Retirement planning considerations for corporate executives

Determine which strategies will help you reach your retirement goals.

As a corporate executive or business owner, you may feel like retirement planning can get complex. While there are more considerations, there are also more levers to pull. This can benefit your plan and help you diversify your investments. You work hard to solidify your company’s future, but are you planning just as carefully for your own?

Maximize the savings mainstays 

Corporate executives or business owners have access to a broader range of resources to leverage in retirement. That said, start by maximizing the foundations of retirement planning, like your 401(k), IRA and health savings account (HSA). You don’t want to rely solely on the value of your business or selling shares to fund your retirement; you should be saving toward retirement with the investment vehicles you can access now. These accounts are the cornerstone of retirement for a reason and provide tax advantages that other investments don’t.

Think about concentration 

About a decade before retirement, think about how much equity you should hold in your company. The variability of the market can put some of your expected retirement dollars at risk. Of course, how much you decide to keep will depend on your company’s projected growth over this period and your risk tolerance, but it should be a point of conversation in your retirement planning. You may want to consider methodically reducing concentration over time. By implementing a tax-efficient diversification strategy, investors can benefit from a diversified portfolio while mitigating taxes.

Factor in cash flow

Your cash compensation has grown throughout your career, and while this part of your income will expire during retirement, you’ll probably still want access to a comparable cash flow. To accomplish this, you’ll need to reallocate your investment portfolio to income-producing. The portion you invest will be determined by your expectations for income in retirement and how your other investments will support your lifestyle.

Consider a deferred compensation program

For highly compensated executives, it’s worth exploring the value of a deferred compensation program. This is an agreement between employer and employee in which the employee agrees to defer a portion of their salary or bonuses, often until after retirement. The deferred compensation is not subject to federal income taxes, though some state income tax may still apply. Evaluate the potential tax savings when considering this strategy.

You may be able to grow your deferred compensation by investing it in mutual funds, stocks and bonds without immediate tax implications. In retirement, you can begin taking distributions.

Time the sale of your business

There are several ways to sell your business, and you may have a vision of how you plan for it to go, especially if the sale coincides with your retirement. Start thinking about the ideal scenario before the opportunity is upon you, whether it’s to transfer the business to family members or target a specific buyer. You’ll want to incorporate tax strategy into the decision-making process to ensure you realize the maximum benefit from the transaction.

Your disposition strategy may be time-based, with a plan to take equity off the table periodically. Or your strategy may be driven by the company valuation. Regardless, you’ll want to incorporate this into your retirement planning and have some contingencies put in place in case things don’t go exactly as planned.

As an executive, you have great responsibilities to your company before retirement, such as preparing your successor. But don’t neglect to prepare yourself for having the retirement you always envisioned. Make retirement planning a recurring topic that you revisit regularly, just as you do business growth. Your future self – delightfully enjoying retirement – will thank you.

Next steps:

While you’re planning your retirement:

• Think about your ideal exit of the business
• Determine a retirement budget that matches your lifestyle
• Review your investment options

Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.