Retirement Planning Tips for Pilots

Given the turbulence of 2020, the airline industry has a challenging flight path ahead. If you’re an airline pilot, it’s time to face the facts and get serious about your financial future. Is your retirement plan flying via IFR (I forgot retirement) or VFR (verified for retirement)? Whether you are a senior captain with a major airline or a new first officer with a regional airline, a well-thought-out financial plan is crucial to achieving your goals for retirement.

My brother is a pilot with a major U.S. airline, and I have witnessed first-hand the challenges and fulfillment that come with this career path. I have true admiration for pilots’ grueling schedules and the time they must spend away from home, as well as the challenges of continuous training and medical exams, and the intense responsibility pilots take on with every flight. As a financial planner, I work with pilots to help them navigate their unique financial challenges and ensure a smooth descent into retirement. Following are several tips to help you achieve the retirement of your dreams.

Tip #1
Do not attempt to “keep up with the Joneses”

As your salary increases with your seniority, resist the temptation to compete with your friends and neighbors by splurging beyond your means. It may be tempting to purchase an expensive car, boat or even a Cessna 152 to take you back to your early training days but doing so is likely not in the best interest of your retirement. Whatever goals you have, make sure they align with your financial plan. You are never too young or too old to have a plan in place to help you achieve your desired lifestyle in retirement.

Tip #2
Don’t let your time away from home keep you from planning

Because your career requires significant time away from your home and family, it may be difficult to find the time to regularly evaluate your retirement portfolio. However, remaining diligent is key. Try to revisit your investments and contributions at least semi-annually to ensure you remain on track. Some retirement plans offer automatic rebalancing, which can help ensure your stock-to-bond ratio remains in line with your risk tolerance.

Tip #3
Consider after-tax contributions

Every airline offers different retirement benefits, so it’s important to understand exactly what options are available to you. Some retirement plans allow you to create your own investment model within your 401(k). Some allow you to make after-tax contributions above and beyond the $19,500 ($26,000 if age 50 or older) 401(k) contribution limit until you reach the defined contribution limit of $57,000 ($63,500 if age 50 or older), including employer match. The after-tax contributions may be eligible to be rolled into a Roth bucket within you plan or, if you move to another job, rolled into a Roth IRA.

Tip #4
Ask yourself if you’re ready to retire

With mandatory retirement at age 65, there is a chance you may not be financially ready to retire when it’s time. This can be especially true if you started saving late due to student loan debt or serving in the military, or if you did not have a bigger paycheck until later in your career. A comprehensive financial plan will help you determine if you’re ready to retire and, if you’re not, what areas you should work on as your retirement date draws nearer.

Tip #5
Be prepared for furlough

As the COVID-19 pandemic lingers on, the future of airline passenger demand remains uncertain. According to Airlines for America, domestic travel is down 63 percent as of September 15, 2020, compared to a year ago.11 Collectively, U.S airlines expect cash burn to persist through winter 2020-2021 given the lack of demand due to pandemic fears and decreased business travel. Airlines are urging congress to include a six-month extension of funding for the Payroll Support Program in its latest stimulus package; however, furloughs remain a real possibility.

To prepare for a potential furlough, make sure you understand how long your benefits will continue and determine if it’s necessary to purchase health insurance. As pilot unions fight to avoid furloughs, now may be the best time to speak to a qualified advisor for insight into your specific financial situation.

Aviation Financial Freedom is a specialty practice of Creative Planning. Each of our dedicated teams specializes in working with pilots and flight crews and includes an attorney, a CPA and a CERTIFIED FINANCIAL PLANNER™ practitioner. These experienced professionals work with clients to develop personalized financial plans that take into consideration a wide range of factors, including their current financial situation, goals for the future and any challenges they may face. If you’d like advice about whether purchasing a vacation home is the right move for your, or for any other financial matters, please schedule a call.

As a Financial Planner, Matt helps clients to see the big picture and realize their long and short-term life goals in order to obtain their desired financial future.  By assisting clients with various complexities, his passion is to help those live a more simpler life and enjoy their dreams while continuing to stay on track to meet their goals of financial independence.

This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.