A Wiser Retirement®

309. Financial Planning Tools for Pilots, By a Former Airline Pilot

• Wiser Wealth Management • Episode 309

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In this episode of A Wiser Retirement® Podcast, Casey Smith, President of Wiser Wealth Management and former airline pilot is with Grace Kennedy, Financial Planning Associate to discuss the unique financial needs of pilots and the smartest financial planning path for them. 

Airline pilots face a unique mix of high-but-variable income, mandatory retirement at 65, stringent medical requirements, and shifting industry dynamics. That’s why “pilot math” matters, your plan has to reflect guarantee hours, upgrade paths, commuting realities, union benefits, and specialized employer plans.

Related Podcast Episodes: 

  • Ep 234: Pilots, Maximize Your 401(k) Contributions!
  • Ep 309: What Pilots and Others Should Consider 5 Years Before Mandatory Retirement

Related Financial Education Videos:

Other Links:

Free 401K Allocation Guide for Pilots

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This podcast was produced by Wiser Wealth Management. Thanks for listening!

Cold Open: Predatory Pitch Rant

SPEAKER_02

That's what makes me come to work every day, quite honestly, because I I get fired up by these are this these people are uh enemies of airline pilots, yet they spend thousands of dollars um targeting them on LinkedIn, targeting them uh through through ads and such.

SPEAKER_03

Welcome to a wiser retirement podcast. Are you curious about why financial planning is different for pilots? I'm Grace Kennedy, and I'm joined today by Casey Smith, president of Wiser Wealth Management. Each week we bring you practical advice on retirement investing and planning for your financial future. Don't forget to subscribe to the podcast wherever you're listening. Let's get started.

SPEAKER_02

There you go. Miss Host.

SPEAKER_03

That was the third time I had to do that.

SPEAKER_02

You guys have to understand that um Grace and I have been working together for a little while now, and she has graduated uh to the point where I'm a little scared of her. She's she's like she's she's now the host, and she's the one that walks to the room going, you have clients waiting. You need to get out there. Right. Let's go.

SPEAKER_03

Yeah.

SPEAKER_02

So accountability is always good. And uh Grace is a good good team member.

SPEAKER_03

Yes. Always. Always.

SPEAKER_02

So hey, I'm talking too much. I'm not even the host. You're gonna be me.

SPEAKER_03

The tables have turned. Last time I was here, that's right. I was the guest. That was a while ago. Lots changed since then.

SPEAKER_02

The host now.

unknown

Right.

SPEAKER_03

Okay, so um we're talking about financial planning tools for pilots, and who better to do that than you? The guy that was once a pilot turned into financial planning.

SPEAKER_02

Well, you're always a pilot.

SPEAKER_03

Oh, you are still a pilot, technically.

SPEAKER_02

Yeah, technically.

SPEAKER_03

Because you do still fly also commercial airlines. Yeah, you don't.

SPEAKER_02

I don't, no, yeah. No, that those days are past.

SPEAKER_03

Right. Yeah. So what was that journey for you? Tell us about your airline pilot time turning into the Mr. Finance.

SPEAKER_02

I we've talked about this, I think, in podcast past. Uh so I don't want to repeat myself. And this show's not about me. It's the people that um that uh listen each week and and to learn more um who are of obviously a lot of my former uh pilot peers and new pilot friends. Um, but but my journey uh is mixed in with finance. So I started uh I went to Barrie College from Georgia, I was a finance major, uh, always loved airplanes. Uh and I got a job at the wrong place. I got a job at a big bad brokerage house, and it was uh not a pleasant experience for me. Um I was there for about a year. Um, they had a no-compete. The I wanted to leave. Um an attorney told me just Georgia's a right to work stay, just lay low for a year, then you'll probably be fine. And so I laid low for a year and I took uh that opportunity to learn how to fly airplanes. And long story short, I it was the best of times, it was the worst of times. I loved, I loved my time in aviation, uh, but I flew um you know through September 11th, uh financial crisis, all the major airlines are in bankruptcy. Fun. Uh not it was a great time to be at a regional airline. I was at Atlantic Southeast Airlines. Um, it was uh guys in the majors were are getting uh getting furloughed at the time. Uh so yeah, it wasn't it wasn't it wasn't the best, I think, for the industry, but it was a great time to be at a growing regional airline. So I moved up very fast uh in seniority and thought more about, hey, I love flying airplanes, but this is not a very stable environment financially. And so that's how a wiser wealth management was born. I bought I bought uh this firm in 2007. I actually technically started my own firm in 2001. Not much really happened for till about 2004. Uh, and then here we are 15 people growing strong, adding a few more team members, hopefully, in the next uh next few months. And here we are.

SPEAKER_03

Yeah. What is it?

SPEAKER_02

You're interviewing me now.

SPEAKER_03

I know.

SPEAKER_02

It's certainly you kind of feel like you guys are putting me out of the pasture.

SPEAKER_03

Yeah, well, that's a journey for sure. I feel like the airlines weren't what they were, what they are now, you know.

Today’s Pilot Career Reality

SPEAKER_02

No, no. What you see in our financial plans now is a very different lifestyle and and yeah, very different the structure than what was happening in the early 2000s for sure.

SPEAKER_03

Yeah, because I've I've heard the story. So, I mean, you were in that world. Um, you know all the different different things as in income, um, you know, career stability, um, all the different things that come with that. So what would you speak to that when it comes to, you know, the pilots and when it comes to the career the career trajectory and the pensions in the 401ks, like what would you say?

