Retirement Pitfalls to Avoid for Pharmaceutical Executives
Retirement can seem like it’s always a lifetime away. Even in your 50s, it can be hard to imagine your life without your job. Because of retirement’s elusiveness, many people fall behind on setting and meeting their retirement goals. As an executive in the pharmaceutical industry, you are likely on a different path than other professionals, so it’s no surprise that the retirement mistakes pharma execs make are also unique. Read on to learn more about common problems you may encounter as you continue your journey to retirement.
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 elections are irrevocable and cannot be changed later in retirement if your needs should change. Working with an experienced financial advisor can help you select the appropriate election that will provide for you and your spouse comfortably in retirement as well as optimize the benefit you 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. 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 a 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, which will help you hit the ground running in a job search if you 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 costly 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 checkup to ensure 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. Schedule a free, no-obligation phone call by contacting us at 484-455-2661 or email@example.com to learn how our 2nd Opinion Service can make a difference in your financial life.
Louis Butera is the founder and president of Butera Wealth Management, LLC, an independent wealth management firm operating out of Newton Square, Pennsylvania. With over 30 years of experience in the financial services industry, Louis specializes in serving pre-retirees who hold management or executive roles, particularly in the pharmaceutical industry. In 2015, he started his own firm with the express goal and vision of fostering meaningful relationships with clients to help them pursue financial independence and prepare for retirement. Louis and the Butera team provide a customized process to help their clients plan for every aspect of their financial life. Trust has always been key for Louis, and with this foundation, he has helped guide his clients through many different market cycles and life milestones.
Louis is a CERTIFIED FINANCIAL PLANNER™ professional and has a bachelor’s degree in business management from Ithaca College. When he’s not working with his clients, Louis enjoys being outside, playing golf, skiing, and leading an active life with his wife, Michelle. They are both great supporters of local charities and their community. To learn more about Louis, connect with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
This material was prepared for Louis Butera’s use.