Retirement readiness

Can I retire after my executive severance?

It's the most consequential question in executive transition planning — and the one that gets the least structured analysis. Most executives know roughly what their severance package is worth. Very few have modeled whether that number, combined with their portfolio and equity proceeds, actually supports the rest of their life at their current spending level.

This page walks through the five components that define the retirement readiness answer, then gives you a calculator to run the numbers on your specific situation.

What the analysis actually involves

1. Total investable assets: portfolio + severance + equity, after taxes

Start with what you actually have to work with — not gross numbers. Your severance is ordinary income and taxable in the year received. Your RSU settlement, option exercise proceeds, and NQDC distributions are also taxable. Run the after-tax number from each source. The severance tax calculator covers the cash portion; the stock options guide covers ISO and NQSO treatment. Add these to your existing portfolio: taxable brokerage, 401(k), IRA, Roth, and any deferred compensation that will eventually distribute.

2. The healthcare gap before Medicare

Medicare starts at 65. If you're leaving at 52, 55, or 58, that's a multi-year bridge at full cost. COBRA lets you continue your employer's group plan for up to 18 months at 102% of the full premium — for executive-level family coverage, typically $1,800–$3,200/month.³ After COBRA expires, the ACA marketplace is the primary option. Note that enhanced ACA subsidies expired December 31, 2025, and the 400% FPL cap has been reinstated for 2026 — at executive income levels, subsidies are minimal or zero. Budget at least $2,000–2,800/month in premiums until you reach 65.

At 65, Medicare Part B standard premium is $202.90/month for 2026, plus Part D (~$35/month average), and a Medigap supplement (~$150–200/month).¹ IRMAA surcharges apply above $109,000 MAGI for single filers or $218,000 for couples — based on income from two years prior. The year you retire with large severance or equity proceeds can trigger elevated IRMAA two years later, even when your ongoing income has dropped significantly.

3. Social Security: claim timing changes the retirement math significantly

Claiming at 62 gives you 70% of your FRA benefit. Waiting to age 67 — full retirement age for those born 1960 or later — gives you 100%. Waiting to 70 gives you 124%.² For a $3,500/month FRA benefit, the range is $2,450–$4,340/month. The break-even on waiting from 62 to 67 is typically around age 80–82. The lifetime income difference for a couple (including survivor benefit implications) often favors delay if you have the assets to bridge.

One planning note: if you claim SS before FRA and earn more than $24,480 in 2026 wages, SS withholds $1 for every $2 earned above that limit.² If you plan to consult or work part-time while drawing early SS, model the earnings test impact before committing to the claim age.

4. Rule of 55 — penalty-free 401(k) access before age 59½

If you separate from the employer where a 401(k) is held in or after the year you turn 55, you can take distributions from that plan penalty-free under IRC §72(t)(2)(A)(v).⁴ The usual 10% early-withdrawal penalty does not apply. Regular income tax still does. Critical constraint: the rule applies only to the 401(k) at the employer you just separated from — not to IRAs, and not to 401(k)s from prior employers (unless those were rolled into the current plan before separation). For executives leaving between 55 and 59½, this is often the primary pre-Social Security liquidity source.

5. The safe withdrawal rate and its executive context

The 4% rule (Bengen, 1994) holds that an initial withdrawal of 4% of a diversified portfolio, adjusted for inflation annually, has historically lasted 30 years across most market environments. For executives retiring at 52–57 with potentially 35–40+ years of retirement, financial planners often model 3.0–3.5% as a more conservative starting point — not because the math is wrong, but because a longer horizon faces more uncertainty.

A concentrated stock position, illiquid equity stakes, or deferred comp that distributes on a fixed schedule also affects the effective withdrawal rate on liquid assets. If a meaningful share of your total net worth is illiquid, the liquid portion needs to support spending during the illiquid period — which can mean an effective draw rate well above 4% on that subset.

Retirement readiness calculator

Estimate whether your combined assets — after taxes and healthcare — can sustain your spending for life, with and without Social Security income.

What an advisor models that this calculator doesn't

A full retirement readiness analysis for an executive exit involves several layers beyond portfolio-to-spending ratio:

• Tax-efficient withdrawal sequencing — which accounts to draw first (taxable, traditional IRA/401(k), Roth) to minimize lifetime tax. This matters most in the gap between separation and the onset of required minimum distributions at age 73 or 75 under SECURE 2.0.
• Roth conversion window — in low-income years between separation and SS claiming, a large Roth conversion can shift significant assets to tax-free status before the portfolio is needed at scale.
• NQDC payout coordination — deferred compensation distributions create income spikes that need to be modeled against investment returns and SS timing to avoid bracket compression. See the deferred compensation guide.
• Concentrated stock exit — executives often leave with meaningful concentrated positions. Systematic liquidation timing, exchange funds, and charitable giving structures affect how quickly concentration risk can be reduced without creating a large single-year tax event.
• Spousal SS survivor benefit modeling — the claiming age that maximizes individual lifetime income is not always optimal for a couple once survivor benefits and the higher earner's benefit are modeled together.