SPEAKER_02

Well, I mean, there's a lot of pain points there. You just said pensions, um, that those don't exist anymore. Uh, there is a lot of variable income, but the base income is a lot higher than it used to be. So, you know, there there's there's that portion of it. There is there can be some career volatility. My heart hurts for those guys at Spirit, even a little bit frontier right now, because in the same business model, this ultra low cost carrier business model is is not really panning out. So you're looking at a situation now where um spirit may not exist, right? You know, but time it may not exist this post-October 20th of 25. So may not last past the end of the year. Uh, or it could. You just don't know. Like, what do you do if you're there? You know, these are the things that we work with people on all the time. I had a long conversation with a pilot uh over the weekend, and and the whole premise was I make a lot of money here at at Frontier. What happens if I what happens if I go to Delta?

SPEAKER_06

Yeah.

SPEAKER_02

And start over again.

SPEAKER_06

Start over from the bottom. Yeah.

SPEAKER_02

You know, and I've done that math so many times. You give me an age, I can kind of tell you where the break-even is. Uh for him, I told him he would be fine, but he's gonna lose his quality of life because right now he's the money that he's making, um, it would take a long time to get back to that at Delta because you know, he's in he does some training type stuff. So he's a little different. Like man, he's like a management pilot, I guess.

SPEAKER_06

Yeah, okay.

SPEAKER_02

Uh so yeah, so th those are the those are the pain points. Um the guys that get hired in 2022 during the the big shortage coming out of COVID. Um, they're probably set. Yeah, they're in great situations. We talked to 24-year-olds getting hired at Delta at that time. Yeah, yeah. It's like, dude, you just hit the like the career lottery.

SPEAKER_06

Yeah.

Volatility, Mergers, and Career Moves

SPEAKER_02

Um, American United, uh, same way. Uh American's a little different breed. I I feel like I don't talk to too many happy American pilots. Uh, but compensation is very similar. Um, you're gonna upgrade faster there. That's the whole thing. Is like how fast can you get in the left seat with a with a reasonable quality of life that you could be home with your family? You know, those those are all things that are, I think, common pain points in a in a plan. And then that's that's the numbers, and then the reality is okay, someone has to go do that. So you're not gonna be a dad, you're not gonna be home as a dad or mom for 15 days. Exactly.

SPEAKER_03

Yeah.

SPEAKER_02

So how does that affect family life?

SPEAKER_03

I agree.

SPEAKER_02

You know, yeah. That's a good you may it it can be it's a being an airline pilot is the funnest job to be at a party.

SPEAKER_03

Yeah.

unknown

Yeah.

SPEAKER_02

Right.

SPEAKER_03

Very talked up, yeah.

SPEAKER_02

But to actually do it, it can be it can be very lonely at times.

SPEAKER_03

Yeah, I agree.

SPEAKER_02

Yeah, and a lot, a lot of distractions. Um, you know, as as airline pilots that that maybe you wouldn't have in other other fields, but um, but yeah, it it's uh uh and then you have to keep yourself healthy, you know. Right, yeah. You can lose your medical. These are all these are all risks that come into the planning process.

SPEAKER_03

Right. Yeah. So with all those considerations, I guess like what would be beneficial, you know, having those specialized planning tools for pilots, just because they are such different from other professionals.

SPEAKER_02

We can use the same software we use for anywhere else or anybody else. Um the difference is how you it's how you put the data in.

SPEAKER_03

Yeah, and execute it. Right.

SPEAKER_02

Mandatory retirement at 65. Right. But if they need to work longer, what does that look like? Um right now I'd say the average salary for someone after 65 flying for flying private is probably around 150,000 a year. That's a big drop. You're going probably going from four or five, six hundred thousand to 150.

SPEAKER_04

Yeah.

SPEAKER_02

Uh, but if you're doing that, it's because you have to, because you didn't you didn't have enough save for whatever reason. Uh so you know, building knowing that those numbers and building that into a plan, um market-based cash balance plans.

SPEAKER_03

Yeah.

SPEAKER_02

That's something that most planners aren't gonna understand.

SPEAKER_03

Right.

Pay, Quality of Life, and Family Tradeoffs

SPEAKER_02

And how to calculate it, and how to calculate it and how to how to take our software, which is made for everybody, uh, to tweak it to where it recognizes uh your your pilot, right? The pilot and the the growth of the income and it correctly would reflect in the market-based cash balance plan. Right now, Delta has it, um, American has it. I'm not sure what the status of United is uh right now with that, but um, but yeah, those are those are like the tools that we'd need. I I I hear this probably a couple times a year. We had hired, you know, the pilot's family says to me, we had hired someone else locally because we do so much of our of our work uh over Zoom, right? So Minneapolis, we have a lot of lot of clients. Uh Seattle help, we have a lot of clients, uh Salt Lake City. Um, we got a few in LA. So what what we usually hear a couple times a year is I hired a financial advisor locally, I heard about you, like what you listen to your podcast, but um we decided we just wanted more somebody more closer. And so I went in there and we told them that they put 18% of what I'm making the 401k plan. They said, No, that's not right. You need to contact your HR department. You're like, okay, you're like, no, no, seriously, they put in 18 there. Like, no, that the 401k's don't work that way. That's not how that works. Maybe here, but don't we threw our hands up and decided to do a consultation with you because we got fed up with this person telling us, and we're like, no, this is how this works, you know, or or asking silly questions like what route do you fly?

SPEAKER_03

or you know, I remember that was one of the first things you said because you know, I came in not knowing really anything, and you're like, never ask what route you fly. And I was like, okay, right, good to know. But yeah, I mean that that is true. I remember when Michaela and I were doing a lot of plans together, we of course had tons of pilots coming in and you know, just knowing the disability that they have um through work and the pay structure. And it's just like we just know that up front. And I remember we we had a guy and he was like, That's so nice that you just knew that. Like, I didn't even have to tell you anything. Like, we just said it and it was already in the plan. Like, they didn't even give us the documents, and so they were like, That's such a benefit of you know, just understanding like the pilot.

