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Executive Exit Strategy: What Every Woman Should Consider in the First 90 Days · The Wealth Cafe

• 0:15
  SPEAKER_00: Welcome back to the Wealth Cafe.
• 0:17
  SPEAKER_00: I am so glad you are joining us for today's episode, and I want to start out with an observation that I have made after years of working with executive women who are at the highest level of their careers.
• 0:29
  SPEAKER_00: These women plan everything.
• 0:31
  SPEAKER_00: They plan their careers, they plan their teams, their annual objectives, and their succession strategies, and their board presentations.
• 0:39
  SPEAKER_00: They build out five-year plans, and of course, they execute on them.
• 0:42
  SPEAKER_00: They run entire organizations at the highest levels.
• 0:45
  SPEAKER_00: They are some of the most disciplined, forward-thinking planners that I have ever met and have had the pleasure of meeting on top of that.
• 0:53
  SPEAKER_00: And they get to most one of the most successful and significant financial events in their entire lives, which is leaving the C-suite.
• 1:00
  SPEAKER_00: And so many times that is when the planning actually stops.
• 1:04
  SPEAKER_00: Not because they're not capable, and they absolutely are, but because nobody told them what it is they should be planning for.
• 1:10
  SPEAKER_00: And here's what I want you to understand before we go anywhere else today.
• 1:14
  SPEAKER_00: The first 90 days after an executive departure, that is where you are retiring.
• 1:19
  SPEAKER_00: It's an early buyout, a voluntary exit, maybe you're even transitioning to a board role, whatever it looks like.
• 1:25
  SPEAKER_00: These are the most important financial consequential 90 days of a woman's life.
• 1:30
  SPEAKER_00: These decisions are made in that window.
• 1:33
  SPEAKER_00: And some of them can be irreversible, which have hard deadlines, some of which require coordination between three different professionals simultaneously, where you will shape your financial picture and future for the next 30 years.
• 1:48
  SPEAKER_00: And the mistakes that are made in this window, I have seen them unfortunately unfold, and they are painful, and most times they are preventable if women had just come to me earlier.
• 1:58
  SPEAKER_00: Now, today I'm gonna give you the checklist that nobody ever gave to you, and we are gonna walk through exactly what you need to know, need to do, need to ask before you hand in that company laptop and walk out the door and in the weeks right after your time ends with that company.
• 2:13
  SPEAKER_00: Now, whether you're planning an exit right now or you even think one might be coming in the future, even if it's the next three years, I want you to be the kind of woman who is prepared before she has to be.
• 2:24
  SPEAKER_00: And if that is you, this episode is going to be for you.
• 2:28
  SPEAKER_00: Now, let me start by explaining to you why the executive departure creates such a unique financial moment, because I think that understanding the why is what makes everything else in this episode actually stick.
• 2:40
  SPEAKER_00: And I'm really big on understanding the why behind everything.
• 2:43
  SPEAKER_00: It's just how my brain works.
• 2:44
  SPEAKER_00: Now, when you leave a senior executive role, you don't just stop getting a paycheck.
• 2:48
  SPEAKER_00: You trigger a cascade of different financial events, but they're all happening at the same time.
• 2:53
  SPEAKER_00: Your employee benefits terminate, your equity vests on a schedule that is very specific, and it might be affected by your departure date, your deferred compensation plan has payout elections that were locked in years ago that probably can't be changed at this point.
• 3:07
  SPEAKER_00: You also have a pension in many circumstances, and for those of you that do have one, it requires a permanent decision about how you want to receive it.
• 3:16
  SPEAKER_00: Your group life insurance is going to expire, your health coverage is going to end, and that's on a date that's typically not negotiable.
• 3:23
  SPEAKER_00: Every one of these things is happening all while a major life event is happening.
• 3:28
  SPEAKER_00: And every single one of them has a different rule, a different deadline, and a different set of people that all come in as a decision maker and involved to help you execute on them as long as you lean on them.
• 3:40
  SPEAKER_00: Now, this is a time pressure problem that you are facing.
• 3:43
  SPEAKER_00: And here's the part that actually makes this very challenging.
• 3:46
  SPEAKER_00: Many of these decisions have hard deadlines, and some of them are tied to your last day of employment or some within 30 days of separation, and there's another set that are within the same calendar year.
• 3:57
  SPEAKER_00: Now, these decisions don't wait for you to feel emotionally ready to deal with them, and the pressure is mounting.
• 4:03
  SPEAKER_00: The pause that may take you some time to decompress, after 30, maybe even 40 years of running at full speed, there isn't necessarily the time to wait.
