The 5-Year Retirement Countdown: A Retirement Planning Checklist for Chicago Executives
For many executives in Chicago, Barrington, Oak Park, and throughout the Chicagoland area, the five years leading up to retirement represent one of the most important financial planning periods of their lives.
During this time, decisions regarding executive compensation, concentrated stock positions, retirement income planning, taxes, healthcare, estate planning, and potential relocation can influence long-term financial outcomes. While retirement is often viewed as a single date on the calendar, successful retirement planning typically involves a multi-year process that addresses both financial and personal goals.
For executives with stock options, restricted stock units (RSUs), non-qualified deferred compensation plans, business interests, or significant investment portfolios, advance planning may help identify opportunities and potential risks before retirement begins.
The following checklist highlights key planning considerations during the five years leading up to retirement.
Year 5: Establish Your Retirement Vision and Financial Baseline
Five years before retirement is often an appropriate time to begin a comprehensive review of your financial situation and retirement objectives. Developing a thoughtful approach to retirement planning can provide additional flexibility as retirement approaches.
Evaluate Future Cash Flow Needs
One of the first steps in retirement planning is understanding future spending requirements. This may include:
- Housing expenses
- Travel and leisure activities
- Healthcare costs
- Charitable giving goals
- Family support and gifting objectives
Developing retirement cash flow projections can help determine whether current savings and investment strategies align with anticipated retirement spending.
Assess Potential Relocation Plans
Some retirees consider relocating during retirement for lifestyle, family, healthcare, or tax-related reasons. Individuals evaluating a move from Illinois to Nevada or other states should carefully review the financial, tax, legal, and estate planning implications associated with a change in residency.
Because residency and taxation rules vary significantly based on individual circumstances, relocation decisions should be evaluated with qualified legal and tax professionals.
Inventory Retirement Assets and Executive Compensation
Executives frequently accumulate wealth across multiple asset categories, including:
- Employer-sponsored retirement plans
- IRAs
- Taxable investment accounts
- Restricted stock units (RSUs)
- Performance stock units (PSUs)
- Stock options
- Non-qualified deferred compensation plans
- Real estate holdings
Understanding how these assets are structured and taxed may help support more effective financial planning decisions.
Year 4: Review Investment Risk and Compensation Planning
As retirement approaches, many executives begin evaluating how investment and compensation decisions may affect future retirement income.
Evaluate Concentrated Stock Exposure
Company stock often represents a significant portion of an executive’s net worth. While concentrated positions may contribute substantially to wealth accumulation, they can also increase portfolio risk.
Reviewing diversification strategies and hedging low-cost basis stock may help align portfolio allocations with retirement objectives while considering applicable tax consequences. These decisions should be evaluated within the context of your overall investment management strategy.
Review Portfolio Risk
Market volatility can have a significant impact on retirement outcomes, particularly during the early years of retirement.
Evaluating portfolio allocations, withdrawal assumptions, and retirement income sources under different market environments may help identify areas that warrant further review.
Review Deferred Compensation Elections
Non-qualified deferred compensation plans often play an important role in executive retirement planning.
Reviewing future distribution schedules, tax implications, and retirement timing may help executives better understand how deferred compensation may affect future cash flow and tax planning opportunities.
Year 3: Focus on Tax Planning and Retirement Income Strategies
Three years before retirement is often an appropriate time to evaluate retirement income sources and potential tax planning opportunities, such as tax-efficient investing in Chicago.
Review Estate Planning Considerations
Individuals with significant assets may benefit from reviewing their estate planning strategy and estate planning documents.
This review may include:
- Wills
- Revocable trusts
- Beneficiary designations
- Powers of attorney
- Healthcare directives
Changes in family circumstances, wealth, residency, or retirement goals may warrant updates to existing estate planning arrangements. Estate planning considerations should be coordinated with qualified legal counsel.