SPEAKER_02

I think it's probably been a year since we did it, but we there was a day where we just we had uh Casey's aviation class. Oh, yeah. Yeah, I took I took all the airplanes and I took like pictures of them. I was like, these are all the airplanes, these are all the pay scales. This is how people move from one plane to the other plane, and this is what the first officer does, and this is what a captain does, and this is you know, these are this is a day in the life of right, right? So just try to make it a little more real, but then but there's really there wasn't a whole lot of order to it, unfortunately. It was just me spewing what was out what was in my hanging on to the to their chairs, going, I don't understand what's going on here. Right. Um, but yeah, I probably need to we probably need to formalize that uh to have like uh you have like wiser wings or something, like the wings of an owl, you know.

SPEAKER_03

We get it, yeah. We've we've got our wiser wings now.

SPEAKER_02

You pass the aviation test. That is funny.

SPEAKER_03

That is funny.

SPEAKER_02

But yeah, it's certainly well, you know all this stuff now.

SPEAKER_03

Yeah, um, but you you you listen into the conversations and you you pick up Michaela William and Shauna.

SPEAKER_02

Uh they all they all get this now. Definitely.

SPEAKER_03

Yeah, and kudos to Shauna for like coming in and being able to do that.

SPEAKER_02

Well, not only that, but she like did a deep dive into Roth versus IRA savings. Right, right. Because that was such a big conversation. And someone reposted it to the uh to the one of the pilot pages. Yeah. People people were uh did not agree with our math, so we had to do a part two. And the part two is like, okay, well, you're wrong. We do this for a living. But there are I will say the pilots that come here are are just very nice. All the people that I've I'm used to talking to and hanging out with, but there is a group that knows more than the rest of us, and we all know who those guys are, and those guys will probably never show up here.

SPEAKER_03

Right, right, probably not. They they can keep on drinking.

SPEAKER_02

They're also the ones that are on the fourth wife of you that don't have money anyway.

SPEAKER_03

So we probably can't really help.

SPEAKER_02

Yeah, probably can't help them much anyway.

SPEAKER_03

Exactly. So, yeah, I mean, you touched on uh different things like the irregular pay and and things like that, but I guess my question would be okay, if I had such like because you know, you can pick up trips and then all of a sudden you have way more money this month than you did last month, like it's such a very so how would you, you know, say for an emergency fund, you know, the rule of thumb is six months of expenses, and they're like, Well, my expenses are all over the place because sometimes I have more money, you know, this month and I do the other month and all these things. So, like, how would you plan for something like that as a part of try to live on your guarantee?

Health, Medicals, and Career Risk

SPEAKER_02

So if your guarantee is 76 or base, right? Yeah, every year on slightly different. But if you're guaranteed 76 hours, credit hours a month, then live on that 76 hours.

SPEAKER_06

Yeah.

SPEAKER_02

Uh the good news is if the kids are in college and you need some extra money or you really like that boat, um, but it's a little maybe a little outside your comfort zone, then man, um, for most for most aircraft in most cities, uh, there's still if you're senior enough, you can pick up that extra trip, which is like you know, two X pay, right?

SPEAKER_04

Yeah.

SPEAKER_02

So if you're a narrowbody uh pilot domestically, you're you're gonna get a few thousand dollars out of that for sure. Which is um if you're going international, you you can buy like a small car.

SPEAKER_03

I know, right. So yeah, you I mean we've seen people pay off their mortgages that way, yeah, like super quick. Yeah, it's such a benefit. That's right. To be able to do that. I remember seeing that for the first time and I was like, well, yeah, exactly. If they're like, if they're if they're set on doing that, they can definitely do it by picking up some extra trips.

SPEAKER_02

So that's it's easy, it's easy for us to say that. Yeah, being have actually have done it. Yeah, that means that you did a three or four day trip, you came home, you had maybe 24 hours of rest, and you went back out during your off stretch and you worked more, then you came home for a day, yeah, and then you went back to your normal trips after that. So that means you were you should have been home, yeah, but you weren't home, you were out traveling, right? You're out working, yeah, you were gone. Can't imagine. You missed whatever activities were at home, right? That's the part, that's the part that people don't understand. Um, if you're not in the aviation business, when you ask a client to go, hey, you need to pick up your trips and do this, what are you really asking? That's what people don't understand. And what are they giving up on the other side? Yeah, they certainly don't understand the overtime system anyway. Yeah, but but they definitely don't understand uh the lifestyle that it has that you're giving up in order to do that.

SPEAKER_03

Which you experience some of that because you were coming here during the day.

What Makes Planning “Pilot-Specific”

SPEAKER_02

Yeah, I I was fortunate. I was fortunate. I was your age, I was young, could kick back and I could I could uh fly all night, work all day, cut down a few trees, save a baby from from drowning in the pool, and go back and rinse and repeat, right? Be just fine. Probably took off some of my my years of my life, but I did what they call stand-up. So I flew, I went to the airport like at eight o'clock at night um for like a 10 o'clock departure or nine o'clock departure. Probably left at seven for a nine departure. And then technically you're on duty all night, but we would get maybe I'd say four to five hours of sleep in a little airport hotel nearby, and then come back the next morning and then work the first flight back. That's how the airline stays on schedule, or one of the ways it can stay on schedule. Um, so the the the bad news was usually once a year there was something that would happen, usually weather related. I would actually physically be up all night. And I was never good at that.

SPEAKER_04

Yeah.

SPEAKER_02

Even at a kid, like the church lock-ins.