• 4:12
  SPEAKER_00: And while you are in the middle of negotiating your exit, your package, or your succession and dealing with a hundred other things that are happening, all of these financial decisions need to be made as well.
• 4:23
  SPEAKER_00: And the clock is running out and continuing to run, whether you are watching it or not.
• 4:29
  SPEAKER_00: Now, the biggest misconception that I encounter and I hear regularly is assuming that HR is going to flag everything that you need to know.
• 4:38
  SPEAKER_00: You might even be sitting here listening to that, laughing, because you already know that's not the case.
• 4:42
  SPEAKER_00: Some people even think that your company's financial advisor will handle it, or that your attorney is going to catch everything.
• 4:48
  SPEAKER_00: Here's the hard truth: is that HR, they're gonna flag some of it, don't get me wrong.
• 4:52
  SPEAKER_00: Your financial advisor at your company, they will have access and handle some of the pieces that they are responsible for, and your attorney is going to cover what's in their lane.
• 5:01
  SPEAKER_00: But nobody, there is no single person that is going to own your entire financial picture except for you, and working with your financial advisor, your personal one.
• 5:11
  SPEAKER_00: Now, the tax implications of your deferred compensation, your payout timing, the coordination of your stock options, the capital gain strategy, the pension analysis that accounts for your full retirement income picture, even updating your estate planning.
• 5:26
  SPEAKER_00: That's a key one here.
• 5:28
  SPEAKER_00: That update should all happen in one year.
• 5:31
  SPEAKER_00: And this is something your financial advisor should help you coordinate.
• 5:34
  SPEAKER_00: They should be telling you who you need to talk to, what is the top priority.
• 5:38
  SPEAKER_00: And ideally, you should start having these conversations 12 to 18 months prior to your departure.
• 5:44
  SPEAKER_00: Now, here is the flip side to everything I just said, because I don't want you to walk away from this episode feeling scared and panicked.
• 5:52
  SPEAKER_00: I want you to feel energized and ready to take charge.
• 5:55
  SPEAKER_00: If you do this right, an executive transition is one of the greatest opportunities to optimize your wealth picture so that you will have a better future than you could have ever imagined.
• 6:05
  SPEAKER_00: You're repositioning assets, income streams, and tax strategies all at the same time.
• 6:09
  SPEAKER_00: So you have a moment where everything is on the table at once.
• 6:12
  SPEAKER_00: Women who come prepared into this transition with a clear picture of what's coming, a coordinated team, and a timeline don't just avoid the mistakes.
• 6:20
  SPEAKER_00: They come out on the other side of this with a financial structure that is better than they could have ever imagined.
• 6:27
  SPEAKER_00: And that's what today's episode is about.
• 6:29
  SPEAKER_00: So let's get into building that picture.
• 6:32
  SPEAKER_00: As we dive into this conversation a little more, I want to be really direct with you about something because we're all friends here.
• 6:38
  SPEAKER_00: If you're an executive woman and at this level, you need to understand that you don't just have a salary.
• 6:45
  SPEAKER_00: Your exit is not just about taking a paycheck.
• 6:47
  SPEAKER_00: You most likely have equity, restricted stock units, maybe even stock options still sitting on the table, possibly even founder shares if you have been a part of a company from the early years.
• 6:58
  SPEAKER_00: You may have deferred compensation, a non-qualified plan where you have been stashing pre-tax income for years, which is governed by an election you probably made a really long time ago.
• 7:08
  SPEAKER_00: And at that time, you may not have fully understood the long-term implications.
• 7:12
  SPEAKER_00: You may even have a defined benefit pension, which you have to make a decision about how you want to receive that money.
• 7:18
  SPEAKER_00: On the other side, you may have a non-qualified retirement plan that your company has been funding separately from your 401k.
• 7:25
  SPEAKER_00: Another situation is having golden handcuffs, which is a retention arrangement that you are releasing and is tied to the timeline of your departure.
• 7:34
  SPEAKER_00: Each of these situations that I just laid out for you has a different tax treatment.
• 7:39
  SPEAKER_00: Each of them has a different timing decision and has a different set of implications around your estate and your retirement income.
• 7:46
  SPEAKER_00: This is not just a, hey, let's roll everything into our IRA and go off into the sunset for our retirement.
• 7:51
  SPEAKER_00: This is sophisticated.
• 7:53
  SPEAKER_00: There's a lot of different layers to this financial event, which require somebody who actually understands this picture, not just a single piece of it.
• 8:00
  SPEAKER_00: This is where that team aspect comes into play.
• 8:04
  SPEAKER_00: The other piece of the puzzle that a lot of people ignore is the healthcare gap.
