IBM fell roughly 30% in one week despite raising its dividend and beating Q1 earnings, exposing concentration risk retirees mistook for safety.
Selling a large appreciated stock position can push provisional income past thresholds that make up to 85% of Social Security benefits taxable.
No single stock should exceed 5 to 10% of a retirement portfolio, and income planning should be anchored by Social Security's inflation-adjusted guarantee instead.
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Picture a retiree who spent three decades accumulating IBM (NYSE:IBM) shares in a taxable brokerage account. The stock was supposed to be the boring part of the plan. A Dividend Aristocrat. Thirty-one consecutive years of dividend increases. Quarterly checks paid every single quarter since 1916. The kind of holding a spouse could inherit without needing to learn about markets.
On July 14, shares plummeted roughly 25%, the steepest single-day drop in the company's history, outdoing even the Black Monday crash of Oct. 19, 1987, when IBM stock fell 23%. Year to date, the stock is down about 26%. Earnings were fine. First-quarter adjusted EPS of $1.91 came in above expectations, revenue grew 9%, and in April the dividend was raised yet again. The stock crashed anyway, on concerns about AI capital spending crowding out traditional IT budgets. In a letter to investors, CEO Arvind Krishna admitted "this quarter we faltered."
On one Reddit thread with nearly 700 upvotes, an investor asked whether this was a company stumble or a sector-wide reset. Every retiree who leaned on IBM for income should be asking the same question about their own plan.
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Reliability of past dividend payments tells you nothing about the share price at which you can sell when you actually need the income. If IBM was 30% of the portfolio and it drops 30%, the retiree just lost 9% of their entire nest egg in a week, on a holding they classified as "safe." That is the mechanic behind sequence-of-returns risk: a crash while you are drawing income permanently shrinks the base that produces future income.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