SPEAKER_04

Yeah, I was like, I'm dead afterwards.

SPEAKER_02

At one o'clock, I'm like, this is this is the most miserable thing ever. You know, no. So so um I I would have to I would have to pivot a little bit and and rest. But you do that for three nights in a row and then you'd have two nights off. Um, but but yeah, that's how I built this company.

SPEAKER_03

Yeah, I was about to say that it allowed you to build what it is now.

SPEAKER_02

Yeah.

SPEAKER_03

So that's super beneficial.

SPEAKER_02

Um, I'll have you guys to be my uh my energy.

SPEAKER_03

We can, yes, all the youngins in the in the firm.

SPEAKER_02

Right.

SPEAKER_03

Um yeah, well, okay, so we're talking more about uh retirement planning tools for pilots. You know, we have a lot of people come in. Um, I feel like we'll have pilots come in and they're, you know, they have all of these ideas. They get so creative about like how to save retirement. Should I do this? Pre-tax, Roth, 401k, deferred comp, all the things.

SPEAKER_02

I have a book idea. So I'm working on my first book now. Um, it's in a draft format. Uh don't really mention aviation a whole lot. Um, it's really about our financial planning steps doing it with uh Andrew and Shauna. Actually, I think this is the first time I publicly talked about it.

SPEAKER_04

I agree, actually. I was like, I don't know if we've said anything.

SPEAKER_02

I have the last chapter to go. And um I have so many things I want to put there, and I'm just trying to decide what it's gonna be. But yeah, um, but I have a second book in mind um following this one, and it's called Um Uh Bad Decisions at 30,000 feet.

SPEAKER_04

Yes, yeah.

SPEAKER_02

How how pilots hurt themselves, you know, talking, yeah. I don't know, but the joke here is that uh in aviation, a lot of times it's you're sitting there watching paint dry. I mean, it can be kind of boring sometimes, and and followed by weather events and mechanical events, you know. The the joke is it's three hours of sheer boredom followed by you know 20 seconds of sheer terror.

SPEAKER_03

Yes, the the landing and the taking off, right.

Why Specialized Knowledge Matters

SPEAKER_02

So, so that's um uh yes. So we I get text messages all the time, and it's either two kinds. It's I flew with a guy, and this is this is what he said. This is what he said. He said he said I should I should start trading options. Really, oh uh he's made a lot of money at it. Yeah you know uh or or it's uh really cool pictures of dude check this out, saw this today, which I really love those. Um I've gotten some really really cool ones uh over the last few years um from uh uh Derek Rogie, actually, one of our one of our uh Delta clients up in Minneapolis. He sent me some really cool, really cool pictures over the years. Shout out to Derek there. Appreciate the pictures. Um so it's it's um uh I I guess the you know, I want to be respectful of people. Um there are a lot of neat investment ideas that people come up with, but you have to take care of the basics first, and that's what a lot of people are missing.

SPEAKER_03

Yeah, they skip that stuff.

SPEAKER_02

Yeah, we gotta get rid of credit card debt, we gotta make sure we have emergency reserves saved up, we've gotta make sure that we that we have our uh financial future uh on track in a in a reasonable way, meaning it's really hard to beat the SP 500, and everyone out there is selling a mousetrap that's still gonna beat the SP 500, and uh statistically that just doesn't happen that way. I mean, we watched the the stats on this, uh only 4% beat the SP 500 over 10 years, 2% over 20 years, and yet we've got these big firms targeting pilots trying to get them to move their 401k to a brokerage link, yeah, uh, only to reinvest sometimes in the SP 500. Like you're literally paying 1% to invest what's free in your 401k plan. Yes, I mean it's not actually free, it's like one basis point, so 0.001 of 1%. Um, that that that's what makes me come to work every day, quite honestly, because I I get fired up by these these people are uh enemies of airline pilots, yet they spend thousands of dollars um targeting them on LinkedIn, targeting them uh through through ads and such. Uh and and pilots were typically um positive people thinking, yeah, there's got to be a way to beat the SP 500, or maybe that's a negative thinker. Yeah, that the simple way isn't isn't right. So uh that that's really important that we stay away from we had to stay away from um from the mouse traps that are expensive and you know, and then beyond that was what we would call opportunity money.

SPEAKER_04

Right.

SPEAKER_02

And that's what we people can be creative with money that they don't need for retirement, and you could you still use it for retirement. Um, but that's the part we typically I typically I think we we have to fight that a little bit.

SPEAKER_06

Yeah.

Irregular Income, Guarantees, and Extra Trips

SPEAKER_02

Um we've had pilots tell us that they met with Northwestern Mutual people that want to um uh want them to stop contributing to the 401k and invest 100% in the whole life insurance. That's a terrible, terrible, terrible idea.

SPEAKER_04

Right.

SPEAKER_02

Um we've had a few people talk about annuities, they should just buy an annuity. Uh that doesn't make sense. Annuities, if you can do math and read the legalese, which we can, yeah, you'll understand that those are those are not good topics or not good products.

SPEAKER_04

Right.

SPEAKER_02

Um we have we have the the people that call us about the options, you know, about trading options. Um we have the Bitcoin people, which there is a place for Bitcoin, just I don't necessarily want you to do uh 30 to 40 percent of your infrastructure inside in cryptocurrency. That doesn't make sense to me. Um I'm trying to think of other other crazy things that have come up.

SPEAKER_03

I mean the mega backdoor Roth, too. Oh, yeah, yeah. We're talking about within these and stuff, which was a big topic for a while.

SPEAKER_02

There's nothing wrong with a mega backdoor Roth, just to be clear. Yeah, uh, you sound really smart when you say it. Uh mega backdoor Roth.

SPEAKER_04

Right.

