From missing out on mega backdoor Roth opportunities to overconcentration risk and more
By Dan Goldberg, CFA, CFP®, CAIA, and Connor Hughes, CFP®, Diversified Portfolios Inc.
Key Takeaways:
Key Takeaways· What is a mega backdoor Roth? It’s an advanced retirement strategy that, in 2026, allows executives to contribute up to $72,000 in pre-tax and Roth dollars, but the mechanics are complex and often underutilized. (Note that the amount changes each year).
· What’s the biggest risk with company stock? When your career, income, and investments all depend on the same company, you’re not diversified—you’re overexposed. · Should I stay at my company for unvested stock? Not if it’s keeping you from living the life you want. Sometimes walking away from a vesting schedule is the smartest financial decision you can make. |
“I know this is all valuable. I just don’t know if I’m doing it right.”
Equity grants, enhanced retirement plans, health benefits, disability insurance—when you step back and look at it all together, executive compensation can represent hundreds of thousands of dollars in value over the course of a career.
The challenge is that these benefits rarely arrive as a clear, coordinated strategy. More often, they show up as a stack of documents, deadlines, and decisions that are easy to postpone or overlook.
That’s why so many of the executives we work with tell us they feel overwhelmed—not by any single decision, but by the sheer volume of decisions happening all at once. Our role is to be your thought partner through all of it, helping you see how the pieces connect.
Let’s walk through three of the most common (and expensive) mistakes we see with executive compensation, and the strategic moves that prevent them.
Mistake #1: Holding Too Much Company Stock
Company stock can feel different from other investments. You’re close to the business, believe in the mission, and see the growth potential. That emotional connection can make it easy to hold on longer than you should.
But markets shift. Industries change. Even strong companies face unexpected headwinds. When 25% or more of your net worth is concentrated in a single stock, especially the one that also pays your salary, you’re creating unnecessary vulnerability.
We recently met with an executive whose compensation package included substantial equity grants. Over several years, as the stock vested, they held onto it. The thinking made sense on the surface: “I see the numbers. The company’s doing well. Why would I sell?”
The challenge was that their career success, their annual bonuses, and now a significant portion of their net worth were all tied to the same company. If something went wrong (a downturn in the industry, layoffs, or simply a shift in company performance) they’d face a double blow.
Building Your Strategy Together
Together, we built a systematic divestment plan that gave them the protection they needed without making emotional, all-or-nothing decisions. As shares vest, we sell them thoughtfully, managing tax implications while building a diversified portfolio that isn’t dependent on any single company’s performance. They still benefit from future equity grants and bonuses, but now their family’s financial security isn’t riding on one company’s fate.
Mistake #2: Missing Out on the Mega Backdoor Roth Opportunity
Most people can contribute $23,500 to their 401(k) each year. But if your employer plan allows it, the mega backdoor Roth strategy lets you contribute up to $72,000 in 2026 through a combination of pre-tax and Roth contributions. Note that the maximum amount (known as the annual additions limit), changes each year.
The long-term impact is significant:
- Your contributions grow completely tax-free
- Roth withdrawals in retirement are also tax-free
- Over a career, this can shelter hundreds of thousands of dollars from future taxation
This strategy involves multiple moving parts, including after-tax 401(k) contributions, in-plan Roth conversions, and careful attention to contribution limits and timing. It’s genuinely complex, and most plan administrators don’t actively promote it. We regularly meet executives who have access to this benefit but simply don’t know it exists.
How We Serve as Your Decision Partner
We worked with a couple where both were high earners maxing out their standard 401(k)s and thought they were doing everything right. But when we reviewed his benefits package, we discovered he had access to after-tax 401(k) contributions that could be converted to Roth—a mega backdoor Roth opportunity worth potentially hundreds of thousands that had been sitting there, unused, for years.
Related: Click here to read “Beyond the Basics: Strategic 401(k) Maximization for Dual-Career Professionals”
Our role is to spot these opportunities in your specific situation, handle the technical complexity, and make sure you’re actually benefiting from what’s available to you, not just in theory, but in real dollars working for your family’s future.
Mistake #3: Letting the Vesting Schedule Control Your Life
Executive compensation packages often include “golden handcuffs,” where unvested stock or bonuses keep you tethered to a company even when you’re ready to move on.
We’ve seen the real cost of this in clients who stay in roles that drain them, who watch dream opportunities pass by, or who keep pushing back retirement “just one more year” to capture the next vesting date. Before they know it, five years have slipped by—years they could have spent doing work they love, spending more time with family, or simply living the life they’ve worked so hard to build. The financial gain rarely makes up for what gets left behind.
Designing Life Around Your Goals, Not Your Vesting Schedule
If you’ve reached your financial goals, and if you have the flexibility and resources to live the life you want, the unvested stock shouldn’t be the deciding factor.
Yes, companies structure vesting schedules specifically to retain talent. That’s their strategy. But your strategy should be built around what serves your life and your family, not what serves your employer’s retention goals.
We’re not suggesting everyone should ignore vesting schedules. If you’re happy in your role and the work is meaningful, then staying absolutely makes sense. The unvested equity is a bonus on top of work you’d choose to do anyway.
But if you’re staying only because of the stock, that’s worth examining. Sometimes the smartest financial decision is letting go of future compensation to gain something more valuable: time, health, freedom, or simply work you actually want to do.
For those who are ready to retire, or ready to transition to work that brings more meaning and satisfaction, we help run the numbers. Can you afford to walk away? What would you actually be giving up?
Looking at the Whole Picture Together
We recently worked with a couple where both were executives with complex compensation structures. They’d been successful by every conventional measure: promotions, raises, equity grants piling up year after year. But one spouse was sitting on a concentrated position in already vested company stock, with a large portion of their investable assets tied to a single ticker symbol. Their career success, bonuses, and a significant portion of their wealth were all tied to the same company, and that concentration risk had quietly become their biggest financial vulnerability.
The other spouse had access to a mega backdoor Roth opportunity in their employer plan but wasn’t taking full advantage of it, partly because the mechanics were genuinely complex.
We sat down with the couple and looked at both situations in tandem. Together, we developed a systematic approach to unravel his concentration risk, carefully managing the tax ramifications of selling while building a more diversified portfolio. At the same time, we worked through the sequencing and timing requirements to maximize her Roth opportunity, making sure everything was coordinated throughout the year.
The result:
- One spouse reduced their overexposure to a single company’s performance
- The other unlocked significant long-term tax savings they’d been leaving on the table
- Together, they gained the confidence that comes from knowing someone is looking at their complete picture—not just isolated pieces
That’s the kind of work we do, serving as your decision partner who understands your family’s unique story, helps you navigate complexity, and makes sure the technical details serve your bigger goals.
You’ve Earned This. Let’s Make Sure You’re Getting Everything You Deserve.
Executive compensation packages represent real value for you and your family, but only when every piece is working together strategically. The difference between leaving money on the table and capturing everything you’ve earned often comes down to having someone in your corner who sees the complete picture.
If you’re already working with us and have questions about your compensation package or recent changes to your benefits, we’re always here to talk through what’s new, what’s changed, and how we can adjust your strategy to keep everything working in your favor.
And if we haven’t met yet, we’d genuinely welcome a conversation about your own compensation picture. Are you holding too much company stock? Missing out on mega backdoor Roth opportunities? Staying in a role longer than you want because of unvested equity? Schedule a complimentary Financial MRI meeting, where we can walk through your complete compensation picture together.
