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Guide to Financial Planning for Executives


Top business executives earn more money than many workers, but they also face a variety of challenges when planning personal finances. Complex compensation plans, risk reduction, tax management and portfolio diversification are top challenges for many executives. Additionally, executives often have access to exotic retirement saving options that call for expert advice. Financial planning for an executive is best addressed by a team of professionals from the legal, accounting, insurance and lending fields, as well as a financial advisor. If you’re an executive who is thinking about making a financial plan, consider talking to a financial advisor today.

Executive Financial Planning Goals

Executives tend to share some basic personal financial planning goals with most people. That is, they want to earn as much income as possible, grow their wealth and maintain it for the future. They want to be able to afford comforts such as a home and fund college educations for children while building a nest egg to provide for a secure retirement.

Beyond that, executives’ goals may diverge somewhat from the norm. They tend to put more emphasis on managing risk, because they are high earners and have more to lose. They may have loftier goals, such as owning a vacation home in addition to a primary residence. Because they can earn more, they may want to leave sizable bequests that will benefit loved ones and, sometimes, support favorite charities.

Executive Financial Planning Challenges

An executive addressing challenges when creating a financial plan.

The good news about top executives is that they have more financial resources. Median pay for an American chief executive was $189,520 in May 2022, according to the Bureau of Labor Statistics Occupational Outlook Handbook. That is more than four times as much as the $46,310 earned by workers across all occupations.

High compensation comes with high complexity, however. For instance, much of their pay often consists of annual bonuses awarded only when they achieve specific business goals. Irregular and potentially unreliable cash flow makes it important to emphasize budgeting wisely and avoid over-committing to long-term expenses, such as purchasing a second home, that may exceed future resources.

Top executives also commonly receive an array of benefits including health, life insurance and retirement plans not available to other workers. Making best use of these sometimes calls for counter-intuitive approaches. For example, health savings accounts (HSAs) are designed to let workers enrolled in high-deductible health plans save for out-of-pocket healthcare costs. HSAs can also serve as tax-advantaged long-term saving plans, however. So, executives who could enroll in seemingly more attractive low-deductible health plans might forego those so they can put money into HSAs, funding their current medical costs with cash.

Executives may also receive company shares, options and restricted stock as part of their compensation. This can create a poorly diversified investment portfolio with an over-large concentration in the employer’s stock. To address this, they can begin selling these shares and buying other securities early in their careers, before they have advanced to senior management and become subject to insider trading restrictions. They can also give shares instead of cash to children and charities, and may consider setting up predetermined trading plans that conform to the SEC’s Rule 10b5-1 on insider trading.

Risk management is a substantial concern for executives who accumulate considerable wealth. Adequate life insurance and liability coverage, including errors and omissions policies, are central parts of a typical executive financial plan. Long-term care insurance, which can generate imposing bills later in life, may be advisable for executives who can afford the premiums.  

When it comes to retirement accounts, the standard options may not meet executives’ needs as well as some others. For instances, Roth plans may be more suitable for executives who can forego current tax deductions from contributing to traditional 401(k) plans. Executives may also have access to non-qualified deferred compensation plans that offer advantages such as no contribution caps, but also potential disadvantages such as a prohibition on early withdrawals. The solution here is to get expert advice on a personalized approach to saving for retirement.

Building a Team

An executive’s multifaceted financial planning needs call for a team of financial professionals rather than a single individual. A financial planning team may consist of the following:

The attorney can set up trusts and avoid legal infringements. A certified public accountant or similar expert can help with tax management. An insurance agent acts as a risk management consultant. A lending professional can assist with mortgages and similar debt decisions. A financial advisor oversees the team and crafts overall strategy.

Bottom Line

An executive researching how to create a financial plan.

Executives make good salaries and have plenty of options for accumulating and managing their wealth. They also face challenges from complex compensation plans, over-concentration in investment portfolios and unfamiliar choices when it comes to retirement saving, among others. To cope with these, executives can build a team of legal, tax, insurance, lending and financial advisor professionals.

Tips for Financial Planning

  • A financial advisor can help executives by overseeing the team of professional assisting them and crafting a strategy to address their special concerns. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s paycheck calculator to find out how much will be deposited to your account next payday.

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