How to Avoid the Biggest Mistakes Executives Make When Negotiating Their Retirement Packages

By July 25, 2016 October 19th, 2016 Retirement Planning

Retiring from a company that has embodied your professional success for many years is one of the biggest changes that a senior executive will ever experience. It can also lead to one of the biggest financial missteps you ever make. Corporate executives aren’t used to being on the other side of the table when it comes to negotiating with their (soon-to-be-former) companies. And though you may have anticipated this moment, you may also have been caught off guard by a sudden shift in corporate strategy or leadership. You may be looking forward to a life change; but you could also be disgruntled or uncertain about how the next phase of your life will actually play out.

Whether planned or unplanned, welcomed or resented, personally negotiating the details of a retirement support package with an organization that has been your career home for many years is filled with risk as well as potential. And you have just one shot at it. Here are some recommendations to help the conversation go more smoothly and the outcome turn out better for all parties concerned.

Don’t Assume That the Company Is Your Enemy

The first mistake some executives make is treating the retirement package as a battle or a zero-sum game. This can be especially true if the retirement decision was sudden or otherwise contentious. However, even in such cases it is usually more productive to approach it as an open-ended business negotiation where both parties have something to gain and something to lose. The key is to understand not only what you want in the end, but also what your company may have to gain (or lose) through the process as well.

Chances are that, even if the timing of your departure wasn’t completely to your liking, your company wants to see the transition go smoothly for all concerned. For one thing, nobody likes emotional unpleasantness. In addition, and especially if this is part of a larger corporate change, the company may be stretched for resources and/or concerned about ongoing morale. They may wish to leverage your expertise in certain arenas even after your formal departure. They might even welcome an offer on your part to mentor younger executives who are being groomed to fill functions you are familiar with. The point is: take time to imagine yourself in the position of the person you’re going to be talking to as well as the person who will be approving the final arrangement. What do you both want? Where do your wants differ? What fits into the company’s current plans and goals?

Don’t Make the First Move

Try as hard as you might to understand another person’s perspective, there are some facts that you will simply never know. Your first step in the actual conversation, therefore, should be one of discovery.

There are, of course, two potentially different problems to being first-out-of-the-gate in this kind of a situation. The first, obviously, is that you may sell yourself short and offer to accept a package that is far less generous than the one your company was ultimately willing to give you. If so, you’ll leave a lot of money on the table. On the other hand, if you ask for a package that is significantly richer than what the company had in mind, you risk offending them or giving the impression that you’re being unreasonable. Such a misconception could prejudice the rest of your negotiation.

So even if you’re used to being in charge, it’s best to be a bit humble in this situation. You’re doing this for the first time in your life, remember? The people you’re talking to (probably) do it for a living. You can credibly ask them, as the experts, to make the first move.

Don’t Fail To Do Your Homework

Just as in any other negotiation, you’ll be in a better position if you know what to expect and if you have hard data to support your positions. So, in addition to thinking honestly about your goals as well as the company’s financial and business realities, you’ll want two other kinds of information. First, find out how other retired executives have fared over the past couple of years. See if they’ll talk to you about their experiences as well as about their own packages. Even if they can’t (or won’t) talk specifics, you can ask them what was easy or hard, as well as what they would do differently if they could. You’ll learn a lot.

Find out what is typical in your industry. If your company is stingy with retirement packages and you want to argue for a more ‘standard’ package for your industry, you’ll need the facts to back you up. Having the data will make the argument less emotional. Perhaps the company will even be grateful – in a way – to know that their financial norms risk putting them at a hiring disadvantage vis-à-vis other industry players.

Don’t Get Fooled By Big Numbers

When talking about one-time payouts, it’s easy to get blinded by big numbers. Lump sum payouts can look deceptively large, but one needs to consider them in the light a whole span of retirement. For example, a cash offer of $250,00 may seem large, but when divided over a 30-year retirement span, it only amounts to only $8,330 per year – not counting inflation. Similarly, you should carefully evaluate any lump com payout proposal in comparison to any alternative, guaranteed annual payout. Annual payouts reflect embedded interest rates and may also include income guarantees, which can be valuable. Smaller numbers, guaranteed over many years, can be more valuable to a retiree than a lump sum. Do the math.

Don’t Just Focus On Cash

Though cash is the most visible – and typically the most valuable – aspect of a retirement package, it isn’t everything. The problem with cash payouts is that they may be the thing that your company counterpart has the least flexibility to change on your behalf. So even if your company is relatively inflexible with regard to the cash component of your package, there are still may be non-monetary benefits that they can to be much more generous with.

For example, how about including health, life, or disability insurance in the discussion? It may also be possible for certain company perks or benefits, such as legal or accounting services, to be extended to you without charge for at least some time. Such ‘asymmetric’ items are ideal areas for negotiation because each dollar of services the company provides is actually worth nearly twice the amount of pre-tax cash that they would give you. Since the additional cost to the company will probably not be called out, it may be relatively easy for company officials to say yes to such requests.

Another huge opportunity may lie in the actual timing of your departure, especially where taxes, options and stock grants are concerned. Rather than retiring in December, see if you can retire in January and lower your tax bill for that final year by spreading your final income over two tax years. Better yet, retire in January and ask for a bonus stock grant on the way out or negotiate a continuance in your options holding period, which could both result in significant value to you over time.

Don’t Be Too Greedy

It’s called ‘taking the last bite out of the apple,’ and it’s a negotiating technique many people find it highly annoying. It means always wanting more, and never knowing when enough is enough. The problem is that if you get too greedy, asking for concession after concession, you’ll eventually risk the whole deal. Remember, a great deal of your leverage in this situation depends on the goodwill of your company counterparts. It also depends on the position of the person with whom you are negotiating. So avoid an endless litany of demands that will test the good will of your counterpart. And think twice before you make requests that are beyond what that individual can commit to, automatically moving the discussion to the legal department or to the board. You may not fare as well with those parties.

On The Other Hand, Don’t Simply Fail To Ask

Asking for the one big thing that you really want – even if you think it’s improbable – isn’t the same as endlessly negotiating for more and more as described above. If done respectfully, you’ll probably not suffer by making a special request that’s particularly important for you, even if you’re eventually turned down. It usually can’t hurt to ask. The fact is that people aren’t very good mind readers, and if you never ask no one can ever consider your request.

Never Forget That The Negotiation Is Not The Relationship

Finally, never confuse how you feel about the person sitting across the table from you with the negotiation itself. Whatever the financial details, you want to be respectful and appreciative of this person. You can do that through your demeanor and your choice of words. Maintaining a positive personal relationship with him or her can only help your cause.

Remember that having different goals and limits doesn’t make you enemies. But it can be a delicate balance, and it’s easy to let professional conflict spill over into personal animosity. In fact, however, if you conflate the outcome of your discussion with your personal relationship, it’s almost a foregone conclusion that you’ll lose. For example, if you say something like “I would have expected better treatment from a mentor (or mentee) of mine,” you’ve lost the negotiation before it begins.


There’s a good reason you’ve enjoyed so much success in your career. If you bring the same personal and analytic skills you’ve always employed to this final corporate task, you’ll maximize the chances of an outcome that you’ll be happy to live with for years to come.

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