Strategic Retirement Planning for Corporate Executives

July 11, 2024

As an executive in a dynamic business landscape, you’ve excelled in driving corporate success. But as retirement approaches, a new challenge arises: How do you transform your hard-earned resources into steady, comfortable cash flow for your post-career life?

In this blog, we’ll cover:

The Importance of Developing Your Retirement Vision
Strategies for Managing Retirement Cash Flow

The Importance of Developing Your Retirement Vision

As you stand at the precipice of retirement, consider this an incredible opportunity to evaluate your mission. These transitional moments can feel equal parts exhilarating and daunting, as they create space to consider this new phase of life. Before diving into your retirement financials, it’s important to connect with how you fill this newfound space with your retirement vision.

When Ginni Rometty was nearing the end of her 40-year tenure as IBM’s CEO in mid-2020, she hadn’t taken time to consider a vision plan for her retirement. After considering some classic paths for retired executives, like joining corporate boards and taking private equity roles, Rometty’s longtime mentor challenged her to take a step back and reconsider her life’s purpose.

Through this period of reflection, Rometty discovered a fulfilling mission that surprised her with a redefined purpose:

“Today, I can say I’m doing pretty well, and feel purpose driven. But the journey to get to this point was certainly not an easy or expected one,” she admitted.

“At the center of my circle is creating a global movement around SkillsFirst leadership by helping companies hire and promote people—particularly those from underrepresented groups—based on their skills, not just formal educational degrees,” she said. “I’m just as busy now as I was when I was CEO. It’s just a very different kind of busy.”

When you truly hit “pause” to reflect on your values, you may be surprised by what you find. Rather than simply allowing inertia to carry you into the next phase of life, give yourself time to consider this new phase of life.

Strategies for Managing Retirement Cash Flow

Whichever retirement path you choose, transitioning from an executive role to retirement involves thoughtful planning to ensure a steady, reliable cash flow.

Here are several strategies to consider as you aim to manage your assets effectively and enjoy a comfortable retirement:

Create a Tax-Efficient Withdrawal Strategy

The order in which you tap your retirement accounts can have substantial tax implications. As you evaluate your assets, you and your wealth advisor may want to consider:

Required Minimum Distributions (RMDs): RMDs are mandatory annual withdrawals from retirement accounts like traditional IRAs, starting at age 73 for those born between 1951 and 1959, or age 75 for those born in 1960 or later. These withdrawals are subject to income tax and can impact your overall tax bracket. Failing to take RMDs can result in significant penalties, so planning these withdrawals carefully is essential for minimizing your tax burden.

Tax Bracket Management: Optimizing the sequence of withdrawals from your accounts can help “smooth” your annual earnings, thereby potentially reducing the overall taxes paid during retirement. For example, if you are currently in a lower tax bracket than you expect to be in the future, you might benefit from converting traditional IRA funds to a Roth IRA, which involves paying taxes now to potentially avoid higher taxes later. Conversely, if you are in a higher tax bracket, you may consider strategies to lower your taxable income, such as contributing to pre-tax retirement accounts, health savings accounts (HSAs), or making tax-deductible charitable donations.

Considering that executive portfolios often include complex assets and plans, it may be worth collaborating with a fiduciary who is legally accountable for protecting your well-being.

Factor in Your Social Security Benefits

While Social Security may seem like a small piece of the puzzle for high-earning executives, timing your benefits can significantly impact your overall retirement income. Delaying benefits until age 70 may increase your monthly payment by up to 8% per year after reaching full retirement age.

When it comes time to consider Social Security in your retirement plan, take a look at these tips:

Estimate Your Future Benefits: Starting at age 50, you can check SSA.gov to see your projected Social Security payments. This amount will likely rise if you’re still in the highest-earning 35-year period of your career. If you’re not in the highest-earning 35-year period of your career, your projected payment amount is not likely to change. With this information, you can estimate your total retirement income, including IRA and 401(k) withdrawals, pensions, and investment income.
Understand the ‘Use It Or Lose It’ Rule: The money you’ve paid into Social Security is your money, but unlike other investments, you can’t pass it on to your heirs. Social Security is a “use it or lose it” scenario, so taking payments as early as possible makes it more likely that you’ll actually get out what you’ve put in. The only exception to this rule is that you can transfer your Social Security payments to your spouse upon your death.
Plan the Order of Your Spending: When it finally comes time to spend your retirement assets, it can be strategic to withdraw from accounts that won’t outlive you, like Social Security, rather than assets you can pass on to your heirs.

Aligning your Social Security benefits with your estate planning goals can help ensure the well-being of your heirs while optimizing your retirement income.

Take Your Next Steps Toward an Aligned Retirement

Transitioning from earning a high executive salary to living off your assets can feel like a significant shift. Careful planning, strategic decision-making, and ongoing management will encourage you to confidently step into retirement. With a clear plan and honest guidance, you can approach this new phase of life with joy and conviction.

Ready to turn your executive success into a lasting retirement? Let’s start a conversation about how we can help you build a comprehensive retirement transition strategy tailored to you.

Connect with Alicia and the SWM Team for a complimentary retirement-readiness review. Together, we’ll craft a detailed plan to transform your career achievements into a fulfilling and financially secure retirement.