Executives: Don't Overlook These Three Critical Financial Planning Moves

Here are three critical financial planning moves that deserve your immediate attention.  

1. Anticipating Tax Law Changes: Preparing for TCJA Permanence or Expiration

The Tax Cuts and Jobs Act (TCJA) of 2017 created significant changes to the tax landscape that are set to expire after 2025. With the political landscape constantly shifting, executives should strategically plan for either scenario – the provisions becoming permanent or reverting to pre-2017 levels.  

The uncertainty around whether Congress will make the TCJA permanent creates both challenges and opportunities. Developing flexible tax strategies that can adapt to either outcome is crucial.

If the TCJA provisions become permanent, executives should focus on optimizing these key areas:

• Standard Deduction vs. Itemizing: With the higher standard deduction potentially remaining in place, strategic "bunching" of deductible expenses in certain years could maximize tax benefits.
• SALT Deduction Cap: The $10,000 cap on state and local tax deductions particularly impacts executives in high-tax states like Connecticut. Consider tax-advantaged investment strategies to offset this limitation.
• Modified AMT Thresholds: The higher Alternative Minimum Tax exemption amounts help many executives avoid AMT, especially those with incentive stock options (ISOs). This creates planning opportunities around the timing of option exercises. 
• Expanded 529 Plan Usage: Continued ability to use 529 plans for K-12 education (up to $10,000 annually) offers education funding flexibility.
• QBI Deduction: Executives with side businesses or pass-through entity income should structure these ventures to maximize the 20% qualified business income deduction.  

2. Leveraging Executive Retirement Plan Benefits  

Executive compensation packages often include retirement benefits that go well beyond the standard 401(k) plans available to most employees. These can include deferred compensation plans, supplemental executive retirement plans (SERPs), restricted stock units (RSUs), and stock options. The complexity and variety of these benefits create both challenges and opportunities.  

One of the biggest mistakes we see executives make is treating their complex compensation packages as separate from their overall financial plan. In reality, these benefits should be seamlessly integrated into your comprehensive strategy. For high-net-worth executives, understanding the timing of income recognition, tax implications, and investment options within these plans is critical.  

A strategic approach might include:

• Timing withdrawals from deferred compensation plans to manage tax brackets
• Coordinating RSU vesting with other income sources to minimize tax impact
• Developing a systematic approach to exercising stock options based on your overall financial picture
• Analyzing the risk of company stock concentration within your portfolio  

The unique benefit for executives is the ability to potentially defer significant compensation into periods when your tax rate may be lower, such as during retirement or gap years between executive roles. This strategic income timing can result in substantial tax savings over your lifetime. 

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3. Sophisticated Asset Allocation Strategies Available to High-Net-Worth Individuals 

 As an accredited investor (generally defined as having a net worth of $1 million+ excluding your primary residence or earning at least $200,000 individually or $300,000 with a spouse), you have access to investment options that aren't available to other investors. 

 Many executives we work with are initially unaware of the full range of investment opportunities available to them as accredited investors. These alternative investments can play a crucial role in diversifying beyond traditional stocks and bonds.  

These sophisticated asset allocation strategies may include:

• Private equity investments that offer potential for higher returns than public markets, though with less liquidity
• Real estate investment trusts (REITs) and direct real estate investments
• Venture capital opportunities in emerging companies and technologies
• Hedge funds that employ strategies unavailable in mutual funds
• Private debt that can provide income streams uncorrelated with public markets  

While these alternative investments can offer attractive return profiles and diversification benefits, they also come with different risk factors and liquidity constraints. The key is integrating them thoughtfully into your overall financial strategy in proportions that align with your goals, time horizon, and risk tolerance.  

Creating Your Comprehensive Financial Strategy  

Executives face unique challenges and opportunities in their financial lives. The complexity of compensation packages, the scale of potential wealth accumulation, and the impact of changing tax laws require specialized attention and expertise.  

At WHZ, our Plan Well, Invest Well, Live Well™ process is designed to address these executive-specific concerns while providing Absolute Confidence and Unwavering Partnership, For Life. With our experience in executive wealth management, we can help you to build a level of financial security that matches the success you've achieved in your career.  

The best time to address these planning opportunities is now. With potential tax law changes on the horizon and markets continually evolving, proactive planning can make a significant difference in your long-term financial outcomes. To discuss how these strategies apply to your specific situation, contact us for a complimentary discovery session at (860) 928-2341 or visit whzwealth.com. 

Authored by Associate Vice President, Wealth Advisor Jonathan Mathews. AI may have been utilized for some research and the initial drafting of this piece. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice.