CASE STUDY
Securing Retirement for a Corporate Executive
CLIENT PROFILE
Age 59
Married with 2 adult children, 3 grandchildren
Annual income: $1,000,000
Net worth: $7,500,000
Investable assets: $4,500,000
The corporate executive works long hours with a demanding travel schedule in exchange for a rich compensation and benefits package. A significant part of his incentive compensation is tied to his company’s stock price in the form of restricted stock and option grants subject to vesting schedules. In addition to stock-based compensation the executive is eligible for the company retirement plans including a 401(k) and deferred compensation plan. He and his wife would like a financial plan to support his family’s lifestyle after he retires in five years, along with guidance around maximizing the overall compensation and benefits package given their personal goals.
ACTION
Helped client determine which shares of company stock to sell to reduce company specific risk while planning to mitigate tax costs associated with stock sales.
Recommended client hold existing stock inside company 401k plan to take advantage of a little-known strategy called Net Unrealized Appreciation (NUA) to receive favorable income tax treatment on 401k withdrawals upon retirement.
Increased contributions to company deferred compensation plan to reduce current year tax liability.
RESULT
Reducing exposure to company stock enabled the client to invest in a diversified portfolio with less risk. The clients were more confident in their ability to afford their current lifestyle in retirement.
Significantly reduced expected income tax costs over a 20-year period by more effectively utilizing company retirement plans.
Allowed executive to spend less time managing his personal finances so he could focus on work and spend more time with his family.
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