So you’re an executive nearing retirement. Now what?
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After decades of being defined by high-powered roles, influence, and constant decision making, the transition to life after work for corporate executives can feel disorienting.
“That can be a tremendous shift for individuals, especially with the audiences they can command and the importance they’ve had from their roles,” said Amy Permenter, head of corporate executive planning at the Planning Center of Excellence within Bank of America Private Bank.
Executives can prepare themselves by getting a handle on their assets and benefits, as well as how they want to spend their retirement, Permenter said. Those who once enjoyed company-paid travel, fine dining, and generous perks may need to recalibrate spending expectations, taking into account not only personal spending but also ongoing family support.
In a new episode of Decoding Retirement, Permenter explained the essential steps for retirement planning, whether you’re a CEO, department head, or anyone else transitioning from your working years.
If you’re a corporate executive five to 10 years from retirement, the single most important step for you to take is a deep, document-level audit of your employer benefits.
Don’t settle for a skim, Permenter urged. Plan with the actual terms.
That means thoroughly reviewing plan documents and equity award agreements, mapping vesting and forfeiture rules, confirming retirement-eligibility triggers, and looking for special provisions, such as subsidized retiree healthcare, that could materially affect your plan.
“Like most retirees, the company benefits are going to play a significant role in an individual’s retirement,” Permenter said. “But with executives, it tends to be a little bit more poignant because the dollar amount can be larger and there can be more at risk and more that could be subject to risk of forfeiture.”
Deferred compensation, an arrangement that allows employees to postpone receiving a portion of their salary until a future date, is one benefit that requires strategic planning, not a “set it and forget it” approach, Permenter said.
Executives, she said, should review their distribution elections, consider state tax implications, and integrate deferred compensation into their broader retirement strategy — especially as circumstances, tax laws, or residency plans change.
“It’s a great tool for deferring taxes, but sometimes people approach that without a real strategy in place for how that’s going to complement their overall retirement plan,” Permenter said.
Deutsche Telekom CEO Timotheus Hoettges and CFO Christian P. Illek pose with a birthday cake to celebrate the 25th anniversary of Deutsche Telekom on Feb. 19, 2020. (Ina Fassbender/AFP via Getty Images) ·INA FASSBENDER via Getty Images
She also recommended remaining flexible with timing. Adjusting payout elections, such as shifting from a lump sum to installments or deferring distributions for at least five years, can help manage both cash flow and taxes.
Similarly, executives with significant company stock should consider strategically diversifying holdings, using methods such as gifting stock to family or charity, participating in exchange funds, or selling shares gradually to balance risk and tax efficiency.
“When we’re looking at anyone who has a concentrated stock position,” Permenter said, “we want to think about options that can help defer the tax consequences … along with finding that diversification they’re seeking.”
She cautioned that unwinding a large position takes time and discipline. That’s why it’s essential to develop a consistent liquidation plan, with clear price or timing triggers, and stick to it.
“If your concentrated stock position represents 70% to 80% of your portfolio, getting down to below 10% could take years,” she said.
Retiring executives also often assume their company’s retiree health coverage will last for life, but that’s not always the case, Permenter said.
Plans can change or be eliminated, and even when coverage remains, it may not be the most cost-effective or comprehensive option.
Permenter recommended treating health coverage as an annual decision, not a one-time choice. Retirees should regularly assess whether their plan still fits their health needs, location, and preferred medical providers.
“Just because a company offers healthcare benefits to retirees doesn’t mean that is the best option for that retiree to consider given their health circumstances [and] where they reside,” she said.
As executives transition to Medicare, it’s important to compare traditional Medicare with Medigap and Medicare Advantage options, especially since employers may provide different types of support.
Many executives are also shocked by the true cost of Medicare, Permenter said. Once you layer in Parts B and D, income-related surcharges (IRMAA), and Medigap premiums, “it can be a sizable number and might not be any less than what they were paying as an active executive — and sometimes a bit more.”
For many corporate executives, one of the most profound challenges of retirement isn’t financial — it’s the loss of identity. To help ease that transition, Permenter encourages executives to envision what retirement truly looks like well before it arrives.
“We ask people to envision what retirement looks like,” she said. “How do they see themselves? What are their hobbies? What are the things that are going to take the place of their daily work?”
Some may find purpose in paid board service, while others gravitate toward volunteering, mentoring, or community leadership. What matters, she said, is having a plan for meaning and engagement.
“I’ve worked with many executives over the years that [have] retired, and after six months of playing golf, … that’s been enough,” Permenter said. “They need to be back in that position where they’re making an impact … whether it’s something small like their church, their community, or something bigger like other companies.”
She stressed that the identity shift shouldn’t begin on day one of retirement, but as an ongoing process of reflection and reinvention.
“This is a discussion that you have ongoing,” she said, “and [you should be] trying to envision how your talents can be transitioned into that next role for you — whether that’s something more ‘toes in the sand’ or your next chapter of being impactful in the world.”
Ultimately, Permenter said, retirees should stay open to evolution in this next phase: “You’ve got to be flexible,” she said.
Got questions about retirement? Email Robert Powell at yfpodcast@yahooinc.com, and we’ll do our best to answer it in a future episode of Decoding Retirement.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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