Retirement Advice from Corporate Executives
August 30, 2007
If a wealthy retired corporate executive gave you retirement advice would be thankful or feel like they were rubbing your nose it in?
Executive Privilege
Our most recent company newsletter featured several former corporate executives that have retired from the business to pursue their life’s ambitions. I had mixed feelings as I read the article in my worker-drone cubicle. They all gave good advice on preparing for retirement but they also had much larger salaries than most people in the company. I understand that the corporate benefits office was trying to promote 401k investing and good money management with the article but it didn’t sit quite right reading about these executives living their dreams while we slave away in our cubes.
Money Management
These executives worked long and hard to get to the top but they didn’t achieve early retirement simply by earning a lot of money. They were smart and managed their money well. The article started off by explaining they had all set their retirement goals when they were young and managed their lifestyles and finances around the goals. It also mentioned that the booming market of the 1990’s had a part in helping them retire early.
Retirement Advice
Here are some of the actions and philosophies the executives follwed that allowed them to retire early:
– maximized participation in the company 401k, invested in non-company plans like a Roth IRA, and worked there long enough to become fully vested in the profit sharing plan
– lived a conservative life style, tried to manage their money to stay out of debt and that left more money to invest for retirement
– "When I got extra money it went into investments; I didn’t drive big fancy cars and I didn’t buy big fancy houses. You have to put aside to take care of yourself, and if a company hands you money, you have to manage what they hand you"
– Started planning for retirement as soon as they joined the workforce, first thing they did was start a savings account
– Remained debt-free
– "It’s all about choices: if you choose to spend, you choose to work until you pass away; and if you choose to save, you leave when you want"
Article Reactions
I’m glad that our company is trying to promote planning and saving for retirement, I just wish they had used some role models that more of us workers could relate to. I’m afraid that since only executives were interviewed people may miss some of the message on money management and focus on the fact they need to become corporate big shots to make enough money to retire. What do you think? Did the executives inspire our workforce to save? Will people be able to see beyond the big salaries to the wise retirement preparaton advice?
All posts by Ben Edwards
Anonymous, I agree, the advice focused on planning and deferred consumption and those are principles that will work across all income levels.
BUT
High paid executives have much more money to work with. They make enough money that it’s much easier for them to max out their 401ks and save money. Even with deferred consumption its easier for them to live a comfortable lifestyle, whereas in order for the a regular worker to max out the 401k, they’d have to sacrifice a great deal more.
I do agree it’s good the company is trying to raise awareness but I still think it would have been more effective if they would have profiled a different sector of the workforce.
Based on your summary, none of the advice given remotely focused on maximizing income by moving up the corporate ladder.
All of the advice focused on planning and deferred consumption.
Planning and deferred consumption are principles that will work across all income levels.
Based on that, I’m assuming that the judgment made in choosing retired execs to speak to this issue was something along the lines of: “Hey, retired Senior Muckity Muck was only able to retire early due to planning and deferred consumption. That logic applies across all income levels, so pointing that fact out will build unity within the Company and be beneficial advice to our workers. Plus, even though he’s retired, ex-Senior Muckity Muck will feel obligated to contribute to this article because he was an executive. If we ask a line worker to give their story, that’s extra work for them w/o compensation, which isn’t fair, and exposes them to risk that we shouldn’t ask them to shoulder (a la your not publicizing this website.”
For the record, I’m not an executive. I am an employee at a shop that gives zero guidance on financial issues. Because of that, I’m impressed that your shop does give financial advice, even if they give it imperfectly. I’ve thought often of putting together a seminar on common sense financial issues (e.g., don’t buy a fancy car, save an emergency fund, etc.), but haven’t pursued it because the political risks aren’t worth it personally (e.g., persuading someone to build an emergency fund entails convincing them they can be canned tomorrow).
Nice work bill, sounds like you guys are on the right track. Where did you fall on the salary scale during the years you worked?
You’re right MoneyNing, I don’t advertise this site to my co-workers because sometimes I write about work issues.
ben: Maybe you should approach them and say you want to hold meeting and help explain the principles to everyone since you are part of the workforce and can relate to everyone else better. But then you might not be able to cover the fact that you own a personal finance site if you do so 🙂
bill: Good for you! I’m still young but this is definitely what I’m trying to do!!
My wife and I are in our 50s, and our cash worth (not including the mortgage-free house) is just over seven figures. We did it using those techniques. I think that for us the key was ‘stick as much away as often as you can; get into some kind of investment club-401k, mutuals, whatever’.
I can see how this can be slightly irritating to the company’s regular workforce. I think it would irritate me as well. CNN recently posted an article about how CEOs of the Fortune 500 companies earn 360+ times the amount of the average worker in their company. If you can’t retire on that, I don’t know what it would take. Most of the CEOs also have defined plans that will pay them well into their golden years, if not pay them for life. Like you, I would prefer to hear about how a mid-level manager prepared for retirement and was successful.