SPEAKER_02

Yeah, I'm doing the mega backdoor Roth. And people are like, What? That was a mega backdoor Roth. This sounds crazy. It's like super sizing your 401k. It's insane. Um there's like nothing wrong with that, but it could be your 401k is big enough that you're you're gonna be just fine and you should really be putting that money into a brokerage. Because even if you put it into the Roth, it's gonna grow tax-free, that's great. But how do you buy that second home? How especially at a six, seven percent interest rate right now or mortgage rate. Um what if what if you don't want the constraints of when you can pull that money out, having to wait the five years?

SPEAKER_06

Yeah, yeah.

SPEAKER_02

Uh what about what about uh direct indexing and tax loss harvesting where you can create tax credits with that money? Right. Everyone goes, oh, we're gonna have all these big capital gains. Not not necessarily.

SPEAKER_04

Yeah.

SPEAKER_02

Not necessarily, not if you're investing it in a tax efficient manner. Um, you will eventually have some capital gains, but you're also gonna have hundreds of thousands of dollars in credits sitting there waiting on you to offset those gains if you need that money in the future. So there's there's a lot of um different angles that pilots on a chat board or or pilots flying across the country talking to each other are not gonna fully understand.

SPEAKER_04

Yeah.

SPEAKER_02

Right.

SPEAKER_04

Yeah.

SPEAKER_02

And and that's that's where that's what our job is. You know, our job is to guide that person to be able to get them in the right direction for sure.

SPEAKER_01

Before we continue, do you want to make the most of your airlines 401k plan? We've created three 401k allocation guides for most major airlines to help you do just that. Download yours for free at pilotretirement.com. Now back to the episode.

SPEAKER_03

Yeah, and I guess touching on, you know, having those constraints whenever you are like fully doing the retirement accounts, like not just like a simple brokerage account. We do have people come in, pilots, you know, I want to retire at 60, you know, mandatories at 65.

SPEAKER_02

Yeah.

SPEAKER_03

And it's like, should I just do it early, or does it benefit to like stay until 65 and just drop trips as I can? Hopefully that you're senior. So I feel like that's a that's a conversation we have. Nine times out of 10, we will be like, you know, if you just drop trips until 65, you'll have the healthcare because healthcare breaks a lot of people's plans, honestly. Yeah. Um, so that's a benefit too if you're senior enough to do that. But that's a that's a conversation that we have a lot too in planning.

SPEAKER_02

Yeah, and you have to walk, you have to put yourself in the shoes of the person. Why is it they want to retire at 60? Yeah. Is it because um family reasons? Um, is it is it because they're just tired and worn out? Uh are you talking to a spirit pilot? Are you talking to a delta pilot or or American pilot? Are you talking to a pilot who commutes to work or someone who lives in base? These are all very different things. Yeah, if you if you imagine okay, you drive to work every day, it takes you what, probably 30 minutes to get here?

SPEAKER_03

20. 20 minutes. It's not even bad.

Building Wiser: Nights, Stand-ups, and Hustle

SPEAKER_02

Not even bad. So imagine that in order to go to work, you're gonna drive to Hartsfield, you're gonna park your car, you're gonna ride a uh a crew bus, and you're gonna you don't have to worry about security. You're gonna go through security pretty quick. Uh, but then you're gonna have to hope that you get on an airplane because you're on standby. So you've been monitoring how many seats are haven't been sold, and you're gonna ride to New York, JFK in the winter, in the summer.

SPEAKER_04

Yeah.

SPEAKER_02

And then you're gonna start your trip. I mean, your trip might be gone, you might be gone for four days or five days. Yeah. And then you're gonna come home and you're gonna get off your trip. Instead of driving to your home, you're gonna go down to your gate to Atlanta, you're gonna look at how many seats are available. Can you get on this flight? Oh, but there's a cloud in Atlanta, so all the flights are backed up.

SPEAKER_05

Yeah.

SPEAKER_02

Now you have to wait to the last flight because you know, have these shift paying passengers forward, right? Uh, and then you get home and then you have to ride on that bus back to the parking lot, you have to get in your car. It's now one o'clock in the morning, and you're gonna drive home, and everybody in your family's already asleep and you're exhausted.

SPEAKER_04

Yeah.

SPEAKER_02

Right. So if you if that person says, I'm done at 60, yeah, you go, let's try to make this work for them.

SPEAKER_06

Yeah.

SPEAKER_02

And maybe we can show them that, hey, at 60, if you're senior enough and you have the trips everybody wants, you can start dropping some of those trips. Um, and maybe you only have to do that once a month.

SPEAKER_06

Yeah.

SPEAKER_02

Right?

SPEAKER_06

Yeah.

SPEAKER_02

Maybe twice a month if you couldn't get the trip dropped. So that that that's the part that other firms aren't gonna be able to have that have that dialogue and understand that have you actually walked in in the foot. And and and this with me, you know, I don't do as much planning anymore. You guys are doing the planning. Uh, but you understand this.

SPEAKER_06

Yeah.

SPEAKER_02

I'm not telling you this for the first time. You understand the life of, right? Uh you'll probably when you walk through the airport, you see them walking around their uniforms, you feel a little differently about them.

SPEAKER_05

Yeah, definitely.

unknown

Yeah.

Retirement Accounts: Basics Before Tricks

SPEAKER_02

And what's happening and what's happening. So, um, but ideally, yeah, it's it's you want to go to 65 because that's when your that's when your um retirement is compounding the most. That 18% is being that they put in the 400k is being applied to the largest amount of money you've ever made, most likely.

SPEAKER_03

Yeah.

SPEAKER_02

Uh, and so you have you're leaving a lot of wealth behind. But sometimes people are just done.

