Retirement Revisited

The financial crisis threw a lot of people for a loop, including corporate executives contemplating when to retire.

Nearly 40 percent of chief financial officers are more uncertain about when they will retire than they were five years ago, according to a recent survey by Robert Half Management Resources.1 Another 13 percent said their plans for retirement have changed altogether.

Today’s economic challenges and lengthening life spans mean it’s more essential than ever for executives to time their retirement carefully. The decision can affect their financial resources in retirement and, in turn, their quality of life.

Three key questions executives should ask before retiring:

Question #1: Will I Have Enough Income to Maintain My Lifestyle During Retirement?

Your retirement income will likely come from several places, including any pensions, deferred compensation plans, your savings and stock options. A common guideline is  to plan on replacing at least 70 percent of your preretirement income to live comfortably, though that target can vary widely depending on your retirement goals.

Adding up your likely costs in retirement can help you better understand your income needs. Beyond that, also consider whether you have the necessary resources to cover a major health care event and possible long-term care while maintaining your desired lifestyle or protecting your estate.

Question #2: How Will Retiring Affect My Executive Retirement Benefits?

Many executives are privy to special retirement benefits, such as nonqualified deferred compensation and supplemental executive retirement plans. You may have the option to take certain assets as a lump sum or as an annuity. That decision should depend on factors such as your risk appetite, market conditions, tax rates, lifestyle and life expectancy. Another consideration: if your company suffers financially in coming years, your deferred compensation may be at risk.

Question #3: Do I have a Clear Image of My Retirement?

The idea of retiring may seem blissful, but it can be a tough transition if you don’t have well-defined expectations for how you want your retirement years to play out. Doing something you love will keep you happy and productive. This may include working part-time, traveling or relocating. All of these decisions have financial implications that need to be considered in advance. For example, continuing to work at your company part-time could reduce your pension benefits, as many plans calculate benefits using a formula that is based in part on your salary in the years before you retire. The sale of property, such as investment real estate or your primary residence, can affect your tax and income situations in retirement.

1Robert Half Management Resources, “Retirement Redux,” Feb. 21, 2013; Survey was conducted by an independent research firm and based on more than 1,400 interviews with CFOs at U.S. companies with 20 or more employees.


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