Accenture fosters a fast-paced and challenging environment that demands a lot from employees.
Thus, not many make it to Managing Director, and those who do usually retire much earlier than the “traditional retirement” age of 65.
Many of my Accenture MD mentors left the firm in their early 50s, usually moving to “industry” or another consulting firm.
Those who stuck it out longer typically retired before their 60s went part-time or continued with their own consulting (to consultants).
While this might seem unforgiving, Accenture MDs have a significant ability to generate large amounts of cash and equity, which should easily fuel a very comfortable retirement when managed correctly.
Taking an early retirement mindset
This earlier retirement window should factor into retirement planning for Accenture Managing Directors.
For example, if your plan says you have to work at Accenture until age 65 and continue increasing your income, you might not be set up for success.
Instead, you should plan an earlier retirement age, such as in your 50s. This mindset should be used to prepare yourself financially as well as mentally.
Accenture MDs have a lot of power and responsibility, and it can be tough to walk away from all of that when you retire. Mindset is critical here.
What to do with your time?
On the softer side of the planning, you need to think about what you’d do with your time if you suddenly retired from in your 50s.
Would you continue working in the ‘industry’ where you’ve probably built a large network of potential employers?
Does this mean you’d be full-time in your next career?
Maybe you’d rather take a part-time role as a consultant to other firms or industries.
Others might prefer to get out of the corporate world altogether and spend time supporting non-profits or universities.
You have a lot of valuable experience; how do you want to put it to use?
Another option: make up for all that lost time while working and traveling, and retire early! Have you planned your finances to allow this to happen?
How to prepare financially for early retirement
In many of the scenarios discussed above, you’ll take a large income hit by leaving Accenture. You should plan on this being the case and prepare financially while you’re making money.
To start, make a realistic estimate of when you’ll leave Accenture and how much money you’ll need to support your new lifestyle.
If you’re currently spending $10k a month and don’t want to spend less, you’ll need to make up your lost Accenture income with a new salary or live off investments.
The financial planning elements start to get more important here as you look at different scenarios, but this should give you an idea of how much money you’ll need.
Which investment vehicles to use?
As you contemplate your transition, you’ll need to think about the best way to build up your required stash.
You’ve probably saved a lot of money in your qualified accounts (401k) and IRAs, but this creates some challenges that need managed.
The other large chunk of your investments is probably in Accenture stock accumulated through the VEIP and various other equity grants.
This means most of your savings and investments will be in tax-deferred accounts or Accenture stock.
You should consider a few other options that will lower your tax burden now while you’re making so much money and allow tax-advantaged withdrawals later.
Read the full details of Accenture MD investment opportunities, or an overview:
1. Nondeductible IRA
Even though you’re way past the point of contributing to a Roth IRA or a tax-deferred IRA, you can still use a nondeductible IRA.
This option allows you to contribute to an IRA with after-tax money, but all growth is tax-deferred.
You can convert the nondeductible IRA to a Roth IRA, but that starts getting more technical based on your other IRA accounts, and you should work with a professional.
2. After-tax 401(k) contributions
Did you know Accenture allows you to contribute after-tax to your 401(k)?
This is different than your regular tax-deferred 401(k) contribution or even the Roth 401(k) contribution.
You’re able to contribute an additional $15,000 per plan year, on top of your regular 401(k) contributions.
These contributions are similar to the nondeductible IRA as you’re allowed to contribute after-tax money into this account, which can then grow tax-free!
(Don’t worry, most people haven’t heard of this option before).
Like the nondeductible IRA conversion, there’s also an option to complete an in-service Roth conversion with this account.
You really should talk to a professional and your benefits provider before jumping into this as there’s a huge danger of messing these up and owing a lot of money in taxes.
3. Health Savings Account Contributions
Another great option for high-income individuals is to use a Health Savings Account (HSA).
HSA contributions are before tax, which lowers your high tax bill, allows your money to grow tax-free, and you can reimburse any qualified health expenses tax-free.
This is the only “triple-tax advantaged” account, and many people use it as an investment vehicle similar to an IRA.
Contributions build in the account each year; it’s not a “use it or lose it” situation like the flexible spending account (FSA), and most accounts allow you to invest it in the market.
If you never reimburse yourself for health expenses and instead save your money, it becomes similar to an IRA because, at age 65, you can spend the money without penalty.
Just like the IRA, money you take out after 65 will be taxed as income.
Of course, you can also continue using the HSA money after you retire for tax-free qualified health expense reimbursements.
4. Donor-Advised Fund (DAF)
Another great vehicle to take advantage of while you’re in your high-earning years is the donor-advised fund (DAF).
This is a fund you can set up with one of the big investment companies that essentially allows you to build your own charitable foundation.
Once you set up a DAF, your contributions are treated the same way as a qualified 501(c)(3) donation, meaning you can deduct them from your taxes if you itemize.
One strategy is to bunch your charitable contributions into a DAF in your high-income years so you can lower your tax bill, build up your giving fund, and then have a huge pot of money to give away later!
You should especially think about this in high-income years, like when your MD grant vests.
Retirement Strategies for Accenture Execs
If you’ve done all the work beforehand to save and invest enough money, combined with optimizing contributions to the various accounts mentioned above, now you need to think through how you spend the money.
The example I’ll walkthrough below is just that, an example. Everyone’s situation is different, so you should work with a professional when creating your plan.
However, here are some things to think about if you’re retiring early with Accenture.
1. Plan to not have Social Security yet
If you retire in your 50s, you won’t have access to your social security. The earliest age you can start taking benefits is 62, but most people will be better off waiting until Full Retirement Age, or even until age 70.
That means you’ll have to fund everything yourself. If you’re going to work somewhere else, it’s probably not an issue, but what if you want to retire?
This is where it helps to know some additional tax secrets, like avoiding paying capital gains taxes.
2. Avoid capital gains taxes
Since you’ll have a sweet nest egg built up, which will probably include a lot of Accenture stock due to your equity requirement, you’ll more than likely be sitting on a huge amount of capital gains.
If you sell the stock during your high-income years, you’ll pay up to 23.8% federal taxes plus applicable state taxes, but if you wait until your income is much lower, there’s a potential to sell this stock and not pay any capital gains!
It takes some major planning, but check out my post on avoiding capital gains taxes for additional insight.
3. Consider IRA conversions
If you plan your income correctly, there’s a chance Roth IRA conversions could be very advantageous to you.
Since you won’t have any social security income, and if you’re living off savings or capital gains, it might make sense to convert some of your money from your 401(k)/IRA to a Roth IRA account.
Any money in your Roth account is tax-free, and when you take the money out after age 59.5, when it becomes penalty-free, it won’t push up your income or capital gains tax brackets.
Once again, you should consult with a professional because this could have negative implications if you messed it up.
4. Review insurance needs
You’ve had great health, disability, and life insurance while at Accenture, but now you’ll be on your own.
Your budget should include enough money to pay for your insurance needs if you can’t get it from another company.
These are just some of the things to think about if you’re on the Accenture retirement track. It will probably make a lot of sense for you to use a qualified planner, as your situation is very complicated.
If planned correctly, though, you can optimize the money you worked so hard to earn while minimizing how much of it is given to the government.