A Woman’s Guide to Retirement Planning with Equity Compensation

Written by Hazel Secco, CFP ®, CDFA ®

Equity compensation can be a game-changer for many women in executive roles, but let’s be honest—it can also feel overwhelming. Trying to navigate stock options, RSUs, and performance shares while juggling other financial goals, like maxing out your 401(k) or exploring charitable giving, isn’t always straightforward. You might be asking yourself, “How do I make my money work for me when I don’t have enough time and energy?”

As you start thinking about your retirement strategy, it’s important to understand how equity awards fit into your overall financial picture. Selling or keeping shares of your company stock shouldn’t be a standalone piece of decision.

In this blog post, we’ll cover the key decisions around managing your equity compensation, how to weave it into your broader life goals, and ways to prepare for potential market ups and downs. Plus, we’ll talk about the value of working with a financial advisor who can help you create a plan that suits your unique needs. You’re not alone on this journey—together, we can build a retirement plan that truly reflects who you are and you feel comfortable with.

The Role of Equity Compensation in Women’s Retirement

Equity compensation can play a huge role in retirement planning for women, offering a way to bridge the retirement savings gap and benefit from your company’s growth. Understanding how to make the most of these benefits is a must for female executives looking to build a confident financial future.

Closing the Retirement Savings Gap

Women face unique challenges in retirement planning, partly because of systemic factors like the gender pay gap. On average, women earn about 83 cents for every dollar that men earn, which can make it harder to save and invest at the same rate.¹ Over time, this can lead to lower Social Security benefits and potential shortfalls in retirement. That’s why it’s so important to take full advantage of equity compensation—things like stock options, RSUs, and employee stock purchase plans (ESPPs). With a bit of planning, these benefits can help boost your retirement savings and give you a clearer path toward financial independence.

One smart move is to make sure you’re maximizing the benefits of your employer-sponsored retirement plans, such as 401(k)s. Take the time to closely review your plan documents so you understand all the perks, including the company match.

I’ve seen many pharma executives who are incredible savers, but it’s not just about how much you save—it’s about where you save it. Simply putting money aside without a strategy might not be the most effective way to reach your financial goals. Wouldn’t it make sense to invest more in an account if you knew it could give you a better bang for your buck? By strategically prioritizing where you save, you can ensure you’re getting the most out of each dollar, setting yourself up for greater long-term success.

Leveraging Company Growth

Equity compensation lets you share in your company’s success. As the company grows, the value of your equity awards can grow, too, which can be a great way to build wealth over time. For instance, when a company’s stock price increases, employee stock options can provide more leverage than other investments. ² While it’s not common, a single grant can potentially grow into a substantial portion of one’s wealth.

The growth potential makes equity compensation a powerful tool for helping professional women to bridge a retirement savings gap caused by career breaks or lower wages. However, while the potential growth is exciting, remember to be strategic. Having too much of your wealth tied to a single company’s stock can be risky, so it’s often wise to diversify your holdings as you get closer to retirement.

To make the most of your equity compensation, consider:

• Getting to know your equity plan: Understand the details, like vesting schedules and exercise periods.

• Thinking about taxes: Know the tax implications before you exercise options or sell shares.

• Fitting it into your overall retirement plan: Integrate your equity compensation with other assets to create a balanced approach.

• Building a plan that feels right for you: It’s not just about the numbers; it should align with your values and life goals.

Navigating Equity Compensation Can Be Tricky—But You’re Not Alone

Managing equity compensation and planning for retirement doesn’t have to be overwhelming. Working with a financial advisor can help you navigate these decisions and build a strategy that suits your needs. A tailored approach can make all the difference, helping you manage the complexities of stock compensation, taxes, and long-term goals without feeling stuck or stressed.

Integrating Equity Compensation with Life Goals

Your equity compensation is more than just a financial tool—it can help you reach major life milestones and align with what really matters to you. Whether it’s buying a home, funding education, or supporting charitable causes, your equity awards can give you the extra boost you need.

Preparing for Market Volatility

As you get closer to retirement, market ups and downs can be more nerve-wracking. Having a plan in place can help you feel more secure. Diversification, hedging strategies, and regular reviews of your financial plan can help you navigate any bumps along the way.

A Financial Plan That Grows with You

Your financial plan is a living thing—it evolves as your life and circumstances change. The same goes for your equity compensation strategy. Regular check-ins with a financial advisor can make sure your plan stays aligned with your goals, so you’re always on track to enjoy a comfortable and fulfilling retirement.

FAQs

1. What are some common mistakes in retirement planning?
   • Not having a clear picture of what you want your retirement to look like can be a big stumbling block. Without a vision for how you want to spend your time, it’s harder to create a plan that supports those dreams. Another common misstep is thinking of each investment account separately instead of as part of a larger strategy, which can lead to missed opportunities.
2. What is the 4% rule?
   • The 4% rule is a general guideline for how much you can safely withdraw from your retirement savings each year. However, with people living longer and market conditions shifting, experts are now suggesting a more conservative approach, closer to 3%, to help ensure your funds last.
3. What happens to unvested stock options when I retire?
   • Usually, unvested RSUs are forfeited when you retire, but the specifics can depend on your company’s policies. It’s a good idea to check the details and, if needed, work with a financial advisor to plan ahead.

Planning for your retirement should be about more than just saving money—it’s about creating a future that lets you live the life you want. And when it comes to equity compensation, having the right strategy in place can make all the difference.

Set up a 20-minute intro call with us. We’re here to make your life easier and more straightforward, so the money you’ve worked so hard for can start working for you.

References

[1] – https://www.morganstanley.com/atwork/articles/women-retirement-stakes-higher
[2] – https://medium.com/illumination/role-of-stock-option-exercise-in-retirement-planning-a1631f6a2fd5

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