• 8:08
  SPEAKER_00: Now, this is one that catches a lot of executive women off guard.
• 8:12
  SPEAKER_00: So I want to make sure we are really talking about this in a way that everyone feels comfortable and feels empowered by.
• 8:18
  SPEAKER_00: At 65, you may be losing access to your employer sponsored health insurance if you are leaving in that role.
• 8:25
  SPEAKER_00: Now, the most cost-effective health insurance that you have ever had in your life is probably that employer plan.
• 8:31
  SPEAKER_00: So what comes next?
• 8:32
  SPEAKER_00: Some of the options you have are Cobra.
• 8:35
  SPEAKER_00: Now you have the marketplace, maybe if your spouse is still working, they have a plan available, or you have a bridge to Medicare.
• 8:42
  SPEAKER_00: If you are 65, maybe if you're younger, it hasn't started yet.
• 8:45
  SPEAKER_00: Cobra, for so many people though, is such a shock to enter into because it can be incredibly expensive.
• 8:52
  SPEAKER_00: Your employer is no longer paying their portion of the premiums there.
• 8:57
  SPEAKER_00: So for executive level coverage, that can easily be a two to three thousand dollars a month for your family.
• 9:03
  SPEAKER_00: And that is a massive expense that a lot of people don't want to take on, especially as they're now seeing their paycheck, all of you go out the door.
• 9:11
  SPEAKER_00: Now, I'm not saying this to alarm you, and I want to make sure you have the right health care and plan, but this needs to be part of your exit strategy before you walk out the door, not one that you're scrambling to make during those first few weeks of your retirement.
• 9:25
  SPEAKER_00: The other big piece of this retirement and exit strategy is about your identity.
• 9:30
  SPEAKER_00: Now, I want to pause here and say something that doesn't really come up on financial podcasts because it's about the emotional side.
• 9:37
  SPEAKER_00: The C-Suite Exit is often an identity transition and one for many executive women that genuinely want to leave and are excited about this and have been planning to exit, and they're excited about what comes next.
• 9:48
  SPEAKER_00: But there's also a lot of grief that so many people don't expect.
• 9:52
  SPEAKER_00: Your title, your team, your purpose, the rhythm of your professional life, these things are so woven into your self of sense worth that they kind of disappear overnight.
• 10:02
  SPEAKER_00: And I have a lot of women that will come into my office in those first few months of retirement, and it's a real transition period.
• 10:09
  SPEAKER_00: And here is what I've observed from those that come into my office is that they need a plan, they need a structure, they need to have something that actually helps them emotionally in their transition.
• 10:20
  SPEAKER_00: If you're not creating this financial plan, you're gonna feel scattered.
• 10:24
  SPEAKER_00: You're gonna be all over the place in addition to having this massive financial transition that you are going to.
• 10:31
  SPEAKER_00: The anxiety, it'll have fewer places to attach itself if you have this plan.
• 10:36
  SPEAKER_00: That's not why we build the plan, but it is an additional benefit.
• 10:40
  SPEAKER_00: And I mention it because I want you to know about the work that we're talking about today.
• 10:44
  SPEAKER_00: It's not just financial.
• 10:45
  SPEAKER_00: There is so much emotion that comes with it and building the foundation for what comes next.
• 10:51
  SPEAKER_00: And with what comes next, let's get into some of the complex layers here because I think this is where the episode deserves that little save and download side of things.
• 11:00
  SPEAKER_00: Now, the first part of this that I want people to know, or what HR tells you when you're transitioning out, is rolling out your 401k, electing Cobra within 60 days, update your direct deposit, sign your separation agreement, don't forget to return your equipment and laptop so they don't charge you for that.
• 11:16
  SPEAKER_00: This is Surface Layer.
• 11:17
  SPEAKER_00: It's important, don't get me wrong, but this is just the tip of the iceberg.
• 11:22
  SPEAKER_00: Now, let's get into the layer two, as I like to call it here, because that is where the time-sensitive pieces come into play.
• 11:29
  SPEAKER_00: And there's a lot of irreversible decisions here.
• 11:32
  SPEAKER_00: Now, I want you to understand this because there are so many things that they can cause a lot of damage if they are missed.
• 11:41
  SPEAKER_00: Now, let's start with the stock option expiration clock.
• 11:44
  SPEAKER_00: Now, if you have outstanding non-qualified stock options, aka and QSOs, they typically expire 90 days after your termination date.
• 11:53
  SPEAKER_00: Not 90 days after you find out, 90 days after your notice period ends, 90 days after your last day of your official employment.
