3M Employees: A Smarter Way to Prepare for 2026 Taxes in Retirement

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“Many 3M employees are surprised to learn that long-term success can create significant tax friction in retirement. Proactive modeling and coordinated planning can help 3M employees manage embedded gains thoughtfully and avoid letting a single tax year dictate their financial flexibility.” – Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

“For 3M employees nearing retirement, the real challenge often isn’t market performance but how and when taxes are triggered. Thoughtful coordination and forward-looking tax modeling can help 3M employees access their savings with greater flexibility and fewer surprises.” – Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. How long-term investment growth can create unexpected tax challenges for 3M retirees.

2. How a tax-aware long-short strategy can generate losses to help offset capital gains.

3. When this strategy may be appropriate—and the risks and tradeoffs to consider.

Mary and Joe* did everything thoughtfully.

They refrained from making rash decisions during market turbulence, invested patiently, and saved consistently throughout their careers. Like many 3M employees who have spent decades building wealth through disciplined investing and retirement plan contributions, their portfolio grew significantly by the time they retired in their late 60s.

There was only one issue. They had substantial unrealized capital gains on nearly everything they owned.

As we began outlining their retirement income plan—including withdrawals for living expenses and a long-planned home renovation—the numbers became sobering. Selling approximately $300,000 in appreciated investments could have triggered capital gains taxes close to $50,000, depending on federal and state tax brackets.

For reference, long-term capital gains are taxed at 0%, 15%, or 20% federally depending on taxable income, with an additional 3.8% Net Investment Income Tax (NIIT) potentially applying to higher-income households.

Mary summed it up perfectly: “On paper, we feel rich, but it costs money to touch the money.”

Many 3M employees transitioning into retirement are surprised by how common this situation can be.

When a Successful Investment Becomes a Tax Challenge

Long-term investors frequently accumulate concentrated positions with significant embedded gains. For 3M employees, this may include long-held company stock, taxable brokerage assets, or other investments that have appreciated steadily over time.

The longer assets are held—and the stronger they perform—the higher the eventual tax liability when they’re sold.

That creates a difficult trade-off in retirement:

• - Sell investments and trigger a substantial tax bill.

• - Or hold them longer than desired and delay using your own money.

Traditional tax-loss harvesting can be helpful earlier in an investment’s life. But after years of strong markets, many portfolios simply don’t have meaningful losses left to harvest.

That’s exactly where Mary and Joe found themselves.

Introducing a Tax-Aware Long-Short Layer

Instead of immediately selling appreciated assets, we implemented a tax-aware long-short strategy (TALS) inside their taxable account.

To be clear, this is not market timing or speculation. It is disciplined tax management.

Here’s how it worked: Their core long-term holdings remained intact. Then, using a modest amount of borrowing within the account, we added a long-short overlay that included:

• - Buying stocks expected to perform well

• - Shorting closely related stocks expected to underperform

Because these positions were highly correlated—often within the same industry—they tended to move together.

When markets rose:

• - Long positions gained

• - Short positions declined in value

• - Those short-side losses created tax-deductible losses

When markets fell:

• - Long positions declined

• - Short positions gained

• - Losses were again generated from one side of the structure

Despite market movement, Mary and Joe’s overall portfolio still grew modestly during the year. More importantly, it generated over $60,000 in usable tax losses, which they used to offset their capital gains.

IRS rules allow capital losses to offset capital gains dollar-for-dollar, with up to $3,000 of excess losses deductible against ordinary income annually. ¹  Those losses allowed them to carefully sell appreciated holdings to fund retirement goals while significantly reducing their capital gains exposure.

Joe put it this way: “It didn’t feel like a loophole. It felt like we were finally using the tax code intentionally.”

For 3M employees with sizable taxable accounts or concentrated holdings, thoughtful tax coordination can make a measurable difference.

The Advantages and Tradeoffs

It’s important to understand that this strategy does not eliminate taxes. It primarily changes the timing of when they are paid.

Over time, the long-short layer itself may build unrealized gains. If fully liquidated later, those gains may be taxable.

The value comes from:

• - Managing marginal tax brackets

• - Reducing the likelihood of a single-year tax spike

• - Preserving flexibility

• - Improving after-tax compounding

Mary and Joe weren’t trying to permanently sidestep taxes. They simply wanted to access their savings without losing $50,000 in one year.

Who This Strategy May Be Appropriate For

A tax-aware long-short strategy is generally suited for higher net worth investors facing substantial embedded gains and one or more of the following:

- Concentrated stock positions

- Large taxable brokerage balances

- Required asset sales to fund retirement

- Real estate or business sales

- Significant cryptocurrency gains

- Large one-time expenses

For certain 3M employees nearing retirement, taxes—not market volatility—can become the primary planning obstacle. When that happens, more advanced planning approaches may be worth evaluating.

Risks to Consider Carefully

This is not a do-it-yourself solution.

The strategy involves leverage, financing costs, and precise execution. Improper implementation can create unintended consequences. Ongoing oversight is necessary.

For many retirees, simpler approaches—such as spreading sales across tax years, coordinating withdrawals during lower-income years, or incorporating charitable planning—may be more appropriate.

In Mary and Joe’s case, the additional complexity was justified by the numbers. But every situation must be evaluated independently.

Why This Matters for Retirement Planning

Taxes are often one of the largest retirement expenses, yet they’re frequently overlooked.

Mary and Joe didn’t pursue this strategy because they wanted something clever. They asked a better question: “Is there a more efficient way to use our money without letting taxes dictate our decisions?” That question reshaped their outcome.

For 3M employees preparing for retirement, proactive tax modeling can be just as important as investment returns.

The Bottom Line

Selling appreciated investments doesn’t automatically require absorbing a large tax bill—but it does require careful modeling, disciplined execution, and coordinated planning.

A tax-aware long-short strategy can be one of several tools available to the right retiree to maintain flexibility and support after-tax wealth.

Because in retirement, what matters most isn’t just what you’ve earned—it’s what you’re able to keep and use comfortably.

How The Retirement Group Can Help

If you’re recently retired or approaching retirement and holding significant unrealized gains, your only choices are not “pay the tax” or “do nothing.” A detailed tax review may uncover strategies tailored to your specific situation.

At The Retirement Group, we work with 3M employees to coordinate investment strategy with tax planning so taxes don’t dictate how retirement is funded. Call (800) 900-5867 to schedule a personalized conversation.

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Sources:

* Names changed for privacy.

1. Internal Revenue Service.  Investment Income and Expenses (Including Capital Gains and Losses) . Publication 550, 14 Feb. 2025,  www.irs.gov/pub/irs-pdf/p550.pdf .

2. McClelland, Robert, et al.  Net Investment Income Tax: A Primer . Urban Institute, Jan. 2025,  www.urban.org/sites/default/files/2025-01/Net%20Investment%20Income%20Tax.pdf .

3. Paradise, Thomas, Kevin Khang, and Joel M. Dickson.  Tax-Loss Harvesting: Why a Personalized Approach Is Important . Vanguard Research, July 2024, corporate.vanguard.com/content/dam/corp/research/pdf/tax_loss_harvesting_why_a_personalized_approach_is_important.pdf.