SPEAKER_03

Yeah. I mean, we we just ran um that client the other day that was like, I think I'm done at 62. And we were like, well, why, you know, ask all the questions, yeah, figure out if it's it if it's just family and it was just like, you know, I'm done. He had a very long commute.

SPEAKER_02

Yeah, well, it's commutes from from uh the Middle East.

SPEAKER_03

Yeah, probably the longest we've ever seen. So we're like understandable.

SPEAKER_02

It's definitely tired when he shows up to work. You'd have to be.

SPEAKER_03

And he was completely capable. So, you know, it just depends on the situation.

SPEAKER_02

Yeah, to the young pilots listening, I would say um don't live beyond your paycheck, live beneath it, stash away a lot of money now so you get that compounding effect going on. And if you're 60 and you're tired, then you have that opportunity. Yeah. Um otherwise you're just building after that, you're just you're gonna be building generational wealth, most likely, if you if you maintain your lifestyle properly.

SPEAKER_03

And for sure. Yeah. You know. Agreed. Um, touching on risk management, I know we we talked about this just quickly earlier, but um pilots are different when it comes to risk management because they actually need to pass their medical in order to be able to like show up to work every day. Yeah. Whereas like if I'm sick, like I you're not gonna like test me to like figure all these stuff. Like I can still show up to work. I don't have you can do work. Yes, I can still do work. So disability insurance for them is a lot. It's so valuable. Um, and those are and obviously those are through work half the time.

SPEAKER_02

But I mean Yeah, the Airline Pilot Association, uh, which represents is the union that represents most airlines, is uh American is a little different, Southwest is a little different. Uh, they've done a good job of negotiating uh good um disability insurance. At the regional level, it's almost non-existent. Uh in fact, there's one regional airline right now, the older you are, the less they pay you, which makes no sense.

SPEAKER_04

Right. Does it make sense?

Avoiding Mousetraps: Whole Life, Annuities, Options

SPEAKER_02

It's a weak, weak negotiation. Um they should be cleaning that up, I would think, but but maybe not. They're not a strong regional. Uh so so, yes, there's a couple of options. One is can you live on 50% of your income? Because ultimately that's what is gonna you're gonna get paid. The second part is if you can't, then you can. And buy in through like Harvey Watt, through Alpa, you can buy in additional policy, but it's it's not cheap. No. You could be looking as much as$800 a month to pay for the policy, but maybe that's worth it to you. And we've done that before. We've done that with uh pilots who say, My dad had this, my grandfather had this. Like, I feel like I'm just destined. And to me, it's worth paying that because I don't have any hint of it right now, but it's not looking good hereditary-wise, right? Exactly. So, so that's that's that's a threat. Um, you think about threat management as an airline pilot, that's very common in their training right now. It's like, what are the what are the threats? How do we not cross an active runway? Yeah, how do we how do we make sure we're alert when we're moving, right? Uh so we're listening to ATC instructions and don't don't end up on somebody's TikTok, right?

SPEAKER_04

Yes, yeah.

SPEAKER_02

So so in the financial realm, how we look at that is okay, we know that we're set for retirement. We have these great jobs, we have these great contracts. What are things that can derail us? Um, obviously, spirit pilots are being derailed right now. So that's an emergency fund. How much of an emergency fund do I have set aside? Right, that's important. Uh, and then uh if I was disabled and my airline went out of business, that's a really bad thing. So maybe having additional insurance outside that would be beneficial or beneficial, even even life insurance. Yeah, uh obviously you know, I say this tongue in cheek, but death is a lot more clear. You're here or you're not here. It's when you're here and you can't work. Those are the problems to solve because you probably have really big medical bills at the same time. Yep. So these are all things that uh you have to be willing to accept the risk or you have to ensure the ensure the gap, right?

SPEAKER_03

Yeah, exactly. And these are all things that we look at too, and it depends on client per client, you know, um, how in-depthly we go into that. But that's definitely um so we're jumping back into 401ks. I feel like we were just talking about this. Um, but I mean, when it comes to investment ideas that we were already touching on earlier, all of the things, nine times out of ten, you know, we're we're handing out those 401k uh allocations, um, which what I feel like everyone's like, well, how should I invest my 401k?

SPEAKER_02

Yeah, I think number one tip for every pilot out there if you were paying a company to manage your 401k plan, you're being ripped off. Yeah. Um these these these companies are charging one, one and a half percent to manage your 401k. They're taking what's inside the plan, they're moving it to the brokerage link only because that's the only way they can charge you is if it's in the brokerage link. They can't charge you on the other side. Yeah, these big 401k plans already have super low costs. You can be invested in the Delta Airlines, American, United Airlines, Southwest Airlines, 401k plans, Alaska Airlines, 401k plan for less than 0.006% per year in in management fees, not management fees, but uh fund fees. Fund fees, yeah. So I'm so passionate about this that we've built and we monitor allocations for all these airlines. There's more um on the list, but you can go to wiserinvestor.com, you click on the pilot section, and we give you a free 401k allocation. We give you an out, we give you an analysis where you can determine what your risk tolerance is.

SPEAKER_04

Yeah.

SPEAKER_02

Um, or you can just say, I want to be this one.

SPEAKER_04

Yeah.

SPEAKER_02

And yes. And so um, we're giving away free what other people are charging millions of dollars for. Because if you if you have a pilot who got hired in the Delta system in their early 30s and they worked until 65, they'd spend over three million dollars in fees just being charged at 1%.

SPEAKER_04

That's insane.

SPEAKER_02

Yeah, that is three million dollars. Yeah, with the chance of beating the SP 500 less than 2%.

SPEAKER_06

Yeah.