Evaluate Retirement Income Strategies
The years between retirement and the commencement of required minimum distributions may present planning opportunities for some individuals.
Effective retirement planning often includes reviewing:
- Withdrawal sequencing
- Roth conversion analysis
- Tax bracket management
- Social Security claiming strategies
- Capital gain planning
Because tax laws and individual circumstances vary, strategies should be evaluated with qualified tax professionals.
Year 2: Review Risk Management and Legacy Planning
As retirement approaches, many executives focus on protecting accumulated assets and ensuring planning documents remain current.
Update Estate Planning Documents
A review of estate planning documents may help ensure that current wishes are accurately reflected and that designated decision-makers remain appropriate.
Special attention should be given following significant life events, including marriages, births, deaths, relocations, or substantial changes in net worth.
Review Insurance Coverage
Retirees often have changing insurance needs as assets, residences, and lifestyles evolve.
Areas commonly reviewed include:
- Homeowners insurance
- Automobile insurance
- Umbrella liability coverage
- Property coverage for secondary residences
Evaluate Long-Term Care Planning
Long-term care costs can affect retirement assets and legacy objectives.
Whether individuals choose to self-fund potential care expenses, utilize insurance products, or employ other planning strategies, evaluating potential future care needs can be an important component of retirement planning.
Year 1: Implement the Retirement Transition Plan
The final year before retirement often involves coordinating financial, employment, and personal decisions.
Establish Retirement Liquidity
Many retirees choose to maintain liquid assets that may be used to support near-term spending needs.
The appropriate level of liquidity depends on individual circumstances, including spending goals, risk tolerance, income sources, and overall financial objectives.
Review Compensation and Benefit Decisions
Prior to retirement, executives may wish to review:
- Bonus payments
- Equity compensation schedules
- Deferred compensation distributions
- Pension elections
- Vacation and PTO payouts
- Employee benefits
Understanding the timing and tax treatment of these items may help facilitate a smoother transition into retirement.
Prepare for Lifestyle Changes
Retirement planning extends beyond financial considerations.
Many retirees find value in developing plans for travel, volunteer work, consulting opportunities, family activities, charitable involvement, or other pursuits that provide structure and fulfillment during retirement.
Why Work With a Fee-Only Fiduciary Financial Advisor?
Executive retirement planning often involves coordinating multiple financial disciplines, including investment management, retirement income planning, tax planning considerations, estate planning coordination, and risk management.
As a fee-only fiduciary investment adviser, Virtue Asset Management provides financial planning and investment management services designed to help clients evaluate the financial decisions associated with retirement.
We work with executives, business owners, retirees, and high-net-worth families throughout Barrington, Oak Park, Chicago, and surrounding communities.
Whether you are seeking a Barrington financial advisor, Chicago financial advisor, Oak Park financial advisor, or a fee-only financial planner, our team works to provide objective guidance tailored to each client’s circumstances.
You may also find value in learning more about our fiduciary duty and how that standard shapes the advice we provide.
Schedule a Retirement Planning Consultation
If you are within five years of retirement and would like to discuss your financial planning considerations, contact Virtue Asset Management to learn more about our retirement planning and investment management services.
Our offices serve clients throughout Barrington, Oak Park, Chicago, and the surrounding Chicagoland area.
Important Disclosure
Virtue Asset Management, LLC is a registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training.
The information contained in this article is provided for informational and educational purposes only and should not be construed as personalized investment, tax, legal, or accounting advice. Nothing contained herein constitutes a recommendation to buy, sell, or hold any security or to engage in any specific investment strategy.
Any discussion of tax planning, retirement planning, estate planning, relocation planning, or investment management is general in nature and may not apply to your individual circumstances. Tax laws and regulations are subject to change, and individual results will vary. Readers should consult their tax advisor, attorney, and other professional advisors before implementing any strategy discussed.
All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results, and no guarantee can be made that any investment objective or planning goal will be achieved.