older business man with hands over piggy bank Imagine the case of an executive who’s paid for four children to attend an out-of-state four-year college (those bills can easily top $1 million) and who pays for the long-term care of a parent with a condition such as Alzheimer’s — this can blow a hole in even the best-funded retirement plan. (Photo: Shutterstock)

A growing number of firms, from Fortune 500 companies to partnerships, are dealing with an unusual problem that might surprise a lot of people: what to do when a highly paid executive or a partner says they don’t want to retire for another few years because they haven’t saved enough.

It happens more than you’d expect, regardless of compensation level.  Everyone knows that Americans aren’t saving enough for retirement — even the average person between 56 and 61 only has $17,000 saved, according to Economic Policy Institute data.

But top executives often complain that they, too, have failed to save enough to retire. That could be a chief financial officer or a partner at a law or accounting firm earning more than $1 million annually.

Why can’t someone earning so much afford to retire? Typically, it’s for some combination of three factors — they invested too conservatively, overspent earnings, or didn’t save enough.

When executives don’t want to leave when they’re expected to retire, or a partner wants to stay past the firm’s set retirement age, it creates an awkward quandary: How to encourage veterans to exit in a mutually beneficial way without creating a bottleneck that causes up-and-coming executives to leave for greener pastures.

Firms dealing with this problem can tackle it in five ways:

1. Plan in advance with key executives.

For any company expecting executives or partners to leave at a certain time — say there’s a mandatory retirement age at 65 — it makes sense to consult with key executives five or 10 years before that date to gauge how retirement plans are going. Executives may learn that they’ve fallen behind on their goals and may benefit from help with financial planning. Planning years in advance is the best way to avoid retirement problems.

2. Set up deferred compensation programs.

Putting in place a deferred compensation plan can ensure that executives retire on time. Those plans can set specific goals, such as retiring by a certain date with a successor named, to avoid any retirement timing issues.

For example, if a firm wants partners to retire at 65, a plan could pay out distributions between the ages of 65 and 75 — perhaps before Social Security payments kick in (normally no later than age 70).

Firms without such programs can set up an ad hoc deferred compensation plan where a key executive is allowed to remain for a set period. Under such an arrangement, a significant portion of compensation could be deferred and paid out only if the person retires at the new agreed date. This approach boosts the executive’s retirement readiness while also helping the company deal with succession.

3. Negotiate an exit.

When it comes to W-2 employees that don’t want to leave, employers are in a delicate situation because they can’t force a person from their role due to age. In such cases, negotiating a specific date for departure, and leveraging compensation programs to give that executive a meaningful incentive to keep that promise, can work well.

4. Set up a phased retirement.

To allow for a reduced workday and a financial soft landing, reducing an executive’s pay and responsibilities over a number of years allows for a reasonable and smooth transition of job duties while that executive functions in a mentoring capacity with his replacement. Delicate, thoughtful, and non-mandatory retirement options should be carefully designed (with the help of legal counsel), approached and encouraged.

5. Set up financial education programs.

Oftentimes when even those earning significant salaries aren’t ready to retire, it’s because they haven’t planned well enough, or have been too generous for their own good.

A UBS Wealth Management survey reveals that 45 percent of wealthy pre-retirees are targeting retirement savings of between $1 million and $3 million. Now, imagine the case of an executive who’s paid for four children to attend an out-of-state four-year college (those bills can easily top $1 million) and who pays for the long-term care of a parent with a condition such as Alzheimer’s. Such generosity will blow a hole in any retirement plan. Too many Americans dispense their generosity without running a cost-benefit analysis of how various choices will impact their retirement.

Total financial wellness programs should go well beyond simply planning for the right level of retirement savings. They should also educate employees about disability insurance, extended-care for parents, and options for college savings, spending and financing.

Learning about the long-term costs of such things as vacation homes and country club memberships can have a positive impact on retirement planning and readiness.

Without corrective action from companies, employee financial readiness issues will likely get worse. Retirement plan participation has fallen as the use of defined-benefit plans has declined. Participation in any type of retirement plan for workers age 32–61 was 60 percent in 2001, but fell to 53 percent by 2013 even as the number of Boomers nearing retirement grew, according to EPI research.

The right combination of deferred compensation and education can help executives be ready for retirement at the best time for the firm.

Joe Rankin leads Plante Moran’s employee benefits consulting practice.