Mega Backdoor Roth vs Brokerage Flexibility

SPEAKER_02

There's less than a 2% chance. It's not about it, it is about your allocation, but the allocation is very easy to solve. Um, our models online, you can download those. There's no bait and switch here. It is free. It's a free allocation. Apply that to your portfolio. You're gonna have a diversified portfolio for to weather all the storms. Yeah. So now how nasty tariff trade messes up the market or whatever. Um, you're buying every single paycheck. Every every time it goes down. If you're not retired, every time the market goes down, you get a paycheck, you're you're buying prices lower. So the win to win the game, you want to buy more because you know, all these shares pay pay dividends. In order to get more dividends, you need to have more shares. In order to get more shares, you got to have either more money or the shares have to be cheaper. So every time the market's down, you're getting to buy more shares. No matter what the catalyst is, whether it be politics, whether it be um economic news, more shares per dollar is good. Yes. Now, we don't want to have a continually declining market. We want to see prices go up, but you have to retrain your brain that that's a positive event for you as an employee of a firm uh who's putting money into the market. Um it's all about planning. How much should you be saving? Are you saving too much? Where does extra money go? What about disability? What about life insurance? What about long-term care insurance? My old age.

SPEAKER_06

Yeah.

SPEAKER_02

Um, what about, and we don't sell any of these products, by the way. We advise on all of them, but we don't sell any of them. But you think and what about property casualty? You're a big-time airline pilot. You, you, you rear you have a bad day, you reach in the back to tell your child to to stop any child problem. Or you're, God forbid, not doing this, but looking at your phone, you rear in somebody. Yeah, you're a big, bad airline pilot. You better have some good property casualty insurance.

SPEAKER_06

Yes.

SPEAKER_02

And your property casualty insurance plus your umbrella better equal your net worth.

SPEAKER_04

Yeah.

SPEAKER_02

These are all things that we're looking at um as we go through the planning process. So that's what they call comprehensive planning, which no one really seems to do. No, they want to take the pilot's money, they want to put it into brokerage link, they want to charge them a 1% fee. And for what? Yeah, you're not getting there's no secret sauce in investing. There's no secret sauce. You're not, you're not giving you something or some special mix of investments that are gonna do any better than what you already have in your in your account. Yeah, so we spend a lot of our time in our planning session liquidating brokerage links, moving them back over to the regular 401k plan, yeah. Implementing the the plan. We do manage assets. We manage assets for a lot of pilots outside their 401k plan, and their 401k plans are never charged an asset under management fee.

SPEAKER_04

Yes.

SPEAKER_02

Um, so anyway, I I'm I'm on my soapbox now, you as you can tell. But you you just people who who are hiring these companies and manage assets are losing millions of dollars for no reason. Yeah, no reason.

SPEAKER_04

I agree.

SPEAKER_02

And most of them, when we meet them, they aren't um uh they haven't done any real financial planning. They did some maybe time value money calculations. So, yeah, you're okay for retirement, but they didn't look at the whole thing, they didn't look at estate planning.

SPEAKER_03

Nope.

SPEAKER_02

They didn't break down their estate plan, they didn't do any tax planning.

SPEAKER_03

Right. Which is so important for we always have a pilot come in being like, How can I save my taxes?

Direct Indexing and Tax Efficiency

SPEAKER_02

How can I save on taxes?

SPEAKER_03

Or what do I need to be doing to save my taxes later?

SPEAKER_02

Yeah and your average You got 50-year-old guys putting all their money in Roth. Yeah, and you're like, Why are you doing this? The break even for you is is probably longer than your lifespan.

SPEAKER_03

Exactly.

SPEAKER_02

You should be pre-taxed right now, yeah. And we'll show you how to convert to Roth after you retire.

SPEAKER_03

When your income's lower when your income's low, yeah. Exactly.

SPEAKER_02

Uh these again, these are all things that that that should be um common sense, but our financial services industry is not wired to do planning, they're wired to do transactions and and to um charge these assets under management fees. And manage the accounts. Nothing wrong with asset center management. When you hit retirement, I'm gonna offer to manage the assets for you because I have a process with cash flow management, these other firms still aren't doing, that I feel like um justifies my fee. And you also have more money typically in retirement, which means my fees gonna percentage-wise, it's gonna be much, much lower.

SPEAKER_06

Yeah.

SPEAKER_02

Uh, but but for those pilots building wealth, um, you don't need an asset manager, you need a financial planner. And how we work on that is by charging a flat fee. We don't we don't I'm charging a few thousand dollars to compare to what everybody else is charging millions millions of dollars for and they're they're failing at it.

SPEAKER_03

Right. And then you you have all the answers to succeed until up to retirement.

SPEAKER_04

Right.

SPEAKER_03

Wherever you're starting. Yeah, because we have people come in, like you said, like the 24-year-olds. We also have people coming in that are 55 and only have 10 years left. But either way, like exactly we have the flat fee to help you be successful through those stages. But yeah.

SPEAKER_02

Yeah, get it, get it out of uh all worth, get it out of creative, get it out of all these big firms. Um you guys are losing millions of dollars, is it's painful to watch.

SPEAKER_04

Right.

SPEAKER_02

Very painful to watch. And and it's also interesting to see where where they come in from because you know, the Northwest mutual people coming in, they're they're they're always like, Oh, I need to buy all this insurance. It's like, no, you know, yeah, and then the other people, their widget is oh, we're gonna manage assets. Yeah. And so they come in and you're trying to save them from these uh big asset management fees and yeah, or expensive funds and stuff. Yeah, exactly.

