Strategies for Optimizing Executive Benefits Planning

Executive compensation refers to the financial and non-financial benefits awarded to business owners, senior managers, and key employees of companies as a means for attracting, retaining, and rewarding top talent. Executive compensation packages usually include a mix of wage income, bonuses, equity stakes, and other perks subject to complex tax rules, deadlines, and regulations. With so many moving parts, it can be easy for busy executives to overlook opportunities or make costly mistakes where these valuable benefits are concerned.

Below are three challenges business owners and executives often encounter in managing C-suite compensation and ways to help avoid them.

1: Missed opportunities to defer income

In our view, deferring taxes on executive compensation may be considered the key to keeping more of your earnings working for you and your family. One way to do this is by contributing to your company retirement plan, which may allow you to take advantage of company matching contributions and make catch-up contributions if you’re age 50 or over. However, you may be less familiar with other ways to help maximize savings and defer income beyond a 401(k) or similar defined contribution plan. Retirement planning strategies for executives may include non-qualified retirement plans, backdoor Roth IRAs, and defined benefit plans.

To understand how different plans and strategies can help you manage your tax burden as you pursue your long-term goals, consider working with an experienced wealth advisor who specializes in corporate retirement plan strategies and executive compensation solutions.

2: Overconcentration in company stock

When salary, bonuses, stock options, and other forms of deferred compensation all come from the same company, that can result in a concentration of wealth, which can pose a number of risks. For example, when a significant portion of executive compensation is tied up in company stock it can create liquidity constraints. If the stock price experiences a sharp decline and you have a need for cash shortly thereafter, you may be forced to sell shares at an inopportune time or take a loss.

Diversification can help mitigate the risks of concentrated wealth from executive compensation or other sources. Diversification is the process of spreading assets across multiple investment types and asset classes to help reduce exposure to any one security or asset class. This can be accomplished by allocating heavy concentrations of company stock into other assets that may be less correlated to your company and industry. We believe doing so requires a tax-smart strategy governing the sale and reinvestment of shares that incorporates tax-loss harvesting.

3: Lack of a comprehensive plan

As your wealth grows, managing it also becomes more complex. Since executive compensation adds an additional layer of complexity to managing taxes, retirement income, cash flow, and philanthropic goals, estate planning could be considered essential. Failure to create or update your estate plan has the potential to lead to higher estate taxes, delays in asset distribution, and family conflict among your heirs and beneficiaries. 

A wealth advisor experienced in the intricacies of business and financial planning for high earners can not only help you develop a comprehensive financial plan, but coordinate strategies and advice received from your other advisors, including legal and tax professionals. This coordinated approach can help ensure you’re receiving the personalized and relevant advice you require, and that tax-smart strategies are implemented on a timely basis to help optimize executive benefits planning.

To learn more about executive compensation strategies, listen to our latest podcast episode of Frank Wealth Insights. To learn how your team of independent wealth planning professionals at Return on Life^® Wealth Partners can help you and your family pursue the Return on Life^® you desire, contact us today for a free consultation.

About Return on Life^® Wealth Partners

Return on Life Wealth Partners is an independent Registered Investment Advisor (RIA) founded in 1994, with headquarters in Cleveland. The team provides comprehensive wealth planning services to individuals, families, and business owners. By examining clients’ lives before their money, Return on Life^® aligns its advice with clients’ values. This personalized approach also extends to the institutional and corporate retirement plan services available through 401(k) Prosperity^®.

Important Disclosures:

The information provided in this document is for informational purposes only and should not be construed as investment, tax, or legal advice. While we strive to provide accurate and up-to-date information, there are no guarantees that the strategies discussed will achieve the intended outcomes. Individual results may vary depending on factors such as market conditions and personal circumstances.

Tax laws and regulations are subject to change, and strategies outlined may not be suitable for all individuals or entities. Consult with a qualified tax professional regarding your specific tax situation.

Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a Registered Investment Advisor, member FINRA/SIPC.

Investment advice offered through Planned Financial Services, LLC, a Registered Investment Advisor and separate entity from LPL Financial.

For additional information related to our services, please visit https://adviserinfo.sec.gov/firm/summary/112879

This information is not intended to be a substitute for individualized insurance, tax, or legal advice. We suggest that you discuss your specific issues with a qualified advisor.

Investment strategies and recommendations are subject to risk, including the potential loss of principal. Diversification and tax-smart strategies are designed to manage risk but do not guarantee a profit or protect against loss in declining markets. Always consider your personal financial situation and risk tolerance before making investment decisions.

Non-Qualified Plans and Backdoor Roth IRAs: The strategies referenced, such as non-qualified retirement plans and backdoor Roth IRAs, are subject to complex regulations and may not be appropriate for every investor. Please consult with a qualified financial professional before pursuing these strategies.

Past Performance Disclaimer: Past performance is not indicative of future results. Any performance data included herein is based on historical data and should not be relied upon as a prediction of future performance.

Copyright © 2025 Planned Financial Services, LLC. All Rights Reserved.