[vc_row][vc_column][vc_column_text]Stock options, restricted stock grants, corporate-owned life insurance, retiree health insurance, deferred compensation packages, and defined-benefit pensions are all potential aspects of a CEO’s portfolio of retirement benefits. Most of the choices he or she makes when retiring are time-sensitive and irrevocable, so in the absence of a “mulligan,” they must be made carefully. In addition, the impact of estate and inheritance taxation and other forms of governmental wealth confiscation must not be overlooked.
All of the income generated from restricted stock units (RSUs), deferred compensation plans, and pensions will create taxable income. In most cases, the taxes applied will be at ordinary income tax rates and will not qualify for capital gains treatment. If all of these plans happen to pay out in the same calendar year, the income tax bill can be devastating—nearly half of all income can be lost to taxes between federal and state income taxes and the relatively new Medicare surcharge. To minimize the tax hit, consider some or all of the following strategies:
In summary, CEOs have an extraordinary opportunity to build wealth, but must carefully consult with a team of specialists when preparing for retirement. The right Certified Financial Planner will be able to assist in navigating an often complicated set of decisions, deadlines and tax rules, each of which can impact the relative success of retirement plans.
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