Case Study: P&G Early Retirement Strategy
A thoughtful exit before 55
In this hypothetical case study, we explore a multi-layered strategy to help P&G leaders bridge the gap to age 59½ with tax-aware strategies. By integrating NUA planning, exchange funds, and direct indexing, the approach creates immediate liquidity from concentrated stock while leveraging a Solo 401(k) to protect long-term wealth from high taxes and early-exit penalties.
At age 53, Martin made the decision to leave P&G and step into a new, self-employed chapter of his career. While the move created flexibility and opportunity, it also introduced complexity—particularly around accessing retirement assets before age 59½ and managing multiple concentrated P&G stock positions accumulated over many years.
The Situation
Leaving P&G earlier than planned
Martin's priorities were clear:
- Create liquidity prior to age 59½ without unnecessary penalties
- Reduce concentrated P&G stock exposure in both retirement and non-retirement accounts
- Improve tax efficiency and long-term portfolio alignment
- Preserve flexibility for charitable giving and future planning
Because Martin left P&G before age 55, traditional distribution strategies would have triggered a 10% early-withdrawal penalty in addition to ordinary income taxes. At the same time, a large portion of his net worth—inside and outside retirement accounts—was tied to P&G stock, creating both tax risk and concentration risk.
The solution required coordinating multiple advanced planning strategies across retirement plans, taxable accounts, and charitable planning—while keeping flexibility front and center.
The Challenge
Access, concentration, and taxes (without the Rule of 55)
We developed a multi-year transition plan to "level" his income and optimize his benefits:
NUA Planning with a Frank Duke Rollover
We implemented a Net Unrealized Appreciation (NUA) strategy to move Martin’s low-basis P&G preferred stock out of his retirement plan and into a trust account. This allowed future access before age 59½ and converted decades of appreciation from ordinary income treatment to long-term capital gains.
Tax-Efficient Diversification Using an Exchange Fund
Instead of a traditional IRA rollover, we executed a Net Unrealized Appreciation (NUA) strategy for his PST. By moving his most highly appreciated P&G shares into a brokerage account, we "locked in" long-term capital gains rates on the growth, rather than the much higher ordinary income rates. Martin also held a significant amount of P&G stock outside of retirement accounts. Rather than triggering capital gains through outright sales, we diversified a portion of this position using an exchange fund.
This allowed Martin to exchange P&G exposure for index-based returns on a tax-deferred basis. After the required holding period, he will receive a diversified basket of stocks, which can then be transitioned into his direct indexing portfolio.
Direct Indexing for Ongoing Tax Alpha
We evaluated Martin’s existing non-retirement investments against multiple benchmarks and found opportunities to improve both alignment and tax efficiency. By transitioning to a direct indexing strategy, we repositioned his portfolio to track a targeted index while generating ongoing tax-loss harvesting—creating year-in, year-out tax alpha to support continued diversification.
Stock Option Cleanup and Exit Planning
Martin still held stock options dating back to his 2017 STAR award—some nearing the final years of their life. We established clear price targets and an exit plan to begin working out of these options, reducing the risk of expiration and aligning the strategy with his broader diversification goals.
Planning for Self-Employment and a Solo 401(k)
With Martin now self-employed, we helped establish a solo 401(k), allowing him to continue tax-advantaged retirement savings while creating additional planning flexibility in future years.
Strategic Charitable Giving with Low-Basis Stock
Finally, with low-basis P&G stock now held outside of retirement accounts, we ran a detailed analysis to determine the appropriate amount to contribute to a Donor-Advised Fund at Schwab—based on Martin’s itemized deductions and projected AGI. This allowed him to support charitable goals while improving overall tax efficiency.
The Strategy
Coordinated planning across retirement, taxable, and charitable assets
By coordinating NUA planning, penalty mitigation strategies, tax-efficient diversification, and direct indexing, Martin gained access to assets prior to age 59½, significantly reduced concentration risk, and improved the long-term tax efficiency of his portfolio.
Just as importantly, his plan remains flexible—supporting future charitable giving, ongoing diversification, and continued retirement savings as his next chapter unfolds.
The Outcome
Flexibility today, efficiency tomorrow
Disclaimer: This case study is hypothetical and for illustrative purposes only. It does not represent the experience of any specific client. Individual results vary based on years of service, specific compensation structures, and tax laws at the time of retirement. Strategies like NUA involve complex tax considerations and the immediate payment of taxes on the cost basis. Diversification does not guarantee a profit or protect against loss. Always consult with a CFP® professional and tax advisor regarding your specific situation.
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