Cypress Wealth Services
May 2021
Cookie-cutter financial planning just won’t cut it for corporate executives. If you fall into this category, you have very distinct financial planning and retirement challenges. Although you’re a high earner, your unique compensation and investment package often requires the use of certain strategies that will help you mitigate tax risk and maximize long-term financial stability.
While corporate executives are extremely capable and talented people, financial planning for this group requires a very specific perspective and the right experience. We at Cypress Wealth Services understand this and can offer assistance in meeting long-term financial goals.
We will outline below a few financial planning challenges we know corporate executives face as they work toward their financial goals, along with some straightforward solutions that help our clients achieve long-term financial stability.
Unlike most salaried employees, executives need a wealth management plan that specifically addresses the complexities of their compensation and incentive plans—as well as any tax implications.
For example, many corporate executives have a substantial amount of their net worth wrapped up in their company’s stock. However, having a larger portion of your income tied to the company’s success—or failure—can create unnecessary risk. That is why it is incredibly important for corporate executives to diversify their investment portfolio and create a plan to strategically sell shares of stocks in the future.
As we noted above, corporate executives have specific needs when it comes to their compensation, especially in retirement. Many executives struggle to maintain their lifestyle into retirement because they have failed to save an adequate amount that will allow them to keep the lifestyle they became accustomed to. Luckily, there are strategies to help mitigate this deficiency.
Typically we advise our clients that the more they earn, the more they need to save to preserve their current lifestyle throughout retirement. This means, in peak earning years, corporate executives should focus on building up excess cash reserves and putting as much money as possible into their 401(k).
Corporate executives may also have access to deferred compensation plans, such as top hat plans or benefit equalization plans, which can be helpful tools in retirement. These plans typically allow an individual to choose a specific date in the future for when a portion of their compensation is paid to them by the company.
Many executives choose a lump sum when they retire without understanding the full tax implications related to the payout’s timing. This strategy results in a higher tax bill attached to the lump-sum payout. We often advise our clients to stagger the payments so that the tax implications can be absorbed over a few years, which also decreases the overall tax burden.
Many corporate executives financially support households in which they are either the primary income earner or the sole income earner. This leaves their family vulnerable to financial uncertainty if something were to happen to them.
Most couples choose to mitigate risk by investing in disability insurance or life insurance to replace income in the event of any unforeseen circumstances. If you are unsure which policy would specifically meet your needs, we can help you choose a policy tailored to your specific situation.
Often corporate executives tell us that they don’t have a lot of free time, and when they do have a moment to spare, the last thing they want to do is spend it working on a financial plan. We get it. Executives are smart and driven professionals who are very busy working and providing for the people they love.
Given the daily demand for your time, your discretionary time should be spent doing the activities you love with the people you love. Delegate the financial planning to professionals like us, who have the experience to understand your specific situation and can introduce financial strategies that will protect you and your family’s financial stability into the future.
This not only grants you peace of mind but also allows you to spend your limited free time in a meaningful and less stressful way.
If you’re feeling uncertain at all about your financial plan as you get closer to retirement, we hope this outline provides you some direction and confidence. And remember that you’re not alone—we are here to address your questions or concerns. If you think Cypress Wealth Services would be a good partner to help with your financial planning needs, contact one of our offices today.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With financial advisors in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.
