Ask the Adviser: What financial advice would you give to a C‑suite executive?

This might be a tough pill to swallow, but here it goes: Be prepared for a change in leadership.

Harvard recently published a study showing that among S&P 500 companies, the median CEO tenure has dropped from 6 years in 2013 to 4.8 years in 2022¹. This isn’t fun to hear, and it’s something that most people would like to think won’t apply to them. But the uncom­fortable truth is that boards change, prior­ities change, investor senti­ments change—and leadership teams often change with them.

There are two critical things you need to do to prepare. These will sound obvious, but they can make or break financial plans: Make sure you aren’t spending too much, and make sure you’re saving enough.

When you have a high income, it’s natural to want to spend.

It’s easy to tell yourself, “I work hard, so I should enjoy the income that comes with that work.” Your family and friends are probably telling you that too.

The challenge is, if you’re used to spending a lot, it takes a lot of assets to be able to sustain that level of spending in retirement. Using a simple 4% spending policy (ignoring Social Security and pensions for now), to spend $250,000 annually, you’ll need to have investable assets of $6.25 million. If you can cut that spending down to $200,000 annually, you can maintain that level of spending with $5 million.

That’s $1.25 million of retirement savings that you don’t need. Even for people with extremely high incomes, that equates to years of working and saving.

If you don’t know what you’re spending each year, you should sit down and estimate that now. Start by looking at your bank deposits and withdrawals to figure out what you have coming in and what you have going out over the course of a year. You’ll probably need to make a few adjust­ments to account for transfers to investment accounts, voluntary debt paydowns, or other one-time items you might have purchased.

Be honest with yourself about what consti­tutes a one-time expense. If you have a similar “one-time expense” every year, those aren’t one-time expenses (e.g., “This year we remodeled the kitchen, last year we put in a pool, next year we’re planning a pool house, etc.”).

Make hay while the sun shines.

I’m here to tell you that, if you’re leading a company, the sun is blazing—and it’s time to gather enough hay to last the rest of your life.

Along with all that income, however, come high tax rates. It’s imper­ative to maximize pre-tax retirement account contri­bu­tions during these years. If you’re in the 37% tax bracket, you should probably be making the maximum 401(k) and/or 403(b) contri­bu­tions you’re allowed. When you’re retired, you’ll likely be in a much lower bracket. For example, the 24% tax bracket for a couple that’s married filing jointly goes from $201,051 to $383,900 in 2024.

Additionally, if your company offers a deferred compen­sation plan, you should probably be making the maximum contri­bution allowed. Unlike a 401(k) or 403(b), deferred comp plans are normally considered an asset of the company and are subject to the claims of creditors if the company goes bankrupt. That’s why it’s important to look at more than just the tax conse­quences of partic­i­pating in such a plan. Once you’ve maximized your tax-preferred savings vehicles, you should be saving aggres­sively into a taxable investment account.

Finances aside, parting ways from a company you’ve called home can be a traumatic experience. I’d recommend keeping in mind the following things:

This isn’t about you.

In The Godfather, longtime consigliere Tom Hagen sits down with Michael Corleone, who breaks the news to Tom. Tom is taken aback and asks, “Mike, why am I out?” Michael replies, “You’re not a wartime consigliere, Tom. Things may get rough with the move we’re trying.”

Was Tom bad at his job? No, he just wasn’t the right person for the environment they were going into. There’s an excellent chance this could be the case in your situation. In corporate America, things come and go.

Maybe the board wanted someone who was experi­enced with X. They hired you, and you helped the company make great strides.

Then, suddenly, that same board decides that X is no longer what’s needed. The same system that got you the job is about to bring in someone else. And that someone isn’t filling your role: They’re filling a role that didn’t exist before.

You’re more than a job.

If you pour your heart and soul into your work, it’s natural that you start to believe, “I’m a CEO.”

A better way to think about this might be: “I’m a CEO… for now.” Remember, it’s not a lifetime appointment.

Rather than thinking of yourself as a CEO, think of yourself as a father or a mother, a husband or a wife, a brother or a sister, a good friend. These are the titles that matter.

Your story isn’t over.

You get to decide what happens from here. You can start planning your next move. Maybe it’s as an employee, maybe it isn’t. You might focus more on family, or philan­thropy, or take a shot at entre­pre­neurship. What do you want your life story to be? Start with the end in mind and prepare a plan to accom­plish that.