The Top 5 Financial Planning Challenges For Executives

By Mark Colgan, CFP®

Corporate executives have very distinct financial planning and retirement challenges. They are high earners, but their unique compensation and investment packages often require the use of certain strategies that will help them 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 Montage Wealth Management understand this and can offer assistance in meeting long-term financial goals. 

Below, we have outlined a few financial planning challenges we know corporate executives face when they start working toward their financial goals. We have also included a few straightforward solutions that help our clients achieve long-term financial stability.  

1. Complex Compensation 

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. 

2. Lifestyle Discrepancies in Retirement

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). 

3. Unforeseen Tax Implications

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.  

4. Protecting Income and Assets

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.    

5. Spend Your Free Time Wisely

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 allows you to spend your limited free time with your loved ones but also allows you to do so in a more meaningful and less stressful way.

We’re Here To Help

We hope this provides you with some direction when thinking about your financial plan. Do not hesitate to reach out with any questions or concerns. If you think Montage Wealth Management would be a good fit for your financial planning needs, please contact us at info@montagewm.com or (585) 419-2270.

MARK COLGAN

Mark Colgan is a Founding Partner and Private Wealth Advisor at Montage Wealth Management with over 27 years of experience. Mark is passionate about providing proactive, comprehensive financial services to corporate executives and busy retirees so they can do more of what they love.

Through his proprietary Ahead of the Curve℠ planning process, Mark helps his clients prepare for change, both expected and unexpected, wanted and unwanted, so they can take advantage of the opportunities change brings and secure their future. Mark also specializes in helping people handle the logistics of a loved one’s death and is the author of Details After Death.

When he’s not working, you can often find Mark mountain climbing and working towards his goal of climbing all 46 of the high peaks in the Adirondacks. Mark lives in Honeoye Falls, NY, with his wife, Kathy, and their beautiful children, Christopher and Emily. To learn more about Mark, connect with him on LinkedIn.