore dividends and price changes.)
The difference is about $33,800, roughly 3% of the position's value. A 10% decline in PG would cost this couple more than three times that on the taxable shares alone. If you want to reduce the block faster, the tax cost of doing so is smaller than most people expect.
The better reasons to pace sales are these:
Spending needs. Selling what you need, when you need it, keeps the rest of the portfolio working.
Low-income years. The years between retirement and Social Security, and before required minimum distributions begin at age 75 for anyone born in 1960 or later, can let you realize gains at 15%, or even 0% (up to $98,900 of taxable income for joint filers in 2026).
Medicare premiums. IRMAA surcharges on Part B and Part D are based on income from two years earlier, so large sales from age 63 onward can raise premiums once Medicare begins at 65.
Our distribution strategies article covers how these sales fit alongside IRA withdrawals and other income.
Other Ways to Reduce the Position
A few other tools can play a role depending on the household:
Donor-advised fund gifts. If you give to charity, donating shares instead of cash reduces the position without a sale. The deduction is generally the shares' fair market value, subject to income limits, and the embedded gain is never taxed. See our NUA and donor-advised fund case study.
Gifts to adult children. Gifting shares to children in a lower bracket can shift the gain to a lower rate, since the zero basis carries over with the gift. The kiddie tax can apply to children under 19 and full-time students under 24.
Covered calls and collars. Selling covered calls against the shares generates premium income, but it caps your upside and offers no protection if PG falls, and shares that are called away count as a sale. A collar pairs a sold call with a purchased put to set a floor under the position, though a collar set too tightly can be treated as a sale for tax purposes.
Exchange funds. An exchange fund accepts concentrated stock in exchange for an interest in a diversified partnership and defers the gain. It typically requires a seven-year commitment, carries eligibility requirements and fees, and doesn't accept every stock.
Putting It Together
For P&G retirees, NUA is where the concentration plan starts, not where it ends. A sequence we often start from looks like this: diversify the IRA shares first, because they're free to sell; put the options on a schedule before their expiration dates set one for you; then let the taxable NUA shares fund your lifestyle and shrink in the years when the tax picture is favorable. Treat it as a starting point. A retiree with a large pension and no need for portfolio income may be comfortable holding more P&G for longer. One whose spending leans on the portfolio, or who holds a large block of options near expiration, may need to move faster. Every household's connection to P&G stock is different, and the plan should reflect your numbers and how much a drop in PG would change your life.
Frequently Asked Questions
Should I sell all my P&G shares right after NUA?
It depends on your situation. Many households start by diversifying IRA-held shares, which carry no tax cost, then use the taxable NUA shares for spending and sell more in favorable tax years. Selling the whole taxable block in one year costs less extra tax than most people expect, so it can be a reasonable choice when concentration is the bigger worry.
Do NUA shares have to be held for a year before I sell them?
No. The NUA portion of the gain is taxed as long-term capital gain whenever you sell, even the day after the distribution.
Does the Frank Duke rollback lower the tax when I sell my NUA shares?
No. The rollback reduces tax in the distribution year by offsetting the cost basis. The shares you keep carry essentially zero basis, so nearly their full value is taxed at long-term capital gains rates when you sell.
Can I use NUA if I only want to distribute part of my PST?
Not in the year you use NUA. The lump-sum rules require your entire PST and Savings Plan balances to leave the plans within one tax year, but within that distribution you choose how many shares go to a taxable account and roll the rest to an IRA. A partial distribution taken after you separate uses up that triggering event, but reaching 59½ creates a new one for the remaining balance; see Understanding NUA.
Should my stock options count toward my P&G concentration?
Yes. LTIP options stay with you after retirement and carry P&G exposure until you exercise them or they expire, and their value moves more than the stock in percentage terms. Count their in-the-money value alongside your shares, and plan exercises before each grant's 10-year expiration.
How do I know if my P&G concentration is too high?
Add up your P&G holdings across the taxable account, IRAs, the Savings Plan if you still hold it, any brokerage shares, and stock options. The right level depends on your spending needs, your other income, and how much a large drop in PG would change your plans, which is why we set a target for each household rather than applying a single rule of thumb.
Disclaimer: The information in this article is for educational purposes only and is not intended as personalized financial, investment, tax, or legal advice. The strategies discussed may not be suitable for everyone, as individual financial goals, risk tolerance, and circumstances differ. Consult a qualified financial advisor, tax professional, or legal advisor before acting to evaluate your specific situation. The example presented is hypothetical and does not represent an actual Vaultis Private Wealth client. Past performance does not guarantee future results, and all investments involve risks, including the potential loss of principal. Tax laws and regulations may change, potentially affecting the strategies described; this content reflects laws as of September 23, 2026. Vaultis Private Wealth does not guarantee the accuracy, completeness, or outcome of this information and is not affiliated with Procter & Gamble, which does not endorse this content.