Whether planned or unexpected, leaving a company presents challenges and opportunities that have the potential to impact long-term wealth and lifestyle. Proactive financial planning is essential to making informed decisions and mitigating risk.
Jarrett Solomon, Partner & Managing Advisor at Connecticut Wealth Management (CTWM), shares key financial considerations executives should evaluate when exiting a company.
Managing the Financial Complexity of an Exit
“One of the biggest challenges executives face when leaving a company is managing the complexity of their finances to make a clear, informed decision,” said Solomon.
Unlike employees with straightforward salaries, executives often have layered compensation structures, including stock options, restricted stock, and deferred compensation.
“Understanding the nuances of your finances and stepping back from the details, can help you align your decisions with your aspirations,” said Solomon.
Using a Personalized Financial Plan to Guide Exit Decisions
A career exit demands more than general financial advice; it requires a tailored approach.
“You can’t make an effective recommendation without first understanding a client’s complete financial picture,” said Solomon. Every decision, from managing deferred compensation to exercising stock options, carries both short- and long-term implications.
“Important financial decisions shouldn’t be made based on a rule of thumb,” continued Solomon. A personalized financial plan helps executives navigate financial complexities and avoid costly mishaps.
By analyzing income fluctuations, optimizing tax strategies, and aligning decisions with long-term goals, executives can make informed choices that protect their wealth.
Managing Deferred Compensation with Clarity
Deferred compensation is a critical factor in an executive’s exit. While many executives structure payouts to coincide with retirement, an unexpected transition can accelerate distributions, potentially triggering higher taxes.
“The keyword here is clarity—and clarity can but doesn’t necessarily mean maximizing income,” said Solomon. “Clarity means fully understanding the consequences.”
A proactive approach ensures that deferred compensation aligns with broader financial goals and minimizes unnecessary tax exposure.
Evaluating Equity Compensation
“Often, leaving a company means leaving compensation behind. That’s why it’s so critical to assess what you are gaining in return,” said Solomon. “It’s not always just about money—it’s about understanding the full impact of your compensation package, including benefits.”
Be sure to closely examine the tax implications of vested stock, severance packages, and sign-on bonuses at a new employer. Receiving multiple payouts in a single year can significantly increase tax liability.
“Understanding the after-tax impact of staying versus leaving provides greater clarity on cash flow and long-term wealth accumulation,” said Solomon.
Tax Implications of Company-Mandated Relocation
Some executives may be required to relocate as part of their exit. Moving across state lines introduces tax implications that can impact your finances.
“If you’re considering relocation, understand how taxes will impact your financial picture,” said Solomon. “Specifically, how much more or less will you have in your pocket each year?”
Strategic planning, such as timing the recognition of stock options or other compensation components, can help minimize tax exposure in high-tax states. Additionally, the cost of living in a new location should be factored into your decision. Relocating to a lower- or higher-cost region can significantly impact both your lifestyle and financial situation.
Planning Your Next Move with Confidence
A comprehensive financial plan for executives extends beyond tracking stock options and bonuses—it helps ensure that every decision supports your long-term financial success. Understanding the full scope of an executive’s financial life, from managing concentrated stock positions to optimizing tax strategies, is key to mitigating risks and maximizing opportunities.
Whether you are planning an exit or navigating the financial impact of leaving a company, having a strategic plan in place helps you make informed decisions. At Connecticut Wealth Management (CTWM), we focus on helping executives navigate these complexities so they can move forward with clarity and confidence.
Navigating a career transition? Now is the time to align your financial strategy with your goals. Contact us today to connect with our team.