Not all wins are on the payslip: where executives actually build (or lose) wealth
Moving into an executive role is a huge accomplishment. Years of building expertise, putting in the work when no one was watching, and saying yes to opportunity and then handling everything that came with it are paying off.
It might feel like the new salary is enough to set you up for hitting your lifestyle and retirement goals. But your salary is only a small piece of your wealth-building journey. The serious wealth-building stuff is in your equity compensation, if you know what to do with it. If you don’t, it could come back to haunt you as surprise tax bills, missed wealth-building opportunities, and costly money mistakes.
Let’s take a look at the pieces beyond salary that actually build lasting wealth, how you can make them work harder, and what you can do to stay ahead of the tax surprises that can come with your new compensation package.
In this article
- Your base salary isn’t the full story. Long-term wealth is built in equity, deferred compensation, benefits, and tax strategy.
- Equity and deferred comp are powerful but risky. RSUs and stock options can grow massive wealth, but only with strategic planning, diversification, and tax planning.
- Lifestyle choices matter. Upgrading homes, cars, and vacations can eat away at savings and prevent long-term wealth growth.
- Protect what you’ve earned. Insurance, diversification, and regular financial check-ins are critical to preserving wealth and avoiding costly mistakes.
- Partner with a financial advisor. A pro can create a plan that turns high pay into long-term wealth.
Equity compensation
Your executive compensation package is made up of your total pay and benefits. It usually includes your base salary, bonus, equity compensation, benefits, perks, and severance. That means your paycheck is just the tip of the iceberg.
The good stuff, the wealth-building stuff, is found in the equity compensation part of your executive compensation package. Equity includes things like Restricted Stock Units (RSUs), stock options, and other equity awards.
Your equity compensation can make you serious money, but only if it’s managed strategically. For example, when your company does well, something like a $100,000 RSU grant could be worth millions if the stock climbs over the next few years.
But equity isn’t free money. It comes with financial risks attached. Too much company stock puts you at the mercy of market swings and company-specific risk. One crash and years of deferred pay could vanish.
Timing matters too, especially when exercising options. That’s when you buy your company stock at the price set when the options were granted, which is often below market value. If you don’t plan for taxes, you could owe thousands before you even sell a single share.
Deferred compensation and retirement plans
Deferred compensation and executive retirement plans are where the real money (or the hidden losses) hang out. These are things like non-qualified deferred comp (NQDC) plans, SERPs, and enhanced 401(k) contributions that let you stash more than the typical employee.
These plans let you defer income and invest bigger chunks than most people can. Over time, that compounding growth can outpace your standard retirement contributions.
But there’s a catch. Deferred comp is often not protected. If the company hits a rough patch, those funds aren’t guaranteed. Bad investment choices can eat away at your gains, and pulling money out without thinking about taxes can cost you more than you planned.
Remember: Wealth is not just what you earn. It’s what survives over time. Understanding the structure and protections around deferred compensation is critical.
A financial advisor can help you see the full picture of your deferred compensation and retirement plans. They’ll break down what’s actually at risk, model different scenarios, and help you align your withdrawals with taxes so you don’t get hit with surprise bills. They can also help you diversify and protect your wealth.
Benefits and perks
You get more than paychecks and equity. Health programs, tuition reimbursement, and even financial planning assistance can be part of the package. But not all perks are created equal, and some can quietly cost you if you ignore them.
Take company cars, allowances, or relocation bonuses. They might feel like small wins, but many are taxable. Miss the tax implications, and your take-home pay can be a lot smaller than you expected.
On the flip side, benefits like employer-matched retirement contributions, stock purchase programs, and company-paid insurance can quietly build wealth over time. The key is to be proactive.
A financial advisor can help you keep more of what you earn and make your equity work harder. That could mean paying taxes early at a lower rate, donating stock to charity for a tax break, or using investment losses to offset gains. They’ll help you map out a year-by-year plan so you don’t leave money on the table.
Lifestyle creep
As the size of your paychecks increases, it’s tempting to upgrade homes, cars, vacations, and even personal staff. The psychological pull of “living like you earn” can silently erode wealth.
If you tie your expenses to your salary rather than to long-term financial goals, you may find that raises and bonuses do little to build net worth. The more you spend to match your pay, the less you invest, and the smaller your long-term wealth grows.
Wealth is built not by how much you earn, but by how much you save, invest, and protect. Mindful budgeting and disciplined investing are critical to converting high pay into sustainable wealth.
Taxes
High earners have complicated tax lives. Your base salary, bonuses, stock options, and perks all play by different rules at the federal, state, and local levels. Ignore planning, and you could pay way more than you need to or accidentally trigger a massive tax bill.
For example, exercising stock options during a big-income year can create a huge tax hit. Pull money from deferred comp or retirement plans at the wrong time, and you could get pushed into higher tax brackets.
The good news is taxes aren’t a guessing game. There are rules around them and financial advisors can help you get ahead of tax surprises by building a tax strategy around your financial decisions. This will keep more of what you earn and protect the wealth you’ve worked so hard to build.
Risk management
Protecting what you already have is just as important as making more. Treat your protections like investments because they, too, compound value over time by keeping your wealth safe.
Key areas to consider include:
Insurance: Life, disability, and liability coverage aren’t just boring paperwork. They’re your financial safety net. Imagine a sudden health issue, unexpected lawsuit, or prolonged period of unemployment. Without the right coverage, even a six-figure income can be wiped out in months.
Asset protection: Trusts, limited liability companies (LLCs), and other structures aren’t just for the ultra-wealthy. They can shield your assets from creditors or legal claims. For example, if you own rental properties or have a side business, these tools can protect your personal wealth if something goes wrong.
Diversification: Overconcentration is a silent killer. Holding too much company stock or investing only in one sector can erase years of gains in one downturn.
Regular reviews: Risk isn’t a set-it-and-forget-it activity. Markets shift, companies evolve, and your personal situation changes. Conducting regular check-ins with a financial advisor ensures your protections grow with your wealth.
Working with professionals who understand the complexities of executive compensation ensures you’re covered on all fronts: protecting assets, managing risk, and avoiding mistakes that could cost you years of wealth.
Get your financial house in order
Managing equity compensation is a job unto itself. CURO can handle the numbers, plan for taxes, and optimize your equity so you can focus on life while your wealth works as hard as you do.
This material is intended for informational/educational purposes only and should not be construed as investment, tax, or legal advice, a solicitation, or a recommendation to buy or sell any security or investment product. Talk to your financial advisor before making any investing decisions.