By Bill Reiner, CFP®, ChFC®
Many of us begin thinking about retirement and the steps we need to take to get there when we turn 50. Common considerations for most retirees include when to stop working, how much savings is enough to support you in retirement, and where to live in retirement. However, in working with pharmaceutical executives, I’ve noticed they often face specific challenges when nearing retirement. See my list of common obstacles and my suggestions on how to approach them.
Optimizing your Pension Elections
The pharmaceutical industry is one of the few industries that still provide defined benefit pension plans as a foundation of their retirement offering. While this type of plan often provides a robust lifetime income when one retires, it does require making important elections when deciding to leave. These elections involve understanding your income, tax and premature death scenarios in retirement. Many times these election are irrevocable and cannot be changed later in retirement if you needs should change. Working with an experienced financial advisor can ensure the selection you choose will provide for and your spouse comfortably in retirement as well as optimizing the benefit who have spent a lifetime building.
Over-Concentration In Stock Holdings
When you reach the executive level, often much of your compensation shifts to stock options or restricted stock. Unfortunately, that means much of your personal wealth becomes tied to one company, which is also where you draw your paycheck. If your employer begins experiencing trouble, that could deliver you a possible double hit of losing your job and seeing the value of your investments plummet. That’s why it’s important to explore ways to divest some of your company stock if you hold a large stake. Consider exercising some of your stock options, or selling stock that you own outright. An experienced financial advisor can help you consider whether you are over-concentrated in your company’s stock relative to your overall portfolio, and if so, share tax-efficient ways to reduce your stake.
Risk Of Being Laid Off
The pharmaceutical industry frequently experiences mergers and acquisitions. Unfortunately, that can bring layoffs to workers in the impacted companies. Even if your company doesn’t combine with another, restructurings and budget cuts often mean the highest-paid and longest-tenured employees may find themselves out of a job. Losing your job near retirement can be especially damaging because it’s often a long time before you’re able to find a similar role at the same level, and you may be trying to maximize your retirement savings.
That’s why it’s important to be prepared for the possibility of losing your job or even being forced to retire early. Be sure to keep at least 6 months’ worth of expenses in an emergency fund so job loss doesn’t result in having to raid your retirement accounts. Stay informed on your company’s performance so you’re aware of any dark clouds or big changes on the horizon that could lead to job loss. Stay in touch with your industry contacts and keep your skills up to date, both of which will help you hit the ground running in a job search if you do need to find a new role.
Failing To Save Enough To Retire
If you’ve earned a healthy salary over the years, it’s possible that you’ve created a lifestyle that’s expensive to maintain. Though Social Security retirement benefits make up the bulk of retirement income for many Americans, they likely won’t make much of a dent in your retirement living expenses. That’s why it’s important to sit down 5 or even 10 years before retirement to determine how much money you have saved and how that might stack up against your anticipated expenses. Consider meeting with a financial advisor for this exercise, as they’ve helped many near-retirees run the numbers. You may realize you have to save more, work a few extra years, or trim your spending. Taking these steps while you still have time to make adjustments can make your financial situation in retirement much more comfortable.
Planning For Your Future Today
If you’re a pharmaceutical executive with retirement on the horizon, a financial advisor can help you conduct a check-up to ensure that you’re on track. If you’re one of my existing clients, we can always meet to obtain an update on your circumstances and see if any adjustments should be made. You can reach me at (215) 340-2360 or bill@reinerfinancial.com.
About Bill Reiner, CFP®, ChFC®
Bill has been in the financial industry since 1995, earning numerous professional designations, including the Certified Financial PlannerTM Certification in 1999. Bill is committed to honesty and unwavering devotion to superior client service. He helps clients discover what financial strategies work best in helping them work towards their goals and objectives. When taking on new clients, he works diligently to gain their trust and help them understand the strategies he recommends.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA / SIPC. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principle. With any investment vehicle, past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.