Starting Over: Rebuilding the Financial Bedrock After Loss

Francisco, 52, vice president of operations for a biotech company, is starting over. He never sought the divorce and didn’t see it coming. He’s been working tirelessly for the company over 24 years, and when he’s off, he loves fixing and building projects in his own house and for his buddies when they ask. Although he blames himself for not finding a way to save his marriage, his friends can’t find a harsh word to say about him. The divorce shocked them too.

Francisco had made sure he and his wife lived within their means. After the divorce settlement, neither he nor his ex has debt.  He needs a fresh financial start and some guidelines about retirement, tax and his equity compensation.

He contributes $18,500 to the 401(k) each year, and lets his equity compensation accumulate. The nonqualified stock options (NQOs) were divided in the divorce. Even with half as many NQOs, the rising value of the stock has left him more than satisfied. Now what; should he exercise the NQOs or let them run? Would the new tax code favor exercising them in 2018 or 2019, he wonders.

Francisco has never had a wealth and tax advisor beyond his tax preparer, that is. He thinks a lot about his high tax bracket and wants to consider any advantage to reduce his tax bill.  He read a few different articles recently. One suggested that substantial annual pre-tax 401(k) and post-tax contributions are allowed, in combined employer- employee contributions. Another article claimed that, because he’s over age 50, he may be able to sock away more than he has been doing in tax-deferred dollars for retirement. This 401(k) catchup provision raises some questions. And, can he contribute to a Roth IRA?

He wants to make a fresh start this year, get some help, construct a plan. His divorce may have taken him off his stride, but he is ready to turn the page. High time he had a financial plan to address his vesting and expiration schedule for NQOs, as well as retirement and other savings.

 *The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.

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Executive Compensation, Performance Stock Units, Retirement Planning, Stock Options

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