• 12:01
  SPEAKER_00: Incentivized stock shop options or ISOs may have a different timeline depending on your plan documents.
• 12:08
  SPEAKER_00: So make sure you have a copy of those.
• 12:10
  SPEAKER_00: Some may expire faster, some have different rules about when they need to exercise to maintain their track, their tax treatment.
• 12:17
  SPEAKER_00: Now, here is a critical point.
• 12:19
  SPEAKER_00: If you do not exercise your options within the window when they expire, they just expire worthless.
• 12:25
  SPEAKER_00: They're gone, which you may want.
• 12:27
  SPEAKER_00: However, you do want to make sure you understand where they could fit into your financial picture and working with your financial advisor in this case because they could have a lasting impact on your future wealth.
• 12:38
  SPEAKER_00: And if they do expire worthless, well, that's fine.
• 12:42
  SPEAKER_00: At least you did so because it was your choice.
• 12:45
  SPEAKER_00: The next piece that you need to look at is your Cobra election window.
• 12:48
  SPEAKER_00: Now, you have 60 days from the loss of your coverage, which is usually your last day of employment, just make sure you understand that, to elect your Cobra continuation coverage.
• 12:56
  SPEAKER_00: Now, this window doesn't move.
• 12:58
  SPEAKER_00: If you miss it, you lose the right to continue your current coverage.
• 13:01
  SPEAKER_00: Now, here is something that most people don't know.
• 13:04
  SPEAKER_00: The Cobra election can actually be retroactive, meaning you have 60 days to decide.
• 13:09
  SPEAKER_00: And if you decide on day 59, your coverage is treated as if it was continuous from day one.
• 13:15
  SPEAKER_00: So even if you're healthy exploring marketplace options and you think you might not need Cobra, you can elect it as a safety net while you figure out a longer-term solution.
• 13:25
  SPEAKER_00: Why would you do this?
• 13:27
  SPEAKER_00: Because if something medical happens in that 60-day window before you finalize your new coverage, having Cobra elective retroactively can save you from a gap in coverage at the worst moment possible.
• 13:39
  SPEAKER_00: That's never when we want to have a big medical emergency.
• 13:44
  SPEAKER_00: The other piece of the puzzle in this second layer is the deferred compensation trap.
• 13:47
  SPEAKER_00: This is the one I want to spend the most time on because it is a costly mistake I see, and it is so often the least talked about.
• 13:55
  SPEAKER_00: If you have a non-qualified deferred compensation plan and you are a senior executive, here is what you need to understand the payout schedule.
• 14:04
  SPEAKER_00: This is so important for the plan was elected years ago, probably when you weren't even really thinking about it.
• 14:10
  SPEAKER_00: It was under IRS section 409A, and you generally cannot change the timing of the distributions once they have been set.
• 14:18
  SPEAKER_00: Which is incredibly important to understand is that you cannot change this.
• 14:22
  SPEAKER_00: So if you had elected to receive deferred compensation as a lump sum in the calendar year following your separation, you can't now all of a sudden decide, actually, I'd prefer to spread this over five years.
• 14:33
  SPEAKER_00: The election is done and locked in.
• 14:35
  SPEAKER_00: Why does this matter if you can't actually go in and change anything?
• 14:39
  SPEAKER_00: Well, because of the tax impact.
• 14:41
  SPEAKER_00: Let me give you an example here.
• 14:42
  SPEAKER_00: Let's say you are an executive woman, you're earning$400,000 a year, and you're retiring in December.
• 14:48
  SPEAKER_00: In January, your deferred compensation pays out a lump sum of$550,000 because you elected this five years ago.
• 14:56
  SPEAKER_00: Now, you're going to recognize that$550,000 in ordinary income in a year when you may have expecting your income to drop significantly, your paycheck's going away.
• 15:04
  SPEAKER_00: Now, you could find yourself in the top tax federal bracket in the first year of retirement, paying 37% on that distribution when you thought it would be your lowest income year.
• 15:14
  SPEAKER_00: I see this happen all the time as women come into my office and they're like, oh, I forgot I had this thing that I elected years ago.
• 15:21
  SPEAKER_00: Now, here's the good news and why planning early matters.
• 15:25
  SPEAKER_00: If you cannot change the selection and the timing, you need to make sure you are planning around it.
• 15:30
  SPEAKER_00: If we know a large deferred compensation distribution is coming, we can build a strategy to reduce the other sources of taxable income in that year.
• 15:39
  SPEAKER_00: For example, a Roth conversion, capital gain harvesting, charitable contributions, and deductions, they all needed to be coordinated in order to absorb the distribution and make it as efficient as possible.
