However, he said, creating offerings to prepare executives for retirement is complex, and this complexity increases for more highly placed executives. In the qualified plan space, employers quickly run out of room to benefit these employees because of maximum deferral limits, so many add supplemental benefits, including supplemental executive retirement plans or another nonqualified 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.
Employers should create a budget so they can create rewards for executives; just paying a higher salary does not generate loyalty, Westbrook said. Employers should put together a qualified plan, nonqualified 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. In 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.
Westbrook said employers and providers should start all retirement planning education for executives with knowledge about income protection, then how to maximize guaranteed retirement income flow and bridging the gap between income needed and Social Security, because the part Social Security will play in an executive’s retirement income is a mystery.