3 Money tips for busy corporate executives to act on now

Yes, you’re busy. But making time to check off these three critical financial tasks could be well worth it.

Most corporate executives work hard for their money—but many devote little time to managing it. They are often traveling around the nation or the globe, cell phone in hand, constantly speaking to managers, clients and vendors, as well as sending and returning texts and emails. And these executives are hoping to spend at least a few minutes each day on their personal and family life.

But fear not, road warriors. In my opinion, if you can carve out less than 1% of your time each week—just 90 minutes—you can potentially help put your money on a fast track to growth. To get started, here are three critical steps to take:

1. Consider contributing the maximum amount to your 401(k) retirement plan

Start by finding out your current account balance as well as the amount you are contributing to the plan from each paycheck. One of the biggest mistakes executives make is believing they are contributing the maximum amount allowed by law because they are putting in the minimum amount needed to get their company’s matching amount, but this is not a reliable indicator.

People under age 50 can contribute up to $20,500 in 2022, while those age 50 and over can contribute up to $27,000—and each of these figures goes up in 2023.1 Maximizing your contribution might help save you thousands of dollars in income tax and potentially make an impact on your long-term retirement savings. Once you’ve truly “maxed out” your 401(k) plan savings, consider planning to never to lower your contribution percentage.

Next, determine how much of your contributions should be allocated to stocks, bonds and cash. People in their 20s and 30s should consider investing most of their money in stocks since those investments can provide the highest returns over time. But if you plan to retire soon, consider allocating between 50% and 70% of your contributions to stocks. If the stock market takes a nasty fall, you likely won’t have as much time to recover.

Finally, make certain the right people are named as the beneficiaries of your 401(k) plan. They will inherit this money in the event of your death, and if the beneficiary field is left blank, you might lose control of what happens to your 401(k) assets.

In some cases, clients have divorced and remarried, yet their ex-spouse is still listed as their 401(k) beneficiary. In other cases, an executive worked with an attorney to set up a special trust so his children would inherit the money, but the trust was not named as the beneficiary. Don’t make these mistakes.

2. Make sure your wealth isn’t too dependent on your employer

Many corporate executives have a lot of their wealth tied to their employer’s stock. Not only do they depend on a paycheck from their employer, but they might receive stock options, restricted stock grants, 401(k) matching and other compensation that depends on the company’s economic well-being. The danger here, of course, is that your net worth can decline if your company begins to underperform and its stock price drops.

To avoid such a scenario, especially for those nearing retirement, a good rule of thumb is to keep no more than 10% to 15% of all assets in company stock.2 For example, if all your 401(k) retirement savings plan is in your employer’s stock, it makes sense to diversify these holdings, which can be done with no tax cost. As an alternative, consider placing this money in a combination of U.S. and international stock funds, as well as bond funds, available in your 401(k) plan.

3. Develop or update an estate plan

As unlikely as it seems, many executives don’t have a will. And for many of those who do, it might be years or decades old. Others are missing other important pieces of an estate plan, such as financial or healthcare powers of attorney.

Estate lawyers strongly recommend that you review your will and estate plan every five years.3 For example, a married couple with young children may have named a parent as the executor of their will a decade ago. But if their children are now young adults, does that still make sense? The same strategy should also be applied to the financial and healthcare power of attorney documents.

If catastrophe strikes, dying without an estate plan can leave a huge mess for your loved ones to clean up. Assets can go unaccounted for, and legal bills can accumulate. In my view, it’s much less expensive to get an estate plan done during life than to die without your financial affairs in order.

Life moves fast for most corporate executives. But at some point, it’s likely that just about all of them will want to leave the company that has played a major role in building their wealth. When that time comes, making the right moves now to secure your finances will help provide the freedom needed to retire or make your next career move.

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