Free 401(k) Guides & Beating the Fee Machine

SPEAKER_03

I feel like that's either it's either one or the other. We they come in with insurance or expensive funds. Right. If they've if they've talked to someone in the past, but they're also coming to us because they're they're starting to catch on that, like, okay, something's not right, you know, either you know, I'm not growing or why is the in the whole life policy not doing what I thought it was. I feel like we we have a lot of that too.

SPEAKER_02

But yeah, yeah, business owners and doctors get sold those whole life policies too. I'm sure we we've seen a good bit of a lot of people. Which is hard. It's sad to see that situation. But we can usually save them.

SPEAKER_03

Yeah, I was gonna say thankfully we can save them, uh, turn the situation around, but but yeah.

SPEAKER_02

Yeah, I think the uh the tax buying side again goes back to not so much how can you save money in your paycheck today, but it's more of how do you retire more tax efficiently. Occasionally we see pilot situations um that they probably just need to do CPA, they're missing some things. But but taxes have been very simplified since uh 2017 with the tax act. Um, so it's really hard to find those those extra deductions. If you have money outside of your 401k plan, like 700,000 plus, um, you can be you know that that money's supposed to be invested, you can do what they call direct indexing. We can create a lot of uh tax credits that way um that will that will help you with down the road with capital gains uh as you as you liquidate investments or rental properties or things of that nature. Um but there's there's not a whole lot of meat on there's a a uh one of our they're not even competitors because they're they're in a different space. They're not they're not financial planners or asset managers, but one of the the lead generation tools they used, I noticed was um tax planning for pilots. I'm like, what what what exactly what exactly are they would they be talking about? Right. And and I was able to get a hold of the download and really I looked at it. There's nothing, there's no meat there. There's there's there was no secret sauce in there. Everything I saw in there, I was like, well, kudos for them for make mentioning direct indexing, but yeah, but the rest of it, um, yeah, everyone probably should know, you know, max out your HSA. That's gonna give you the most tax savings, max out your 401k pre-tax. That's nice, that would give you some tax savings. Uh hopefully you don't have any medical expenses, uh, but you know, those those might add up uh for for tax savings. Right. Um, other than that, um, I I will mention Delta just launched their deferred comp plan. Um and I don't recommend that at all unless you're in your last two to three years of flying.

SPEAKER_04

Right.

SPEAKER_02

Uh if the plan goes under or if the airline goes under in bankruptcy, um, the plan would would be a become a creditor of the airline. Uh so you you most likely would not get your money back. You'd be less in line. So the so some of the but but if you're in a couple year phase, you feel felt pretty confident about the industry and what's going on for an A350, A330 pilot, that's a great opportunity to stash away up to half your income. Right. Uh and lower those tax savings then. Yeah. Yeah, get those tax savings. Uh, but but then you're gonna have to take it out over a few years after. So again, it all ha literally how we do is we just do the tax return. We're just doing we're doing the tax return year by year to figure out what what the model is. Uh and again, I don't think the other firms are actually doing that. Yeah. Uh I will say, you know, I can I keep picking on the big guys uh in our space that are trying to manage assets. Um I I will add that there's another firm that wants to convert everything to Roth. And you don't need to do that. Um we had we met with a man that's probably been eight, nine months ago now, but he was trying to convert$3.2 million. He made$600,000 a year already. And this group, it's not even a group, it's one person who's a financial advisor.

SPEAKER_04

Yeah.

SPEAKER_02

Who says he's an airline pilot?

SPEAKER_04

Yeah.

Dollar-Cost Averaging Mindset for Pilots

SPEAKER_02

Uh$3.2 million from your IRA to your Roth or from your in your 401k 401k pre-X to Retax to Roth is like going to work and getting another job that paid 3.2 on top of the$600,000 he's already making. You're in the highest tax bracket.

SPEAKER_04

Yeah.

SPEAKER_02

There is no way that any airline pilot m has enough resources, unless they inherited it, to be in the 37% tax bracket for the rest of her life in retirement.

SPEAKER_04

Yeah.

SPEAKER_02

There's just not a chance that's not gonna happen. Yeah. So in a normal pilot's life. So I don't know why he would have been told to do that.

SPEAKER_03

She convert that, yeah. I know.

SPEAKER_02

Um, but that that was interesting. I did not do that meeting. Uh I think that was uh Shauna. But uh it it it all worked out the way it was supposed to.

SPEAKER_03

Exactly. Yeah.

SPEAKER_02

Um, but this is what these guys do. And gals at 30,000 feet, they come up with these crazy ideas. I feel like that when they land, they should have like a cap and gown. They just graduated. He just graduated, you know, the master's in uh financial planning at 30,000 feet.

SPEAKER_03

So all these new ideas.

SPEAKER_02

But I have so many stories, that's why I think it'd be fun to put those in a book.

SPEAKER_03

Yeah, no, I agree. That's a great idea. I'm sure people will be reading pilots and be like, hey, wait, that's me. Was that my conversation?

SPEAKER_02

Exactly.

SPEAKER_03

That would be funny. Exactly. But yeah. Well, thank you for speaking your wisdom upon us on all things.

SPEAKER_02

All things, uh, on the ground. Yes, on the ground and no longer making our decisions on the no longer a commercial airline pilot, just uh pilot of a little airplane now. But um, yeah, this this is uh 25 years of of our hard work to figure this stuff out and share it with others.

SPEAKER_03

Yeah. Got it. Well, thank you for listening to today's episode. If you're interested in learning more about wiser wealth management or want to schedule a consultation to meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com or by clicking the link in the episode notes. See you next week.

True Comprehensive Planning, Not AUM Drains

SPEAKER_00

Thanks for listening to a wiser retirement podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestor.com and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicles or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guest may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation, and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interests. Investments involve risk, and unless otherwise stated are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional, andor legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.