Executives Have Unique Retirement Planning Needs

However, he said, creating offerings to prepare executives for retirement is complex, and the complexity increases the higher up the executive. In the qualified plan space, employers quickly run out of room to benefit these employees due to maximum deferral limits, so many add supplemental benefits, including supplemental executive retirement plans (SERPs) or another non-qualified plan to benefit executives. If an employer has excess profits and is looking for a tax deduction itself, it can add a profit-sharing component to its defined contribution plan, allocated by salary. That will put more company profits into the hands of owners and executives.  

Westbrook said employers should create a budget so they can create rewards for executives; just paying a higher salary does not generate loyalty. Employers should put together a qualified plan, non-qualified plan and financial help. “You want an executive’s decision to leave to be a difficult one,” he said.

Research shows the wealthy are as concerned about retirement security as the non-wealthy. According to a survey from Nationwide Financial, nearly three in four say high health care costs is among their top retirement fears (see “Wealthy Americans Terrified of Health Care Costs in Retirement”).   

Executives need education for retirement planning as much as middle- and low-income employees, not just because of their worries, but because they have different tax and life insurance considerations, Westbrook said. However, they may not want to admit this, so employers should offer separate education for this employee population. Topics should include stock option use, tax planning and Social Security optimization.