• 15:50
  SPEAKER_00: But the work has to start the year before or even years before that distribution, not April 15th when you're filing your taxes.
• 15:58
  SPEAKER_00: That's a little too late.
• 16:00
  SPEAKER_00: Let's dive in for those of you that have a pension and do an analysis on your pension and why this is actually permanent.
• 16:06
  SPEAKER_00: If you have a deferred pension plan or a traditional pension that promises a monthly income for life, number one, you are very lucky and something a little more rare.
• 16:14
  SPEAKER_00: You are going to have to make a decision that you need to be prepared for.
• 16:18
  SPEAKER_00: Now, you're going to have a couple of choices.
• 16:19
  SPEAKER_00: Take it as an annuity payment for the rest of your life, take a lump sum and maybe invest it for yourself.
• 16:25
  SPEAKER_00: Or and in some cases, you have a joint survivor option, period guarantees, and maybe a couple different ones on that list of choices.
• 16:33
  SPEAKER_00: Now, the choice really comes down to do you want guaranteed income for life, or do you want a big income check that you can then decide to go and invest?
• 16:41
  SPEAKER_00: Once you make the decision, though, it cannot be undone.
• 16:46
  SPEAKER_00: So what's the answer?
• 16:48
  SPEAKER_00: What's the right answer?
• 16:49
  SPEAKER_00: It's different for every single person.
• 16:51
  SPEAKER_00: A lot of it depends on your health and longevity expectations.
• 16:54
  SPEAKER_00: It also depends on the other income sources that you have in retirement and your investment risk tolerance.
• 17:01
  SPEAKER_00: The other thing is, are you able to actually manage a lump sum of money if it comes into your estate?
• 17:06
  SPEAKER_00: If you are to have that lump sum, are you going to invest it in a way that's going to manage and be worthwhile to your next generation?
• 17:15
  SPEAKER_00: All of these different pieces that you need to analyze and see what makes the most sense for you.
• 17:20
  SPEAKER_00: There is no crystal ball.
• 17:21
  SPEAKER_00: There is no way to tell, what am I doing and is it right?
• 17:25
  SPEAKER_00: You have to trust your gut and do the analysis and pick what is best for you with the information that you have.
• 17:31
  SPEAKER_00: This is a great time to lean on your financial advisor, have them ask you questions, and try to figure out what's best you can with the information you have.
• 17:39
  SPEAKER_00: A good thing that they can do is a multi-year tax modeling strategy to show you what the future could look like.
• 17:46
  SPEAKER_00: This is a little more complex and in-depth, but when you have an executive role, your income picture is really changing dramatically.
• 17:53
  SPEAKER_00: And once that income goes away, it changes once again.
• 17:56
  SPEAKER_00: Now, in year one, you may have a large deferred compensation or distribution severage payment that keeps you at a high income.
• 18:03
  SPEAKER_00: Year two, your income drops significantly.
• 18:06
  SPEAKER_00: Year three and four, maybe you're in a lower bracket, so it might be a great time to do some Roth conversions.
• 18:11
  SPEAKER_00: And in year five, maybe you have your RMDs beginning and this really changes your picture.
• 18:16
  SPEAKER_00: Mapping out this multi-year income picture and optimizing the tax strategy across all of it is one of the most valuable things that your financial advisor can do for you to help you during this transition.
• 18:28
  SPEAKER_00: This is a great time to also have a CPA consult on this for you, but your CPA is not going to be able to do necessarily all of that modeling and be able to walk you through the entire transition.
• 18:40
  SPEAKER_00: Now, the women who come into retirement with the most effective tax picture aren't the ones who are lucky.
• 18:45
  SPEAKER_00: They are the ones who started modeling this 12 to 18 months before they left.
• 18:49
  SPEAKER_00: They're building out that multi-year plan and then they are able to execute it systematically.
• 18:56
  SPEAKER_00: If you are getting ready to enter this transition, if you know that future is ahead of you, now is the time to start having those conversations.
• 19:04
  SPEAKER_00: This is a great time to say, what are all of the documents I need?
• 19:08
  SPEAKER_00: What are all of the things that I need to start looking at now so I can build out the plan that works for me?
• 19:13
  SPEAKER_00: If this is you, I hope that you will re-listen to the episode, write down everything that caught your ear, and also reach out if you need a second set of ears.
• 19:21
  SPEAKER_00: Or maybe you know someone that is going to be going through this transition.
• 19:24
  SPEAKER_00: We would love it if you can share this educational content with them as well for hopefully their benefit.
• 19:30
  SPEAKER_00: Thank you so much for joining us on this episode of the Wealth Cafe, and I can't wait to see you again next time.